CMT – DBSV

AEI came into fruition

• In line with expectations
  
• FY13 earnings to be driven by full contributions from JCube, Bugis+ and The Atrium
  
• Low gearing and strong balance can be utilised to drive inorganic growth
  
• Maintain HOLD at TP S$2.15
  

Highlights

In line results. CMT reported 4Q revenue and net property income (NPI) of S$173.67m and S$112.9m, +10% y-o-y and +14% y-o-y respectively. The top-line benefitted from the opening of JCube and Bugis+. On a q-o-q basis revenue grew by 1-3% supported by healthy rental reversions of 5.4% to 10.9% p.a for most of its operating malls. The occupancy rate also rose to 98.2% from 94.8% a year ago upon the progressive completion of the asset enhancement initiatives (AEI) work at various malls. 4Q DPU came in at 2.36 cts after retaining CRCT’s S$4m distribution. The management guided that it will retain CRCT’s FY12 (S$15.3m) and future tax-exempted distribution to part fund its capex purpose for various malls which could amount to S$2m per mall per year.

Our View

AEI to drive FY13 earnings. Going forward, the trust should continue to see positive rental reversion of c.6.0% or 2-3% p.a backed by healthy population growth and low unemployment rate. Occupancy for its existing malls should trend up further when the 81,000 sf of space vacated by Carrefour at Plaza Singapura is filled in 1H2013. We expect The Atrium @ Orchard with 87% occupancy to move up progressively as traffic footfall for the enlarged Plaza Singapura gain momentum. The mall attracted a footfall of 1.2m visitors per month post AEI works. The improved portfolio occupancy coupled with the higher contributions from JCube and Bugis will continue to underpin FY13 earnings growth. Meanwhile, the completion of the retail portion of Westgate (currently 50% pre-committed) at the end of 2013 will help to drive earnings in the medium term Healthy financial metrics . The trust refinanced S$783 m loan in Oct’12 and has unencumbered an additional seven properties to 13 out of the 15 properties. In addition, the trust has also secured financing for its 2013 debt with longer term loan with an average debt maturity of 8.8 years. Gearing has moved down to 36.7% post recent placement and revaluation gain of S$69m placing them well to capture acquisition opportunities

Recommendation

Maintain HOLD at S$2.15. We continue to like CMT for its large cap and its conservative balance sheet which we believe can be utilized to drive inorganic growth. Opportunities could come from a visible sponsor pipeline or even through greenfield developments. We have previously factored in $400m worth of acquisitions in our numbers by end of 2013. Trading at 1.3x P/BV, offering a FY13/14 yields at 4.7%-5.0%, we think much of the positives have already been priced in. Upside surprise hinges on CMT delivering higher than expected returns from its completing AEIs or acquisitions.