OCBC research on CMT, among dividend blue chips this is my current top pick cheers
4Q16 results within our expectations
CapitaLand Mall Trust (CMT) reported a 6.1% YoY decline in its 4Q16
gross revenue to S$169.3m, largely due to the absence of contribution
from Funan and Rivervale Mall, which were closed for redevelopment and
divested, respectively. DPU was flat YoY at 2.88 S cents, as management
released S$12.0m of taxable income available for distribution which was
retained from 1H16 but retained S$17.1m of capital distribution following
the sale of the office strata units of Westgate Tower on 20 Oct 2016.
Results were in-line with our expectations. For FY16, CMT’s gross revenue
rose 3.1% to S$689.7m and this formed 98.8% of our full-year forecast.
DPU of 11.13 S cents represented a slight decline of 1.1% and accounted
for 99.3% of our projection.
Firm occupancy, but reversions to remain under pressure
CMT showcased its resilience by recording higher shopper traffic of 2.3%
in FY16, while its tenants’ sales psf per month grew 0.9% despite the
lacklustre retail environment in Singapore. Occupancy at its malls was
also stable at 98.5%, as at 31 Dec 2016 (-0.1 ppt QoQ). However, CMT
experienced a continued moderation in its rental reversion trend, as the
increase in rental rates came in at 1.0% for the full-year (1H16: 1.7%;
FY15: 3.7%). Overall occupancy cost was 19.0% for FY16, versus 18.5%
in FY15. However, on a comparable mall basis, the occupancy cost for
FY15 would instead have been 19.2%. We expect continued pressure on
rental reversions in the foreseeable future, but expect management to
continue its proactive approach in managing its lease expiries, tenant mix
and operational efficiencies.
Maintain BUY
We incorporate this latest set of full-year results in our model, and make
some minor adjustments to our DPU forecasts (FY17 and FY18 projections
lowered by 0.5% and 0.2%, respectively). We also factor in a slightly
higher cost of equity assumption of 7.3% (previously 7.2%), as we raise
our risk-free rate from 2.4% to 2.7%. Rolling forward our valuations, our
fair value estimate is lowered from S$2.23 to S$2.20. However, we
maintain our BUY rating given potential total returns of ~16%.
to prevent myself from spending them but only in blue chips stocks though hahaha
