CapitaMall Trust

Kim Eng on 25 Mar 2013

Expect more positive news flows. CapitaMall Trust (CMT) has used the bulk of the SGD250m raised via a private placement last November to partially finance the redemption of the SGD300m 2-year retail bonds which matured in February. Nonetheless, we still expect more positive news flows in the following months on new AEI plans, which are most likely to involve Tampines Mall and/or Funan. CMT remains one of our top picks amongst the S-REITs. Reiterate BUY, target price SGD2.36.

Well-managed capital structure. CMT has been diligently trying to smoothen and extend its debt maturity profile following the Global Financial Crisis. Via its MTN programmes, CMT had raised long-term debt of as long as 12 years tenure. After the redemption of the 2-year retail bonds, we estimate the average term to maturity of CMT’s outstanding debt at ~4.2 years, which is one of the longest within the SREIT universe. Its healthy cash position of ~SGD800m will be more than enough to fund future AEIs.

The incumbent’s advantage. The importance of Jurong Lake District as a regional commercial hub has been re-emphasized in the recent Population White Paper and Land Use Plan and CMT remains wellpositioned to capitalize on the area’s accelerated development via its three malls – Jcube, IMM and Westgate. In the longer term, the three strategically-located malls will further benefit from a larger catchment area with the development of Tengah New Town, facilitated by greater connectivity from the future Jurong Region MRT Line.

Hunt as a pack. Under the Government Land Sales Programme, sites slated for pure retail use are few and far between. However, we see more opportunities for integrated developments, particularly those near or integrated with MRT stations. We believe this is where the “Westgate model” can be replicated, i.e. CMT joining up with CapitaLand and CapitaMalls Asia, where CMT will take an initial minority stake during the development phase.

Reiterate BUY. We expect AEI plans pertaining to Tampines Mall and/or Funan to be announced soon, while ION Orchard remains a medium-term acquisition possibility following its recent round of rental reversions. Maintain BUY with a DDM-derived target price of SGD2.36.