CapitaMall Trust

CIMB Research, Oct 23

CMT's 9M13 DPU was in line at 73 per cent of our full-year estimate (Q3-13 at 25 per cent) and consensus. We roll over our valuation to FY15 estimates and raise our dividend discount model-based target price (7.3 per cent discount rate) by 3 per cent. We lower our DPU estimates by 1.4 per cent in FY13 and 0.6 per cent in FY14, but raise DPU by 2.2 per cent in FY15, based on tweaks to our model and higher rent from Tampines Mall.

The completion of AEIs at Bugis+ and The Atrium, as well as the completion of J-Cube contributed the bulk of the 12.9 per cent y-o-y growth in Q3-13 NPI. Q3-13 DPU rose 9.7 per cent y-o-y as a result.

For CMT's remaining portfolio, NPI growth was flatter, at 4.6 per cent y-o-y due to the 6.3 per cent positive rental reversion for new leases/renewals achieved three years ago (2.1 per cent p.a.). Its portfolio occupancy remains robust at 99.5 per cent but overall tenant sales growth YTD slowed to 2.8 per cent yoy.

FY14 will see sales/earnings contributions from Phase 1 of Bugis Junction AEI (95 per cent preleased, expected completion in Q4-13) and the completion of Westgate retail mall (70 per cent pre-leased).

The commencement of Bugis Junction phase 2 AEI is expected in Q1-14 and completion by FY15.

CMT also announced that it will convert around 25k-30k sf of rooftop space in Tampines Mall, which is expected to return 8 per cent on the S$36 million capex or S$3.4 million to CMT's revenue. This is slated for completion in FY15.

CMT's portfolio remains defensive but at a P/BV of 1.2x and compressed FY15 yield of 5.7 per cent (against a rising interest rate environment), we believe that positive surprises in retail sales and accretive acquisitions are needed to re-rate the stock from current levels.

NEUTRAL