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.
CMT – CNA
CapitaMall Trust’s Q3 distributable income up 23% to S$74.9m
CapitaMall Trust (CMT) said on Thursday that its distribution per unit (DPU) for the third quarter stood at 2.354 cents.
This is a 23 per cent improvement over the 1.91 cents DPU, for the same period last year after adjusting for a rights issue.
Moreover, its distributable income for the third quarter was S$74.9 million – a 23.3 per cent on-year improvement. Its net property income also rose 8.8 per cent to S$94.52 million.
CMT said the better performance came on the back of higher lease and rental renewal rates. It also said that its acquisition of “The Atrium@Orchard” and the completion of asset enhancement initiatives at Sembawang Shopping Centre boosted its revenue.
Looking ahead, it noted that the economic activity will probably remain below pre-crisis levels in the near term, even though a modest recovery is underway.
However, the company expects its large and diversified tenant base to provide a firm support for occupancy rates and rental revenue at its shopping malls.
For the next two quarters, CMT said retail sales are expected to be supported by festive spending.
Earlier this year, CMT launched a rights issue to raise S$1.23 billion.
MLT – CNA
Mapletree Logistics Q3 DPU down 19.6% on year
Mapletree Logisticis Trust has reported a third quarter distribution per unit of 1.48 cents, down 19.6 per cent from a year earlier.
The fall in DPU was mainly due to the enlarged number of units as a result of a rights issue in August last year. However the DPU was the same as in the second quarter.
Net property income for the three months ended September rose 9.5 percent to S$44 million.
MapletreeLog said the result reflects the resilience of its portfolio which continues to enjoy high occupancy rates and sustained rental rates.
Looking ahead, the logistics REIT said it expects pressure on occupancy and rental rates to ease a little with the improving outlook.
It added that the impact of the economic crisis on the current capital and real estate markets has thrown up some acquisition opportunities in Asia which it intends to look into.
CCT – BT
CCT posts 20.8% rise in Q3 distributable income
Boost from positive rent reversions and cost savings
CAPITACOMMERCIAL Trust (CCT) has posted a 20.8 per cent year-on-year increase in distributable income for the third quarter to $52.14 million.
Net property income rose by 15.5 per cent to $77.1 million on the back of positive rent reversions as well as cost savings from lower property taxes.
In addition, CCT’s distributable income for Q3 was boosted by lower interest expense arising from the prepayment in July of a $664 million debt from proceeds from the trust’s rights issue in June.
CCT’s distribution per unit (DPU) for Q3 ended Sept 30, 2009, was 1.85 cents, down from 3.10 cents in Q3 last year.
After adjusting for the issued rights units, the DPU rose from 1.54 cents to 1.85 cents, the trust manager said. Unitholders will not receive any distribution for Q3 as the trust distributes semi-annually.
The trust’s distributable income for the first nine months of this year rose 26.5 per cent to $145.6 million. Net property income improved 31.2 per cent to $220.2 million.
Given the positive rental reversions, the average monthly office rent for CCT’s portfolio has improved about 18 per cent over the past year, from $7.20 per square foot per month as at end-Q3 2008 to $8.49 psf as at end-Q3 2009.
CapitaCommercial Trust Management Ltd (CCTML) chief executive Lynette Leong is upbeat about Singapore office demand returning to positive territory and rental rates stabilising.
‘From our experience of recent increased office leasing enquires, our tenants’ feedback on better business prospects and, to some extent, a few tenants even asking for more space, I think that these are positive signs of demand returning,’ she said.
‘The recent better GDP figures also support the more upbeat economic environment, and we are comforted that the worst is behind us. What it also means is that the negative demand that we’d seen in the office market has been capped, and to what extent the ‘needle’ moves to positive will depend on the rate of economic recovery,’ she added.
CCT, with a total asset size of $6.3 billion as at Sept 30, 2009, has 11 properties in Singapore and holds investments in Malaysia. Among CCT’s Singapore properties that saw significant improvements in net property income between Q3 last year and Q3 2009 were Capital Tower, Six Battery Road and Raffles City.
While the rate of decline in office rents eased and leasing activity improved in Q3, uncertainties still loom over the office market, with pressure from secondary supply and new office supply that will be added to the market, CCTML acknowledged.
The trust owns 60 per cent of Raffles City, with the other 40 per cent held by CapitaMall Trust. The duo will begin reconfiguring basement 1 space in the mall this quarter.
The total capital expenditure for the initiative is about $33.2 million with an expected 8 per cent return on investment. The works will, among other things, connect the current City Hall MRT Station to the new Esplanade Station through Raffles City’s basements 1 and 2.
The Esplanade Station is expected to open by Q3 2010. ‘With this latest link to the Circle Line, there will be three train lines bringing shoppers to Raffles City,’ CCTML said.
CMT – Daiwa
No bargain
What has changed?
• CapitaMall Trust (CMT) announced its 3Q09 results on 22 October 2009. Its net-property income (NPI) of S$94.5m and distribution per unit (DPU) of 2.35¢ were both 1.2% above our forecasts.
Impact
• Gross revenue was 1.7% higher than our forecast, due to better-than-expected contributions from Raffles City and other assets. Lease renewals and signings for 3Q09 were done at an average of 2.3% above preceding rents, slightly above the average increase of 1.5% for 1H09. The market has recovered slightly, but we still regard leasing conditions as sluggish. CMT’s shopper traffic dipped by 3.2% YoY and 2.4% QoQ. The manager attributed the quarterly decline to the opening of ION Orchard. Management’s tone was still cautious about asset enhancement initiatives (aside from those planned for Raffles City and Jurong Entertainment Centre) and the bidding for the public-housing mall in Clementi.
• We have not changed our assumption that the CMT portfolio will face an average rental reversion of -1.5% for 2010, remain flat for 2011, and recover to an average rental reversion (over preceding rents) of 6% for 2012. After finetuning our assumptions, we have revised up our DPU forecasts by 0.5% for
FY09, 1.0% for FY10, and 1.5% for FY11.
Valuation
• We maintain our six-month target price of S$1.54, based on our RNG valuation (a finite-life Gordon Growth Model), which assumes an effective portfolio cap rate of 6.2% (about 50 basis points above CMT’s prevailing cap rate). On our revised estimates, CMT trades at a 12-month forward yield of 5.1%, the lowest in the Singapore real-estate investment trust sector. CMT’s NAV as at 30 September was S$1.57.
Catalysts and action
• We maintain our 4 (Underperform) rating for CMT. It offers a liquidity premium for yield-starved investors, but compared with other S-REITs, CMT provides neither an attractive yield or value, in our opinion.