CapitaLand Mall Trust Analysis @ 26 July 2020

My previous analysis on CapitaLand Mall Trust (CMT) was on 9 July, let's review after the release of 2Q results on 22 July.

Basic Profile & Key Statistics

NAV has dropped around 4.5% from the previous quarter. TTM dividend yield also dropped, which is expected as DPU drop because of COVID.

Lease Profile

Occupancy drop slightly to 97.7%. The highest least expiry increased to 33.3% which posts a concentrated lease expiry risk. WALE reduced to 2 years, it is still median for retail SREITs with Singapore properties.

Debt Profile

Gearing ratio increased to 34.4%, but it is still healthy. Cost of debt reduced slightly to 3.1%. Fixed rate debt increase slightly to 51.5% and unsecured debt remain at 100%. Interest cover ratio reduced to 4.3 times, it is still healthy and higher than SREITs median level. WADE is long at 4.5 years where its highest debt maturity of 18.9% will be expiring in the year 2023. 

Diversification Profile

No changes in its diversification profile. As a Singapore focus SREIT, CMT is not diversified in terms of geographical. Its top property, top tenant, and top 10 tenants contribute 10.6%, 3.2% and 22.1% respectively. 

Key Financial Metrics

Property yield drop to 5%. Due to distribution retention, Management fees over distribution, distribution on capital, and distribution margin figures are affected. Without retention, management fees over distribution would be 12.5% which translates into S$8.00 dividend for every dollar paid. Distribution on capital would be 3.4% and distribution margin would be 48.4%.

Related Party Shareholding

The sponsor and REIT manager hold significant shares. However, directors of REIT manager shareholding is low.

Trend

DPU is affected by COVID situation, else it is on slight uptrend for the past 5 years. NAV per unit is on uptrend, only dropped once in 2Q 2020. Distribution margin more or less maintain throughout past 5 years.

Fundamental Valuation

Favorable	Less Favorable
Unsecured Debt	Concentrated Lease Expiry
WADE	Top Geographical Contribution
Well Spread Debt Maturity
Top Property Contribution
Top Tenant & Top 10 Tenants Contribution
NAV per Unit Uptrend

Overall, CMT fundamental is slightly affected. However, based on the plus points above, it is still a well managed REIT.

Relative Valuation

i) Average Dividend Yield

Average value at 5.12%, apply past 4 quarters DPU of 9.13 cents will get S$ 1.78. If we take the DPU without retention, then DPU would be 10.52 cents, which translates into S$ 2.05.

ii) Average Price/NAV 

Average value is at 1.09, apply latest NAV of S$ 2.011 will get S$ 2.19

Author's Opinion

By now many should have seen the crowd in retail after phase 2 opening, the situation should be improved, although there is a risk of second COVID wave. I believe in the long run, CMT could continue its good performance, especially after the merger with CCT. For valuation:

i) Fundamental Intrinsic Value = (Removed)

ii) Relative Valuation - Dividend Yield = S$ 2.05

iii) Relative Valuation - Price/NAV = S$ 2.19

At the current price of S$ 1.98, it is considered undervalued still. 

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Please always do your own due diligence before any decision is made.