CMT – DBSV

Growth momentum intact

• 4Q10 performance in line with expectations

• Positive rental reversion and AEI works to underpin growth

• Maintain Buy with TP $2.08

Results in line. 4Q10 topline revenue of S$151.3m was 8% higher yoy, benefiting from the acquisition of Clarke Quay and an organic improvement within its portfolio. However, NPI improved by a smaller 5.7% to S$101.5m due to seasonally higher cost-to-income ratio of 33%. Distribution income rose a modest 3.5% to S$71.8m, on greater financing expenses. The group took in a revaluation surplus of S$122.3m in 4Q10, lifting book NAV to S$1.55. Operation-wise, the group renewed 898,713sf of NLA (c25.4% of total) in 2010 with leases contracted at 6.5% above the previous period. This was supported by a 3.8% better pedestrian footfall and 6.4% higher gross turnover. In general, the city malls such as Bugis Junction, Clarke Quay and Raffles City did better with traffic flow increasing 6-14%.

Positive rental reversion to continue. We anticipate the rental uptrend to continue into 2011, underpinned by healthy economic growth and strong influx of tourists into Spore. Rental pricing power may also have improved as tenant occupancy cost fell from 16.7% in 2009 to 16.4% last year. An estimated 22.3% of NLA is due for reversions in 2011, largely from IMM and Bugis Junction. In terms of debt management, the group is well placed to refinance/repay its outstanding CBs of $579.9m if put in July 2011, with a cash balance of $713m as at Dec 2010.

Earnings momentum to pick up in medium term. Completion of AEI works at Raffles City will boost earnings this year, while redevelopment of JCube and The Atrium AEI, scheduled to reopen in 1Q12 and 4Q12 respectively, should provide a continual source of earnings growth when completed over the next 2 years. In addition, CMT is well placed to look for new acquisition/development opportunities with a current gearing of 35.9% or debt headroom of $810m.

Maintain Buy, TP $2.08. We continue to like CMT as the market leader in the Singapore retail space. It is on track to deliver a 3-pronged organic and inorganic growth strategy. Maintain Buy with TP of $2.08, implying a total return of 15%.