CMT – DBSV

Gunning all engines

• 7.5% y-o-y growth in 2Q bottomline expected

• Organic growth, AEI to underpin mid term profits

• Maintain Buy. Slightly higher TP $2.09

Achieved 48% of full year forecast. CMT reported 2Q bottomline of $73.1m and DPU of 2.29cts (up 7.5% yoy, +2.3% qoq) on 2.8% rise in revenue to $142.5m, helped by higher rental rates. Expense ratio also dipped to <31% on lower maintenance charges. The group took a net revaluation deficit of $112m on its portfolio, largely coming from The Atrium, which had been written down to $1584psf. Cap rates remained largely unchanged. With the robust economic growth and rising retail sales, CMT was able to achieve 1H10 rental growth of 6.3% over preceding levels (2.3% in 2009) for the 323 leases (12% of total NLA) renewed in 1H10. Going into 2H10, we expect the group to enjoy positive rental reversions for the remaining 0.7msf (17% of NLA) due this year.

AEI at JCube and Atrium to complete 2011/12. Apart from AEI works at Raffles City, completing by Oct this year, asset enhancement at JCube has commenced and is scheduled to complete by end 2011. Cost of rebuilding this complex is 18% lower than earlier budgeted at $165m, translating to a higher ROI of 9.7%. The renovation timeline for Atrium in now slated to begin in 1Q11 and complete in 3Q12. The $150m exercise to decant office space into retail area will provide a seamless integration with Plaza Singapura on the first 3 floors, thus maximizing the use of Orchard Rd frontage. Apart from organic expansion, these activities are likely to significantly boost income from 2012 onwards.

Revving up growth drivers. We continue to like CMT for its multi-pronged growth drivers. Following the acquisition of Clarke Quay, the group is also exploring development projects, which are likely to give higher returns, albeit at slightly higher risk. Balance sheet remains healthy at 34.8% geared. We maintain our Buy call with a slightly higher TP of $2.09, translating to a total return of 10%.