Most analysts continue to advise investors to accumulate CapitaLand Mall Trust (CMT) following its 3Q and 9MFY20 results ended Sept 30.
But not RHB Securities.
The brokerage has kept its “neutral” call for the trust with an unchanged target price of $2.03, warning that CMT’s rents will remain under “pressure”.
It points out that the trust’s key malls – Raffles City Singapore, Bugis Junction, Tampines mall, Lot One Shoppers mall and Bugis+ – saw significant rent declines.
Moreover, the impact of Covid-19 has been more severe on downtown malls as compared to suburban malls, due to a lack of tourists and work from home trends, it says.
“Looking ahead, we expect rent reversions to be in the -5% to -15% range as maintaining a high occupancy is expected to be the key focus,” RHB analyst Vijay Natarajan writes in a note Oct 26.
In addition, CMT’s valuations are not compelling in RHB’s view as the trust is trading at about one-time book value and 5% yield this year.
According to CGS-CIMB Research, CMT is still an “add” albeit with a lower target price of $2.13 down from $2.26 previously.
The brokerage believes that the trust has already priced in the near-term volatility.
Furthermore, it notes that the benefits of CMT’s merger with CapitaLand Commercial Trust (CCT) into CapitaLand Integrated Commercial Trust (CICT) would be “felt in the longer run” when it delivers on accelerated growth prospects.
“We look forward to the merged CMT-CCT entity (effective Oct 21) which will commence trading as CICT on Oct 28,” CGS-CIMB analysts Eing Kar Mei and Lock Mun Yee write in an Oct 22 report.
OCBC Investment Research has also maintained its “buy” rating for CMT with a fair value of $2.38.
While the overall operating landscape remains challenging, the brokerage notes that there are encouraging signs.
These include an improved momentum in sales for several trade categories, led by home furnishing and sporting goods.
Tenants are also proactively rolling out new concepts, while CMT’s occupancy cost remaining within its comfortable level of 18-20%, it says.
Some tenants have also expressed interest to expand, it adds, although this would likely happen only in late 2021 or 2022.
OCBC points out that the trust’s higher distribution per unit (DPU) of 3.1 cents could be a positive sign.
“Although this was a one-off boost, we view it as a signal that CMT is more confident on the outlook for it to release the bulk of its income previously retained,” the OCBC research team writes in a noted dated Oct 23.
Maybank Kim Eng also highlights that CMT’s tenants’ sales have gained traction in the Phase 2 reopening.
This should underpin the recovery of its suburban assets, it adds.
Together with CMT scale, this will help cushion its DPUs in FY21-22 against necessary tenant remixing at Raffles City and Clarke Quay in the near term, it says.
The brokerage has kept its “buy” recommendation for CMT with an unchanged target price of $2.35.
“Spending on the mend,” Maybank KE analyst Chua Su Tye writes in an Oct 22 report.
As at 12.33 pm, CMT was down 2 cents or 1.1% at $1.86 with 5.7 million units changed hands.
