CMT – DB

Operating environment still weak; AEI plans articulated

CMT reported 3Q09 DPU of 2.35cts (-35% YoY, +10% QoQ), with 9M09 DPU of 6.45cts making up 72% of consensus estimates. Approximately S $2.5m of distributable income from CRCT has been retained in addition to the S$4.8m in 1H09 (around 0.23cts in total) which will be distributed in 4Q09. On a comparable mall basis, revenue and NPI rose 3.6% and 6.4% respectively. Based on committed leases, locked-in revenue for FY09 is around 104% of FY08’s. Portfolio occupancy remains high at 99.6%. Balance sheet has been strengthened with gearing conservative at 30.4%.

While sentiment and consumer confidence have improved in the quarter, the operating environment remains relatively weak. CMT achieved higher rental reversions in 3Q09 (+2.3% over preceding rents compared to 1.5% for 1H09) although YTD reversions were relatively muted (+1.8% compared to 7-14% over the past 6 years). Shopper traffic and portfolio gross turnover dropped YoY and on a sequential basis; shopper traffic declined 3.2% YoY and 2.4% QoQ while GTO fell 2.5% YoY and 0.5% QoQ. Consumer spending also remained cautious with only 4 out of 18 trade categories reporting YoY growth in turnover.

Mmgt has articulated AEI plans for Raffles City. A new underground link at B2 will be created to provide connectivity between Esplanade MRT station to City Hall MRT station via Raffles City B1 Marketplace. A shopping area at B2 will be created as an extension to the current retail offering while the current B1 will be reconfigured to provide access to and from both MRT stations. This will result in an incremental 16,285sf of NLA (+36%) and a corresponding S$2.65m increase in NPI representing an 8% ROI based on capex of S$33.2m. Completion is expected in 4Q10.