As part of the general sell-down in the markets, CRCT's unit price has fallen 25.2% since the peak of S$1.865 on 11 April 2013. Apart from the prospect of early tapering of QE by the Fed, CRCT has been affected by concerns of a moderation in retail sales growth from: 1) a de-acceleration of China’s economy and 2) President Xi Jinping’s campaign against conspicuous consumption. According to media reports, some Chinese retail landlords have recently begun offering preferential leasing terms for mass-market fashion brands, whereas previously such terms were only reserved for luxury brands. The malls which are facing such pressure typically have poorer locations in second-tier and third-tier cities. We note that CRCT’s malls are in good locations, with the bulk of assets in Beijing. Furthermore, the occupancies in CRCT’s malls are healthy (96%-100%, excluding those which are undergoing tenancy adjustments and AEI). CapitaMalls Asia, which runs the CRCT malls, has the experience and size to better weather the slowdown in China. Factoring in the more challenging operating environment, we reduce our fair value from S$1.76 to S$1.58 but upgrade CRCT to BUY from hold on valuation grounds.
Time to enter
As part of the general sell-down in the markets, CRCT's unit price has fallen 25.2% since the peak of S$1.865 on 11 April 2013. Apart from the prospect of early tapering of QE by the Fed, CRCT has been affected by concerns of a moderation in retail sales growth from: 1) a de-acceleration of China’s economy and 2) President Xi Jinping’s campaign against conspicuous consumption. According to media reports, some Chinese retail landlords have recently begun offering preferential leasing terms for mass-market fashion brands, whereas previously such terms were only reserved for luxury brands. The malls facing such pressure typically have poorer locations in second-tier and third-tier cities. We note that CRCT’s malls are in good locations, with the bulk of assets in Beijing. Furthermore, the occupancies in CRCT’s malls are healthy (96%-100%, excluding those which are undergoing tenancy adjustments and AEI). CapitaMalls Asia, which runs the CRCT malls, has the experience and size to weather the slowdown in China.
1Q13 NPI climbed 1.8% YoY
To recap, CRCT's 1Q13 results were generally in line with ours and the street's expectations. Gross revenue climbed 3.7% YoY to S$39.3m and net property income rose 1.8% YoY to S$25.9m. Increases in both gross revenue and NPI was due to good tenancy adjustments at CapitaMall Saihan and CapitaMall Wuhu. DPU fell 4.1% YoY to 2.31 S cents; excluding the 57m units issued through private placement in Oct 2012, DPU would have been 3.7% higher YoY.
Secured refinancing offers
CRCT has a reasonably good financial position, with gearing at 25.4%, and interest coverage ratio of 8.4x. We understand that CRCT has previously received offers at favorable terms to refinance S$150.5m due in Jun 2013. All-in cost of debt is expected to be maintained below 3%.
Reduce FV to S$1.58
Factoring in the more challenging operating environment, we reduce our fair value from S$1.76 to S$1.58 but upgrade CRCT to BUY from hold on valuation grounds.
As part of the general sell-down in the markets, CRCT's unit price has fallen 25.2% since the peak of S$1.865 on 11 April 2013. Apart from the prospect of early tapering of QE by the Fed, CRCT has been affected by concerns of a moderation in retail sales growth from: 1) a de-acceleration of China’s economy and 2) President Xi Jinping’s campaign against conspicuous consumption. According to media reports, some Chinese retail landlords have recently begun offering preferential leasing terms for mass-market fashion brands, whereas previously such terms were only reserved for luxury brands. The malls facing such pressure typically have poorer locations in second-tier and third-tier cities. We note that CRCT’s malls are in good locations, with the bulk of assets in Beijing. Furthermore, the occupancies in CRCT’s malls are healthy (96%-100%, excluding those which are undergoing tenancy adjustments and AEI). CapitaMalls Asia, which runs the CRCT malls, has the experience and size to weather the slowdown in China.
1Q13 NPI climbed 1.8% YoY
To recap, CRCT's 1Q13 results were generally in line with ours and the street's expectations. Gross revenue climbed 3.7% YoY to S$39.3m and net property income rose 1.8% YoY to S$25.9m. Increases in both gross revenue and NPI was due to good tenancy adjustments at CapitaMall Saihan and CapitaMall Wuhu. DPU fell 4.1% YoY to 2.31 S cents; excluding the 57m units issued through private placement in Oct 2012, DPU would have been 3.7% higher YoY.
Secured refinancing offers
CRCT has a reasonably good financial position, with gearing at 25.4%, and interest coverage ratio of 8.4x. We understand that CRCT has previously received offers at favorable terms to refinance S$150.5m due in Jun 2013. All-in cost of debt is expected to be maintained below 3%.
Reduce FV to S$1.58
Factoring in the more challenging operating environment, we reduce our fair value from S$1.76 to S$1.58 but upgrade CRCT to BUY from hold on valuation grounds.
No comments:
Post a Comment