CapitaMall Trust portfolio kept up a healthy occupancy rate

Fair value S$2.04


2Q12 results within expectations
CapitaMall Trust (CMT) announced 2Q12 distributable income of S$79.6m or a DPU of 2.38 S-cents – up 0.8% YoY. This is mostly in line with expectations, and YTD DPU now makes up 50% and 47% of OIR and consensus FY12 forecast, respectively. 2Q12 topline was S$165.5m, which was up 3.7% mostly due to JCube which opened for operations in Apr 12 and continued positive rental reversions in the portfolio. CMT also booked a S$84.3m divestment gain during the quarter for the sale of Hougang Plaza.

Portfolio occupancy healthy at 98.6%
The portfolio kept up a healthy occupancy rate of 98.6% on a combined basis, as of end 2Q12, with most of the slack coming from the Atrium@Orchard (70.7% occupancy) now undergoing enhancement works. For 1H12, 11% of total NLA has had their leases renewed, of which 84.1% of the tenants were retained. We also saw a 6.4% positive rental reversion, on average, across the new leases. We understand that shopper traffic in 1H12 fell 3.0% YoY, mostly due to construction works near the IMM, Plaza Singapura and competitive pressures at Lot 1 and Funan Centre. Enhancement works at Bugis+, the Atrium@Orchard and Clarke Quay are on track to completion as planned.


Downgrade to HOLD with increased S$2.04 fair value estimate
CMT’s gearing ratio as of end 2Q12 is a comfortable 37.5% (38.3% at end 1Q12), and we note the refinancing of the S$783m secured term loan maturing in Oct 2012 is coming along smoothly with conclusion of the Euro-Medium Term Note Program Series 2 and 3 in Mar and Jun 12, respectively. While we continue to like CMT’s exposure to resilient suburban retail malls, we judge that most of the positives have been priced in at current share price levels, which has appreciated 15.6% to date. Downgrade to HOLD with a higher fair value estimate of S$2.04, versus S$2.02 previously, due to higher values of public holdings and marginally stronger cap rate assumptions.