CMT – DBS

Refocusing on growth

• Results in line with estimates
• Pricing power returning, focus on delivering growth
• Maintain Buy, TP $2.03

Results meet market expectations. 4Q09 revenue of $140m was 4.2% higher yoy while NPI improved a higher 11.8% to $96m with cost savings from property and operating expenses. Distribution income rose a higher 25.5% to $76.5m with inclusion of $7m of profits and dividend from CRCT held back earlier. There was a small $26m of net revaluation deficit, largely coming from The Atrium, bringing full year writedown to $212.5m or book NAV of $1.54/unit.

Signs of stability emerging. The group renewed 971,191sf of NLA (c30% of total) in 2009 with rents at an average 2.3% higher than previous levels. However, more importantly, pricing power appears to be returning with lease reversion spreads in 2H09 higher than in 1H09. In addition, pedestrian footfalls have turned +ve in Dec 09 on a yoy basis while tenant gross turnover was 11.3% greater than in 3Q. We anticipate this uptrend to be sustained in 2010 on the back of economic recovery and greater tourist arrivals with the opening of the 2 IRs. Uplifting impact from completion of AEI in Raffles City and JEC should provide another earnings growth driver from 2011. CMT is well placed to tap accretive new acquisition/development opportunities as it remains one of the lowest geared retail Sreit with a leverage of 30.5%.

Maintain Buy, TP $2.03. The group is on track to deliver a 3-pronged growth strategy from both organic and inorganic means, particularly from FY11 onwards. Our estimates have not factored in any new acquisitions, which should provide further upside surprise when it materialises. The stock is trading at 5% FY10 and 5.1% FY11 yield. Maintain Buy with revised target price of $2.03.