CMT – Maybank Kim Eng

Small boost to revenue

• 1Q14 revenue rose 5.8% YoY to SGD164.7m on AEI completion and positive rental reversion.
  
• Possible tenant cannibalisation in Jurong East with IMM and JCube seeing QoQ drop in occupancy of 80bps and 70bps.
  
• Maintain HOLD with DDM-derived TP unchanged at SGD2.05.
  

Results in line with expectations

CMT reported a 5.8% YoY increase in 1Q14 revenue to SGD164.7m, with DPU rising 4.5% YoY to 2.57 cts. Revenue was boosted by the completion of asset enhancement initiatives (AEIs) at IMM and Bugis Junction last year and a 6.2% positive rental reversion for leases renewed in 1Q14. CMT still has about 12.8% of gross rental income up for renewal for the rest of the year. The all-in-financing cost for 1Q14 averaged 3.5% (4Q13: 3.4%) with debt maturity of four years (4Q13: 3.6 years). Westgate is making good progress with 92% occupancy (4Q13: 85.8%), but we think there may be mild cannibalisation in Jurong East with occupancy at IMM and JCube seeing a QoQ drop of 80bps (98.2%) and 70bps (99.3%), respectively. Portfolio-wise, 1Q14 shopper traffic slipped 1.9% YoY to ~49m while tenant sales shrank 4% YoY to ~SGD86 psf/mth (MBKE estimates). This marked the first decline for shopper traffic since 1Q12 and tenant sales since GFC.

AEIs to provide downside buffer

Apart from the ongoing AEIs at Bugis Junction and Tampines Mall, CMT will embark on phase 2 AEI at IMM to increase the number of stores and sharpen its value-focussed positioning. It will also reconfigure Basement 1 and Level 2 of JCube (due to complete in 2H14) to add more food kiosks and 50 retails units. This move is timely, given that Westgate opened only last December and tenant relocation may be inevitable. CMT has achieved around +6% rental reversions since 2010 and we expect the trend to last another 1-2 years. We think acquisitions (eg, ION Orchard and Star Vista) offer a better chance of “moving the needle”. Maintain HOLD and DDM-derived target price of SGD2.05.