SINGAPORE (Oct 24): RHB is maintaining its “neutral” call on CapitaLand Mall Trust (CMT) with an unchanged price target of $2.08 based on a cost of equity (CoE) of -6.9% and terminal growth (TG) of -1.5%.
CMT last week announced a 3Q distribution per unit (DPU) of 2.78 cents, unchanged from a year ago and in line with RHB’s expectations.
See: CapitaLand Mall Trust's 3Q DPU holds steady at 2.78 cents
In a Monday report, analyst Vijay Natarajan says CMT’s current FY17F-18F yields of 5.5% and price to book-value (P/BV) multiple of 1.1 times FY17F are fair, given the current challenging retail conditions.
He makes no changes to his earnings estimates, while expecting flat to slightly-negative rental growth ahead as retail supply remains high amid changing consumer demand.
While noting a soft retail environment based on CMT’s latest rent reversion figures as well as supply challenges that remain in the industry, Natarajan remains positive on the management’s active rejuvenation of CMT’s assets and repositioning of its malls to combat e-commerce threats.
The trust’s management in August announced its divestment of a serviced residence component in the Funan integrated development to Ascott Serviced Residence (Global) Fund for $101.8 million.
“The divestment ought to result in a net gain of $20.6 million. Proceeds are to be used to repay debt, and management noted that it has no imminent plans to distribute the divestment gains. The move is in line with our expectations,” says Natarajan.
“We also expect CMT to divest the office component in the coming years to further lower development risk and enhance its financial flexibility,” he adds.
As at 1.46pm, units in CMT are trading 1 cent lower at $2.05 or 15.6 times FY18 recurring earnings.
