CMT – UOBKH
2Q08: Maintaining double-digit growth
CapitaMall Trust (CMT) reported gross revenue of S$125.6m in 2Q08, an increase of 20.9% yoy. Key growth drivers were Tampines Mall, IMM Building and Raffles City, where revenue contributions grew 12.2%, 16.5% and 18.4% yoy respectively. Overall occupancy was unchanged at 99.9% in Jun 08. 319,087sf of retail space representing 9.9% of total Net Lettable Area (NLA) was renewed in 1H08 at 9.9% over preceding rental rates. CMT announced DPU of 3.52 cents for the quarter, an increase of 12.8% yoy, and represents annualised yield of 4.6%.
Asset enhancement for The Atrium. The Atrium will be amalgamated with Plaza Singapura to create an integrated development with 170m of prime retail frontage along Orchard Road and NLA of 850,000sf combined. 215,000sf of additional retail space will be created on Levels 1, 2 and 3 of The Atrium by converting unproductive ancillary space and lower yielding office space into retail space. The asset enhancement initiative will cost S$150m and will be carried out in three phases in 2009 and 2010.
The acquisition is funded by issue of S$650m 5-year convertible bonds (exercise price: S$4.36) and medium term notes of S$395m. The acquisition is expected to complete in Aug 08.
Revamp malls in Sembawang and Jurong. Sembawang Shopping Centre is being redeveloped by decanting 42,610sf of residential area and shifting more retail space into the high-yielding basement, level 1 and level 2. The new mall with NLA of 128,413sf will be completed in 4Q08. CMT has submitted written permission to increase the plot ratio for Jurong Entertainment Centre from 1.85 to 3.00, almost doubling NLA to 209,700sf. The asset enhancement initiative involves the construction of an Olympic-sized ice skating ring. CMT has applied for the ice skating ring to be considered as being for civic and community uses, which will provide additional floor space of 35,000sf if approved. The asset enhancement initiative is scheduled for completion in 4QFY09. Sembawang Shopping Centre and Jurong Entertainment Centre will provide incremental net property income of S$9.5m and S$12.4m p.a. when the asset enhancement initiatives are completed.
Maintain HOLD. CMT provides FY08 distribution yield of 4.9%, a narrow spread of 1.5% over 10-year Singapore government bond yield at 3.4%. Maintain earnings estimates and fair price at S$3.42.