CapitaMalls Asia

OCBC on 31 Jul 2012

CMA would acquire Olinas Mall in Tokyo, close to JR Kinshicho Station, for S$367.3m (JPY 22.8b). The freehold-lease mall has an NLA of 381k sq ft and the acquisition price translates to a psf cost of S$964 per sq ft, with a NPI yield of 6%. In addition, management expects to acquire, from Vanke Real Estate Group, a shopping mall site in Qingdao, China. The mall is expected to have a GFA of 89.7k sqm, with a total development cost of S$294.9m (RMB1,457m). Both acquisitions appear to be fairly priced, in our view, and we see limited RNAV accretion at this juncture. We believe CMA’s active acquisition stance, after recent divestments to a new private fund, points to an unabated appetite for portfolio expansion and capital recycling despite current macro uncertainties. Maintain BUY with an unchanged fair value estimate of S$1.85.

Eighth Japanese mall acquired
The freehold-lease Olinas Mall has a GFA of 583k sq ft (NLA 381k sq ft), with 853 parking spaces, and is ~400m away from the JP Kinshicho Station. It is currently at 100% occupancy, with an NPI yield of 6%, given the acquisition price of S$964 psf NLA. CMA expects positive rental reversions and tenant mix optimization to bump the yield to around 7% levels when rental renewals begin in 2015-2016. CMA would fund the acquisition with 50-55% debt with the JPY exposure hedged out.

Greenfield shopping mall in Qingdao
The 23.7k sqm site in Qingdao is situated in the Sifang District, strategically located in the New Urban Center, and would house a six-storey shopping mall with a GFA of 89.7k sqm. This would be CMA’s first mall in Qingdao and completion is expected in 2015. The total development cost translates to a GFA psm price of RMB 16.2k. CMA expects an NPI yield of 4-5% initially, and a stabilized NPI yield in the region of 8%-9% after the first rental cycle.

Appetite for acquisitions stay strong
Both acquisitions appear to be fairly priced, in our view, and we see limited RNAV accretion at this juncture. We note CMA’s access to capital remains healthy; management indicates that it currently has ~S$550m cash and expects net gearing to rise to 30% end-FY12 from 25% presently. We believe CMA’s active acquisition stance, after recent divestments to a new USD1.0b private fund, points to an unabated appetite for portfolio expansion and capital recycling despite current macro uncertainties. Maintain BUY with an unchanged fair value estimate of S$1.85 (10% RNAV discount).