Analyst briefings: CapitaLand Mall Trust 2Q19 earnings

CapitaLand’s Funan mall in SingaporeCapitaLand’s Funan mall in Singapore

CapitaLand Mall Trust reported Tuesday its second quarter net property income rose 10.2 percent on-year to S$133.15 million after the acquisition of the 70 percent of Westgate mall it didn’t already own.

Gross revenue for the quarter ended 30 June increased 10.6 percent on-year to S$189.54 million, the trust said in a filing to SGX.

The distribution per unit (DPU) was 2.92 Singapore cents, up 3.9 percent from 2.81 Singapore cents in the year-ago period, the filing said.


RHB said the earnings were in line with its forecasts, with “positive takeaways” from a stable operational performance and newly opened Funan’s healthy occupancy rate.

But the brokerage had some words of caution.

“While retail supply is expected to slow down, challenges remain in terms of sluggish retail sales, changing consumer trends and e-commerce growth,” RHB said in a note Wednesday, pointing to a continued decline in the trust’s tenant sales. “We expect retail sales to remain under pressure for the rest of the year, with ongoing trade tensions continuing to weighing on the local economy.”

But the brokerage added it expected acquisitions were likely in the near term, including looking at Jewel Changi if the sponsor decides to divest its stake.

It raised its target price to S$2.38 from S$2.20, but kept a Neutral call on CapitaLand Mall Trust.

“We believe its share price has run ahead of fundamentals, driven by liquidity and the hunt for yields. We recommend that investors wait for a pullback,” RHB said.


Daiwa downgraded CapitaLand Mall Trust to Hold from Outperform, saying the growth outlook appears to be priced in and valuations “no longer look cheap. ” That was after the unit price jumped around 15 percent so far this year.

“We believe CMT cannot be regarded as cheap by any measure,” Daiwa said in a note Tuesday.

Read more: CapitaLand Mall Trust downgraded by Daiwa on view it doesn’t look cheap

Maybank KimEng

Maybank KimEng said the results were in line with its forecasts, but it pointed to some caution ahead.

“We expect to see a drag on tenant sales across its larger assets under management given the weak retail sales outlook,” the brokerage said in a note Tuesday.

“We think that CMT’s valuations will likely be supported by its scale and trading liquidity within the S-REITs space. But with the lack of near-term growth catalysts and no clear acquisition strategy, we stay at Hold,” it added.

Maybank KimEng raised its target price to S$2.60 from S$2.40 after lowering its assumption for the risk-free rate.

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CGS-CIMB said the results were in line, with first-half DPU at 49.5 percent of its full-year forecast.

The brokerage said it expected the second half of the year would be better as contributions from the newly opened Funan filter in.

But it added that with another 7 percent and a further 26.7 percent of gross rental income due to be recontracted this year and next, respectively, rental growth could remain in the low single digits.

“The influx of 1 million square feet of new incoming retail space in Singapore could result in some short-term competition while retail sales remained weak,” the brokerage said in a note Tuesday.

It kept a Hold call with an unchanged S$2.60 target price.

UOB KayHian

UOB KayHian said the results were in line with its expectations.

“The successful reopening of Funan in June, with committed occupancy at 95 percent for retail space and 98 percent for office space, augurs well for outlook in the second half of 2019,” the brokerage said in a note Wednesday.

It added it estimated Funan would contribute rental income of S$16.5 million in the fourth quarter, or around 8 percent of total gross revenue.

UOB KayHian kept a Hold call, with a S$2.65 target price and an entry price of S$2.42.

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