Category: CMT
CMT – SGX
CMT Achieves Higher Distribution per Unit of Over 19.3%1 for Third Quarter2 2007
Singapore, 19 October 2007 – CapitaMall Trust Management Limited (“CMTML”), the manager of CapitaMall Trust (“CMT”), is pleased to announce a distributable income of S$53.2 million to unitholders of CMT (“Unitholders”) for Third Quarter2 2007. The distributable income for Third Quarter2 2007 is based on 100.0% of CMT’s taxable income available for distribution to Unitholders for the same period. The distribution for Third Quarter2 2007 also includes a capital distribution of S$1.5 million received from CMT’s 20% investment in CapitaRetail China Trust (“CRCT”). CMT received a total capital distribution of S$3.1 million3 from CRCT, of which S$1.6 million has been retained for distribution in Fourth Quarter4 2007.
Distribution Per Unit in CMT (“DPU”) for Third Quarter2 2007 is 3.40 cents, including 0.09 cents capital distribution from its investment in CRCT, (13.49 cents on an annualised basis), which is 17.2% higher than the forecast5 DPU of 2.90 cents for Third Quarter2 2007 (11.51 cents on an annualised basis). When compared against the Third Quarter6 in 2006, the DPU registered an increase of 19.3% from 11.31 cents (on an annualised basis) to 13.49 cents (on an annualised basis). The Books Closure and Distribution Payment Date will be announced shortly.
CMT Group’s7 gross revenue for Third Quarter2 2007 was S$114.5 million. This is an increase of S$19.6 million or 20.7% over the forecast5 gross revenue for Third Quarter2 2007. Of the S$19.6 million increase in gross revenue, approximately 25.5% or S$5.0 million was due to top line revenue growth at malls within the CMT Portfolio8. The remaining S$14.6 million was due to the consolidation of CapitaRetail Singapore Limited9 (“CRS”) results.
CMT Group’s7 Net Property Income (“NPI”) for Third Quarter2 2007 also exceeded the forecast5 NPI for Third Quarter2 2007 by 21.7% or S$13.7 million. On the same store10 basis, CMT Group’s7 NPI for Third Quarter2 2007 outperformed NPI for Third Quarter6 2006 by 11.9% or S$5.9 million, while its NPI for First Three Quarters11 2007 was better than NPI for First Three Quarters12 2006 by 8.5% or S$12.7 million. Rental renewal rates for the First Three Quarters11 2007 saw robust growth, registering 12.1% over preceding rental rates, and 5.5% over forecast rental rates13.
1 Annualised Distribution per Unit for the period from 1 July 2007 to 30 September 2007 versus the annualised Distribution per Unit for the period from 1 July 2006 to 30 September 2006.
2 For the period from 1 July 2007 to 30 September 2007.
3 For the period from 23 October 2006 to 30 June 2007.
4 For the period from 1 October 2007 to 31 December 2007.
5 Based on the forecast and projection, together with the accompanying assumptions, in the CMT Offer Information Statement dated 29 August 2006.
6 For the period from 1 July 2006 to 30 September 2006.
7 Includes proportionate consolidation of the 40.0% interest in Raffles City, 100.0% interest in CRS (with effect from 1 June 2007) and CMT MTN Pte. Ltd. (with effect from 13 April 2007) and equity accounting of its associate.
8 Comprising Tampines Mall, Funan DigitaLife Mall, Junction 8, IMM Building, Plaza Singapura, Bugis Junction, Sembawang Shopping Centre, Hougang Plaza, Jurong Entertainment Centre and 40% stake in Raffles City.
