Monday 22 April 2013

CapitaMall Trust

OCBC on 22 Apr 2013

CapitaMall Trust (CMT) turned in a strong set of 1Q13 results last Friday. DPU increased by 7.0% YoY to 2.46 S cents, despite a retention of S$8.4m in income for the quarter. This is slightly ahead of our expectations, as S$6.6m in taxable income may be distributed in FY13 (1Q DPU already formed 25.2% of our FY13F DPU). Operationally, we note that CMT continued to deliver on various fronts. CMT also updated that the repositioning of IMM Building has been gaining traction, while the space vacated by Carrefour in 4Q12 at Plaza Singapore has been leased to Cold Storage and John Little and British retailer George. As previously guided, CMT announced a new AEI at Bugis Junction, which is expected to last from 2Q13 to 3Q14. We remain positive on CMT’s performance going forward, in view of these positive developments. We maintain BUY on CMT with a higher fair value of S$2.43 (previously S$2.32).

Promising start to FY13
CapitaMall Trust (CMT) turned in a strong set of 1Q13 results last Friday. As we have previously expected, NPI and distributable income grew by 15.5% and 14.3% YoY to S$125.1m and S$93.7m, respectively, on the back of incremental income from JCube, Bugis+ and The Atrium@Orchard following the completion of their asset enhancement initiatives (AEIs). DPU came in at 2.46 S cents, representing an increase of 7.0% YoY despite a retention of S$8.4m in income for the quarter. This is slightly ahead of our expectations, as S$6.6m or ~0.19 S cents in taxable income may be distributed in FY13 (1Q DPU already formed 25.2% of our FY13F DPU).

Steady operational performance
Operationally, we note that CMT continued to deliver on various fronts. Notwithstanding a slight dip in occupancy at IMM Building due to ongoing AEI, portfolio occupancy inched up 0.1ppt QoQ to 98.3% amid stronger take-up rates at The Atrium@Orchard. Steady positive rental reversion of 6.2% was also achieved during the quarter, consistent with our view for a 6.0-6.5% increase. In addition, 1Q shopper traffic improved 4.3%, while tenant sales climbed 2.4% YoY.

Maintain BUY with higher fair value
CMT updated that the repositioning of IMM Building has been gaining traction, as evidenced by the commitment of another 10 outlet brands in 1Q (total: 50 outlets). We also understand that the space vacated by Carrefour in 4Q12 at Plaza Singapore has been leased to Cold Storage (operational on 18 Mar) and John Little and British retailer George (open in Jul), much to our delight. ~S$8.7m in capex is estimated for reconfiguration of the space and AEI, with target ROI to come in at 9.8%. As previously guided, CMT announced a new AEI at Bugis Junction, which is expected to last from 2Q13 to 3Q14 (S$35.0m capex, 9.0% ROI). We remain positive on CMT’s performance going forward, in view of these positive developments. We are raising our fair value from S$2.32 to S$2.43 after factoring the better-than-expected results and new initiatives. Maintain BUY.a

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