CMT – DBS

Continues to deliver

Consistent set of results, in line with expectations. CMT reported FY06 results in line with expectations, with DPU growing 14.3% y-o-y to 11.69 cents. We have previously highlighted that there would be kicker for 4Q06 DPU of 0.27 cents due to 10% retained earnings from 1Q06 for asset enhancement of IMM. As a result, CMT would distribute 4Q06 DPU of 3.35 cents. 4Q06 also saw revaluation of assets of S$239.6m and S$499m for the full year, raising NAV per unit to S$1.87 which further expands portfolio base and increase debt capacity.

Steady asset performance. Active leasing management for the CMT portfolio continues to pay off, with renewals and new leases achieving rental kicker of 8% for the CMT portfolio for FY06. Portfolio occupancy continues to be healthy at 99.5%. Asset enhancement initiatives continue to be underway for CMT, with AEI for IMM, Bugis Junction, Tampines Mall and Sembawang Shopping Centre expected to raise NPI by S$18.6m when completed by 2Q08. Moving forward, enhancement of JEC is also in the pipeline.

Outlook for physical market remains positive. The revaluation would expand the portfolio base on its balance sheet and provide further headroom in terms of debt capacity for acquisitions. Outlook remains positive, with double-digit retail rental growth expected by market watchers.

Maintain Buy, TP S$ 3.64. We continue to like CMT for its strong pipeline of acquisitions backed by strong sponsor Capitaland, consistent delivery of asset enhancements, alternate growth channel in China’s retail sector through CRCT and exposure to positive fundamentals in the Singapore hotel sector through Raffles City asset. We are revising our target price up to S$ 3.64 based on DCF valuation after raising NPI assumptions backed by enhancements. Maintain Buy.