CMT – DBS

Results in line

Comment on Results

Results in line with expectations. CMT reported 1Q08 distributable income of $65.4m, up 27% yoy and beating its own forecast by 3%. This was achieved on a 24% jump in revenue to $121.1m. The group elected to distribute 88% of income or $58m in Q1, translating to a DPU of 3.48cts.

Strong organic growth. The better results were achieved on higher rental reversions, which were on the average 10.4% better than preceding levels, particularly at Tampines Mall, IMM Building, Bugis Junction and Plaza Singapura. The higher rentals were also a result of asset enhancement activities (AEI). Management estimates about 38% of DPU improvement since listing came from AEI activities.

More value creation from AEI going forward. Looking ahead, DPU growth is anticipated to come from value add activities at its malls. The group plans to spend $179m this year to decant valuable retail space to take advantage of its additional plot ratio. Positive contributions from these activities will kick in from FY09 as works are completed over FY08 and FY09. Current gearing is low at 35.3%, giving them debt headroom to buy up to S$1.2bn of assets.

Recommendation

We maintain our buy call on CMT with a price target of $3.93. FY08 and FY09 DPU of 15.4cts and 17.0 cts, translate to a yield of 4.4% and 4.9% respectively.