CMT – Kim Eng

Consistency is key

Event

• CapitaMall Trust (CMT) reported a 7.1% yoy increase in its net property income to $101.2m for 3Q10, due in part to its acquisition of Clarke Quay. The result is in line with our expectations. A DPU of 2.36 cents a share was also announced, taking year‐to‐date DPU to 6.88 cents a share. The consistent performance looks set to last as more organic growth is expected in 2012 and 2013. Maintain BUY.

Our View

• CMT continues to enjoy positive rental reversions with an average growth of 2.1% in rents from renewals or new leases signed so far this year. Its portfolio occupancy rate remains a robust 99.6%, dragged down only slightly by the newly acquired Clarke Quay.

• In addition to active lease management, asset enhancement initiatives at JCube and The Atrium@Orchard will propel organic growth in 2012 and 2013, respectively. We believe this should more than offset the marginal increase in financing costs, assuming that the convertible bonds are put back by holders in 2011.

• The retail industry in Singapore should continue to post stable performance as consumer confidence strengthens. The Retail Sales Index showed that retail sales, excluding motor vehicles, grew by 6.2% in August, marking the tenth consecutive month of yoy growth. As long as this continues, it should augur well for CMT’s tenants.

Action & Recommendation

While we continue to expect CMT to deliver similarly steady performance in the future, further positive catalysts may come from its possible participation in greenfield development projects, in partnership with its sponsor CapitaMalls Asia. Maintain BUY with a DDM‐derived target price of $2.27.