9 Comprising Lot One Shoppers’ Mall, Bukit Panjang Plaza and Rivervale Mall.
10 Excluding 40.0% interest in Raffles City, Bukit Panjang Plaza, Lot One Shoppers’ Mall and Rivervale Mall.
11 For the period from 1 January 2007 to 30 September 2007.
12 For the period from 1 January 2006 to 30 September 2006.
13 Forecast rental rates for the period 1 July 2007
Source : SGX
REITs – UOBKH
Mixed Performances In Turbulent Times
Growth was 1H07 theme. For the most part of this year, growth has been the main theme of the real estate investment trust (REIT) sector. The best-performing REITs for 1H07 were high-growth REITs such as CapitaRetail China Trust (CRCT), Capital Mall Trust (CMT) and CDL Hospitality Trust which saw returns in excess of 40%. As the market has turned cautious with the bottoming out of interest rates in April and May, most REITs have fallen from their highs in May and June. The recent correction has resulted in the decline of most REITs.
Boring REITs offer capital protection. In turbulent times, the market’s appetite for risk falls sharply and risk premiums shoot up. The focus then shifts from growth to capital protection and income preservation. Investors should consider boring REITs. Though less exciting, they have the lowest growth premiums built into their stock prices. We look for REITs with low price-to-book values for capital protection and high-yield REITs for income preservation. In addition, we prefer REITs with a greater focus on the Singapore economy given the latter’s safe haven status. ParkwayLife REIT (Parkway) and Macquarie MEAG Prime REIT (MMP) stand out in terms of yields and price-to-book ratios.
Avoiding logistic REITs for the time being. With slower asset appreciation and rental reversion, REITs focusing on the logistics segment rely on acquisitions to drive growth. As risk premiums go up, the increase in cost of capital makes it more expensive to fund new acquisitions on yield-enhancing terms.
Buying opportunities for the brave. The current market turbulence may represent an opportunity to pick up some high-quality REITs at depressed prices. For the bottom-fishing investor, we recommend CapitaCommercial Trust (CCT), K-REIT Asia (K-REIT), CRCT and CMT for their ability to grow organically and via acquisitions. As the market recovers, these higher-quality REITs are likely to be the first to stage a rebound. As seen in the market rebound this week, these REITs had the bigger price appreciation.
CMT – OCBC
Guiding for larger size
Slightly worst off than 1Q. CapitaMall Trust (CMT) reported a modest set of 2Q07 results with revenue rising 35.8% YoY and 6.7% QoQ to S$103.9m. Income available for distribution (IAD) grew 27.6% YoY, but down 5.2% QoQ to S$48.8m. CMT declared 2Q DPU of 3.12 cents or +13% YoY and +4.0% QoQ. This is slightly below our forecast of 3.16 cents. The anomaly between sequential decline in the IAD and a sequential growth in DPU was due to a low DPU base. In 1Q07, CMT distributed only 90% of its IAD. If 100% of its 1Q07 DPU were distributed, its 1Q07 DPU would have been 3.3 cents (instead of 3.0 cents) resulting in 2Q07 seeing a 5.5% sequential decline, which is comparable to its IAD negative growth.
Higher operating costs and management fees to blame. CMT’s better sequential top-line performance was mainly attributed to the acquisition of 72.8% of CapitaRetail Singapore (CRS) bonds. However, the better revenue could not offset its higher operating costs which rose 19.3% QoQ. This was compounded by higher manager/trust fees which rose 22.7% QoQ. The net effect is that CMT suffered NPI margin decline of 4% QoQ to 65%. CMT attributed the higher operating costs to higher property tax and higher marketing and maintenance expenses. As for the higher managers’ fees, this was probably due to higher fees from the revaluation of its portfolio. An extra S$290m in revaluation surplus was added in 2H07.
Completed acquisition of CapitaRetail Singapore bonds. Over the last quarter, CMT completed the acquisition of 72.8% of CRS class E bonds for an aggregate value of S$516.9m. As CMT previously already owned 27.2% of CRS, it now owns 100% of CRS bonds and hence all the 3 malls within CRS.
Maintain HOLD. With the CRS acquisition, CMT’s asset size has been boosted from S$4.6bn (end 2006) to S$5.6bn (including revaluation surplus of S$290m from recent revaluation). Furthermore, with the likelihood of CMT acquiring a development project soon, it is on target to achieve an asset size of S$7.0bn by 2009. In light of this, CMT has revised up its target asset size to S$8.0bn by 2010. Even with the revalued portfolio, CMT is not cheap, trading at a very high price-to-book of over 1.75x and with yield at about 3.5%. We thus maintain our HOLD rating and fair value of S$3.44.
