Capitaland Mall Trust - UOB Kay Hian 2017-01-23: 4Q16 Results Of CMT In Line With Expectations

CAPITALAND MALL TRUST C38U.SI

REITs − Singapore - 4Q16 Results Of CMT And FCT In Line With Expectations

The results of CapitaLand Mall Trust (CMT) and FCT both came in in line with expectations. Both retail REIT managers have re-iterated a subdued outlook on the domestic retail sector.
Maintain HOLD on CMT with an unchanged target price of S$1.95.

CapitaLand Mall Trust (CMT) and Frasers Centrepoint Trust (FCT) have reported their quarterly results.

Entry price: S$1.70.
Our valuation is based on DDM (required return: 6.3% and terminal growth of 1.2%).
CMT’s 4Q16 DPU was flat at 2.88 S cents, due to the distribution of S$12m in retained income (from 1Q16) in the quarter. Excluding this, 4Q16 DPU would have declined 11.8% yoy.
FY16 DPU of 11.13 S cents (-1.1% yoy) came in within our expectations, representing 100.6% of full-year forecast.
4Q16 gross revenue and net property income saw respective declines of 6.1% yoy and 7.6% yoy, on the back of Funan's closure last July, as well as Rivervale Mall which was divested in Dec 15.

4Q16 reversions were positive, although management refrained from disclosing further details.
Negative reversions were recorded at Bugis+ (-8.0%), Westgate (-7.2%), The Atrium @Orchard (- 2.5%), and Bedok Mall (-1.3%) for FY16. Tenant sales were up 2.3% yoy while shopper traffic grew 0.9% yoy.

Management has re-iterated its cautious outlook on the sector, noting that the retail sales index (excluding motor vehicle sales) declined 0.6% and 2.1% on a yoy basis in October and November 2016 respectively.
It also previously highlighted high labour costs, the ubiquity of online retail platforms and lower tourist expenditure to be contributing factors.
Management will continue to place emphasis on maintaining DPU distributions.

4Q16 saw demolition works completed for the S$560m project (611,000 sf by NLA), with the site handed over to the main contractor this month. A showsuite will be opening come 2Q17.
Management re-iterated that the AEI remains on the track and that a cinema operator has just signed on, taking leasing pre-commitment to 15%.
We would not rule out the likelihood of CMT leveraging on the expertise of sister REITs CCT, ART and sponsor CapitaLand in potential tie-ups.

Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-01-23

UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.950 Same 1.950