CMT – Kim Eng
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A shopper’s best friend
The largest landlord of retail malls in Singapore, CapitaMall Trust (CMT) offers exposure to many well-frequented malls across the four corners of Singapore. Its properties are well-located in the suburbs and even downtown, each catering to a sizeable catchment area of shoppers. CMT was the first REIT to be listed in Singapore in 2002.
Ahead of its peers
Since then, CMT has proven to be an innovative landlord, pioneering the art of asset enhancement initiatives (AEIs) to optimise space and rentals. AEIs will underpin CMT’s organic growth for the next three years at least. CMT historically trades at an average yield spread of 2.9% over the 10- year bond yield. Its current yield spread of 4.8% implies ample upside for the share price. In fact, it is still cheap relative to its own yield band of between 3.6-11.5%.
Shopping is a way of life here!
Other than Raffles City, CMT’s malls are largely located in the suburbs, catering to necessity shopping. Even Plaza Singapura that is located at the end of Orchard Road is positioned more as a neighbourhood mall, with hypermart Carrefour as the anchor, than high-end malls. CMT’s portfolio of malls has consistently achieved high occupancy rates of over 99% since 2001, with an estimated average retail passing rent of $11.80 psf per month.
Plenty of room to grow
Following the 9-for-10 rights issue to raise $1.2b, CMT will be using part of the proceeds to repay $956m of debt due in 2009, thus bringing down its gearing from 43% to 29%. Most of the balance of the proceeds will be used for the AEIs at Jurong Entertainment Centre and the Atrium@Orchard. CMT is also exploring opportunities to increase the retail GFA of Funan DigitalLife Mall and Tampines Mall.
A true industry leader
We like CMT for its market leader position, strong quality of assets, healthy balance sheet and its strong sponsor, CapitaLand. In difficult times like these, CMT’s vast potential for organic growth and earnings resilience has and will continue to deserve a premium to its peers. Initiating coverage with a BUY, a target price of $1.53.