CMT – CIMB

Still pricey

• Maintain Underperform. CMT has good exposure to retail malls in suburban Singapore as well as the downtown core of Singapore which are traditionally resilient to economic slowdowns. Nonetheless, strong upcoming supply in the central area, slowing visitor arrivals and a global economic slowdown are likely to hurt the retail business, particularly in the Orchard Road precinct. The ability to increase rents through asset enhancements may weaken on these accounts, although we are not expecting CMT’s occupancy levels to weaken substantially from current near-full levels. On the other hand, the decision to continue with the integration of Plaza Singapura and Atrium@Orchard may result in much higher capital expenditure, affecting CMT’s free cash flows.

• Unchanged DDM-derived target price of S$1.90 (discount rate 9.7%). CMT’s P/BV of 0.9x with forward yields of 6.9% still makes it expensive compared with its closest peer, FCT’s 0.59x with yields of 10.1%. Maintain Underperform in view of a weakening macroeconomic outlook.