CapitaMall Trust

OCBC on 19 Apr 2012

CapitaMall Trust (CMT) reported 1Q12 distributable income of S$76.6m (DPU: 2.30 S-cents) which is 4.6% higher YoY. This is broadly in line with our expectations and make up 23% of our FY12 forecast. Topline came in at S$155.2m, up 0.4% YoY. 1Q performances across CMT’s portfolio stayed firm; occupancy improved to 96% with pressure coming mostly from the Atrium due to enhancement works. Management also reported that JCube opened on 2 Apr 12, with 99% of NLA committed, and would contribute to earnings from 2Q12 onwards. We continue to like CMT for its AEI execution and believe that valuations remain attractive at current levels. Maintain BUY with an unchanged S$2.02 fair value estimate.

1Q12 results broadly in line
CapitaMall Trust (CMT) reported 1Q12 distributable income of S$76.6m (DPU: 2.30 S cents) which is 4.6% higher YoY. This is broadly in line with our expectations and make up 23% of our FY12 forecast. Topline came in at S$155.2m, up 0.4% YoY - rental income was boosted by higher rentals and the Illuma acquisition but mostly offset by lower income from the Atrium due to enhancement works.

Rental reversions could ease ahead
1Q performances across CMT’s portfolio stayed firm; occupancy improved to 96% with pressure coming mostly from Atrium’s enhancement works. Average rental reversions over 1Q12 remained positive at 6.1% across the portfolio. However, we forecast reversions to ease into the year, as the economic outlook softens. Operating expenses (Opex) on a comparable mall basis fell 6.7% YoY which surprised us mildly; we understand from management that this was mostly attributed to one-time items and expect opex ratios to track closer to FY11 levels ahead.

Malls returning from AEIs – a key driver for growth
We continue to see CMT execute well on its asset enhancement initiatives (AEI) – a key driver for distribution upside ahead as malls under enhancement return to operations over FY12-13. JCube opened on 2 Apr 12, with 99% of NLA committed at average rentals of S$11-12 psf, and we expect contributions to begin in 2Q12. Management expects a 9.7% ROE on investment upon stabilization. Enhancement works for Illuma (to be renamed as Bugis +) remains on track to complete by Jul 12, and over 90% of the tenants are slated to start operations by Jun 12. We observe a significant revitalization of the retail tenant mix with Uniqlo, Sephora and Aeropostale coming into the mall. The Atrium would complete its enhancement in 4Q12. The take-up rates at Bugis + and Atrium are encouraging with over 80% and 73% of NLA currently taken up.

Maintain BUY with unchanged fair value
We continue to like CMT for its AEI execution and believe that valuations remain attractive at current levels. Maintain BUY with an unchanged S$2.02 fair value estimate.