by winston » Thu Nov 26, 2009 2:17 pm
Not vested. From Kim Eng:-
CapitaMall Trust – Company Update (Wilson LIEW, DID: 64321454)
Previous Day Closing price: $1.72
Recommendation: BUY (upgraded)
Target price: $1.96 (upgraded from $1.69)
Interest in suburban malls is apparent
The tender for Clementi Mall in early November drew a healthy response of six bids and the winning bid by a consortium led by SPH translated to a breakeven of nearly $3,000 psf. CMT’s bid of $338.8m, which translated to a breakeven of about $2,000 psf, came in third. We believe that developers remain selectively keen on suburban mall developments, especially in areas which are still underserved by well-managed malls.
CMA’s platform is a boon to CMT Investor interest in the retail sector was evident with the successful IPO of CMA.
The management of CMA (which has taken over CapitaLand’s 29.9%-stake in CMT) reiterated that CMT is an integral part of the business, as completed retail malls in Singapore will eventually be injected into CMT. We believe that the synergies with CMA are tremendous, as CMT can tap on CMA’s huge tenant pool for its malls, while CMA undertakes the development risks.
Suburban retail positioning exhibits resilience
The Retail Sales Index (excl. motor vehicles) has rebounded off its February 09 low by about 7.5% (at constant prices) as of September. Necessity shopping categories have shown resilience, mitigating waning discretionary shopping. This explains CMT’s high portfolio occupancy rate through the downturn, and we do not see direct competition from new upmarket malls like Marina Bay Shoppes and 313@Somerset.
Still remember the Jurong Lake District?
The blueprint for Jurong Lake District was unveiled over a year ago under the Master Plan 2008, and it will be the biggest commercial hub outside the city to be built over the next 10-15 years (5.4m sq ft of office GFA, >2,800 new hotel rooms). We think that CMT’s redevelopment of JEC is timely and together with IMM, they will be key beneficiaries as the district eventually takes shape.
5.2% yield is looking increasingly attractive
We have increased our DDM-derived target price to $1.96, as we lowered our cost of equity assumption to 8%, and also upgraded our occupancy assumption from 95% to 98.5% for its major malls in 2010. At the current price, we expect a 5.2% DPU yield for FY10 and its AEIs will underpin organic growth going forward. At almost double the 10-year government bond yields, CMT’s DPU yield looks increasingly attractive. Upgrading to a BUY recommendation.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"