CMT – DBS

Slowly but steadily

• 2Q09 results within expectation
• Occupancy remains high, slight positive rental reversion
• Maintain Buy with TP $1.68

Still holding ground. CMT reported a 10.4% rise in Q2 revenue to $138.6m while NPI improved 12.2% to $93.8m. Distributable income of $67.9m (DPU 2.13cts) was 15.8% higher than previous period. On a qoq basis, all operating metrics continued to show positive growth of 3%, 1.5% and 8.5% respectively. The group took a $276.2m deficit in the value of its assets, lowering book NAV to $1.56.

Occupancy levels sustained. The better sequential performance was due organic growth with 223728sf of NLA being renewed at rents 1.5% higher than previous levels. Portfolio occupancy remained at a high 99.7%. The growth in bottomline was also aided by lower interest cost at the group repaid loans with the rights proceeds. Outlook is ‘cautiously optimistic’ with a slight 2.2% recovery in pedestrian footfalls. However, tenant sales psf growth remained anemic at this point. Trade sectors that continue to do well were basically necessity shopping. CMT has a remaining 13.9% of GRI to be renewed this year with another 36.5% and 25.7% in FY10 and FY11 and we expect them to be able to recontract these at modest but positive improvement over previous levels.

Maintain Buy. Management’s ability to grow rents despite the challenging conditions while maintaining a high occupancy level underlines its good track record as retail property managers. We have lifted FY09 and FY10 DPU to 8.6cts and 9.1cts on higher portfolio occupancy assumption of 99% vs an earlier 95%. The stock is currently trading at 5.5-5.8% DPU yield and offers a 12% total return.