CMT – UOBKH

2QFY08: Maintaining Double-digit Growth

CapitaMall Trust (CMT) reported gross revenue of S$125.6m in 2QFY08, an increase of 20.9% yoy. Key growth drivers were Tampines Mall, IMM Building and Raffles City, whose revenue contributions grew 12.2%, 16.5% and 18.4% yoy respectively. Overall occupancy was unchanged at 99.9% in Jun 08. Leases for 319,087sf of retail space representing 9.9% of total net lettable area (NLA) were renewed in 1HFY08 at 9.9% over preceding rental rates. CMT announced DPU of 3.52 cents for the quarter, representing an increase of 12.8% yoy and an 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. Some 215,000sf of additional retail space will be created on levels 1, 2 and 3 of The Atrium by converting unproductive ancillary space and loweryielding office space into retail space. The asset enhancement initiative will cost S$150m and will be carried out in three phases in FY09 and FY10. The enhancement initiative is expected to be completed in Aug 08. It is funded by the issue of S$650m five-year convertible bonds (exercise price: S$4.36) and medium-term notes of S$395m.

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.