Shopping Centre owner CapitaLand Mall Trust has received endorsement from an OCBC analyst.
In an assessment posted online, OCBC analyst Andy Wong says he believes “value has emerged” for the trust following its recent sharp price correction.
“We believe management’s strong track record and CMT’s focus on necessity spending will allow it to better weather the challenges,” Wong wrote.
“Approximately 74.5 per cent of its existing portfolio (by gross revenue) is derived from non-discretionary spending. Once CMT completes the acquisition of Bedok Mall, this figure would be increased to 76.2 per cent.”
Wong said CMT has also managed to deliver positive shopper traffic and tenants’ sales growth of 3.4 per cent and 2.9 per cent year on year in the first half of 2015, “reflecting its resilience”.
“Although rental reversions for 1H15 moderated to 4.6 per cent, versus the 6.1 per cent registered in 1Q15 and FY14, we believe the softer outlook has been priced in by the market.”
Wong said while OCBC had lowered its projections for 2016 and 2017 year performance, it believes management’s strong track record and CMT’s focus on necessity spending will allow it to better weather the challenges than other property owners relying more on discretionary spending for their retail tenants to do well.
CapitaLand Mall Trust’s share price has dipped 17.6 per cent from its peak price this year of S$2.27.
“We believe this was largely driven by the broad market weakness and concerns over an impending Fed lift-off. Given the vagaries surrounding the global economy, headwinds facing Singapore’s retail sector and CMT’s tenant repositioning exercise at some of its malls, we see the need to fine-tune our assumptions by lowering our FY16 and FY17 DPU projections by 3.1 per cent and 4.4 per cent, respectively.”