CMT – BT
CMT’s Q2 net income up 27.6% to $48.8m
The Reit’s strong Q2 showing is due to good revenue growth
CAPITAMALL Trust (CMT) yesterday said that distributable income for the second quarter ended June 30, 2007, rose 27.6 per cent year-on-year to $48.8 million, boosted by higher rents and earnings from its newly acquired stake in Raffles City.
Distributable income for the same three months in 2006 came to $38.3 million. CMT bought 40 per cent of the Raffles City retail and office complex on Sept 1 last year.
Distribution per unit (DPU) increased by 12.6 per cent to 3.12 cents, from 2.77 cents for 2006.
For the first six months of 2007, CMT recorded a 26.2 per cent jump in distributable income to $95.7 million while DPU rose 11.5 per cent to 6.12 cents.
CMT, which is the largest real estate investment trust (Reit) in Singapore, has an asset size of about $5.7 billion. The trust said that it owns 13 per cent of the private retail stock by net lettable area in Singapore.
The trust’s strong second-quarter showing was underpinned by good revenue growth as most of its malls performed better than expected in the second quarter, it said.
Net property income for the three months rose 36.2 per cent to $67.1 million, mainly due to revenue of some $16.3 million from CMT’s Raffles City stake. Another $6.4 million increase in revenue came from other malls mostly due to new and renewed leases as well as higher revenue from IMM Building which benefited from asset enhancement works.
‘We remain confident of the acquisition opportunities in Singapore and have raised our target asset size to $8 billion by 2010,’ said Hsuan Owyang, chairman of CMT’s manager.
In the second quarter, the trust said it will pay some $290.3 million for three local suburban shopping malls here.
The Reit may also buy 50 per cent of Ion Orchard, a mall its parent company CapitaLand is developing with Hong Kong’s Sun Hung Kai Properties along the Orchard Road shopping belt.
CapitaLand’s stake in the mall, which is expected to be completed by end-2008, is worth more than $1 billion, Pua Seck Guan, chief executive of CapitaLand’s retail arm, told reporters yesterday.
The trust also plans to spend $169 million upgrading its malls this year, and another $127 million in 2008.
Amid a broad market retreat, CMT’s shares fell 12 cents to close at $3.64 yesterday. The stock has climbed 25.1 per cent since the start of the year.
CMT – DBS
More of Funan Digilife in store
Unutilised GFA paves the way for development plan. Asset enhancement plans are continually unwrapped by CMT, creating value to its portfolio on a consistent basis. This time, it centres around 385,000 sf of unutilised GFA of derived from a maximum plot ratio of 7x. This paves the way for further value creation opportunities for CMT on top of the various asset enhancement initiatives as discussed in our previous note on various assets under its portfolio.
Office extension in store. As revealed by CMT recently, its planning application has received provisional approval from URA, paving for the development of a nine-storey commercial building as an extension to the existing retail mall. To achieve a more efficient floor plate for the proposed new office block extension, CMT is appealing to URA for an additional waiver. We expect CMT to disclose more details for this new development soon as the latest edition of a consistent string of AEI initiatives, pending finalisation of details with URA.
Preliminary assumptions. Assuming S$400 psf development cost for the office extension fully funded by debt with 80% efficiency of floor plate, we expect this piece of asset enhancement to be highly accretive ROI of 15% on book costs of development (inclusive of DC) based on our estimates. We expect DPU accretion of 6% to our 2011 DPU estimates, assuming a three-year development time frame.
Raising TP to S$4.31. Factoring the potential addition of Funan Extension to CMT’s portfolio, we derive accretion of 24 cents to our DCF-based target price of S$ 4.31 (inclusive of surplus on CRCT stake). Maintain Buy on CMT, in our view the primer of S-REITs supported by consistent performance in organic growth, asset enhancement initiatives as well as acquisitions-driven growth reinforced by alternative channels of acquisition pipeline.