CapitaMall Trust

Kim Eng on 19 July 2012

Delivering steady growth. CapitaMall Trust’s (CMT) distributable income rose by 5% YoY in 1H12 to SGD156.2m, with DPU rising marginally by 1% YoY to 4.86 cents. For 2Q12, DPU came in at 2.86 cents, a rise of 5% YoY and 4% QoQ, largely in line with expectations. We expect greater contributions from assets affected by AEIs in the coming quarters. On the back of the stable portfolio outlook, we maintain our BUY recommendation.

Tenants reported steady sales. Excluding the assets that underwent or are undergoing AEIs, CMT’s malls experienced a marginal 3% decrease in shopper traffic, but tenant sales nevertheless still managed to grow by 1.5% YoY in 1H12, thanks in part to the Great Singapore Sale. Rental reversions during the period remained positive at 6.4% while portfolio occupancy rate stood at a very healthy 98.6%.

AEI assets to play a bigger part in subsequent quarters. JCube resumed operations in April, while Bugis+ was soft-opened only in early June. As a result, neither asset contributed significantly to CMT’s 1H12 earnings. Looking ahead, Bugis+ should complete its AEIs by end-July and as of now, 97% of its NLA is already committed. The Atrium’s AEI works are also on track to complete in 4Q12 and close to 90% of the total space is already committed, which will include American fashion retailer GAP’s largest store in Singapore.

2012 debt refinancing almost done. Of the SGD783m of debt due this year, CMT has already secured financing for SGD659.3m, comprising SGD505.2m fixed at 3.29% due in 2018, and SGD190.1m fixed at 3.45% due in 2022. CMT’s gearing is at a very comfortable 37.5% with an average cost of debt of 3.3%.

Safe-haven buy. CMT has proven its ability to deliver consistent results, with a solid track record for yield enhancements via AEIs. We emphasise that the uplift from the recent and ongoing AEIs will flow in more strongly in FY13, which we forecast will translate to a decent DPU yield of 5.6% - a 400 bps spread over the 10-year bond yield. We maintain our BUY recommendation, with a slightly improved target price of SGD2.25, as we update our beta assumption to 1.05 from 1.07.