• 4Q11 results in line
• Recurring earnings to jump 84%
• Fair value raised to S$1.79
FY11 results above consensus.
CMA reported FY11 PATMI of S$456m, down 15.8% YoY. Adjusting for one-time gains in 4Q (S$177m), earnings would fall to S$279m which is above consensus but in line with our FY11 forecast of S$285m. FY11 topline came in at S$246m, which is mostly flat YoY. Again, this beat consensus ($226m) but was in line with our expectations for S$241m.
Expect recurring earnings to increase significantly.
Major Shanghai malls, Minhang and Hongkou, have successfully opened for retail operations with opening costs already accounted for.
We also saw an encouraging same-mall YoY NPI growth of 20.7% and 4.9% in major markets China and Singapore respectively. In our view, the execution of CMA’s growth plan is coming through smoothly, with the majority (62%) of CMA’s Chinese malls currently operational versus 40% as of end 3Q11. We also forecast recurring profit to jump 84% from S$120m in FY11 to S$221m in FY12 and expect strong earnings growth to be a major catalyst ahead.
Acquisitions to be opportunistic in FY12.
Management did not give a specific target for capital deployment in FY12 and we believe they would take a more opportunistic stance in terms of acquisitions ahead. This is reasonable given significant capital commitments ahead for greenfield projects in the pipeline. Though there is leverage headroom given the current gearing of 3.9%, we believe management could be looking to divest mature malls to fund equity commitments.
Conviction BUY among developers.
We also expect China’s loosening monetary policy stance to limit the downside for CMA’s Chinese exposure and update our bear scenario to reflect a lessened downside for Chinese cap values. We update our model and maintain BUY on CMA as one of our conviction calls amongst developers. Our fair value is raised to S$1.79 from S$1.48 previously, based on a scenario-weighted sum-of-the-parts RNAV valuation.
Company Overview
CMA is a shopping mall developer, owner and manager. It has interests in and manages a pan-Asian portfolio over 90 shopping malls. Its principle business strategy is to invest in, develop and manage a diversified portfolio of real estate used primarily for retail purposes in Asia.
- CMA reported FY11 revenue of $246.2mn (+0.3%) and PATMI of $456mn (-15.8%)
- Strong reval gain of $320.3mn, 64% from operational malls, 36% from malls under development
- >60% of China NAV operational, 9 malls openings in 2012
- Maintain Buy with unchanged target price of S$1.77
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