CapitaLand Mall Trust Analysis @ 9 Jul 2020

Basic Profile & Key Statistics

Capitaland Mall Trust (CMT) is the first SREIT listed in SGX in July 2002. In January 2020, both Capitaland Mall Trust and Capitaland Commercial Trust (CCT) announced for merger through the acquisition by CMT, initially expected to be completed in June 2020. However, due to COVID, this has been delayed and management announced in May that the Long-Stop Date under the Implementation Agreement remains on 30 September 2020. Once merged, it would become the largest SREITs in terms of market cap.

Lease Profile

Occupancy is high at 98.5%. Income received in SGD is not 100% because of its 11% interest in Capitaland Retail China Trust (CRCT).  WALE of 2.2 years is the median of retail SREITs with Singapore properties. The highest lease expiry by GRI of 32.4% will be expiring in the year 2022, this posts a slight concentrated lease expiry risk. Weighted average land lease expiry is very close to SREITs median.

Debt Profile

Gearing ratio is slightly low at 33.3%. Cost of debt is only slightly higher than the median despite 100% of debt is unsecured. Fixed rate debt is low at only 50%, which is favorable in the current low-interest environment. Interest cover ratio is healthy at 4.6. WADE is long at 4.7 years where its highest debt maturity of around 18% will be expiring in the year 2024. 

Diversification Profile

CMT is not diversified in terms of geographical. However, it is considered very well diversified in terms of property and tenants, which top contribution at only 10.6% and 3.2% respectively. The top 10 tenants' contribution is low as well at 22.1%.

Key Financial Metrics

Property yield and management fees over distribution are close to SREITs median. Distribution margin is low at 42.3% because management has retained capital in the previous quarter due to COVID situation. 

DPU & NAV Trend

Before COVID, DPU is on a slow uptrend for the past 5 years. NAV per unit growth is faster and steadier as compared to DPU.

Fundamental Valuation

Favorable	Less Favorable
Occupancy	Cost of debt
Gearing Ratio	Top Geographical Contribution
Unsecured Debt	Distribution Margin
Well-Spread Debt Maturity
WADE
Top Property Contribution
Top Tenant & Top 10 Tenants Contribution

Overall, CMT is a very well managed SREITs and has operated the longest time in SREITs history. 

Relative Valuation

i) Average Dividend Yield

Average value at 5.15%, apply past 4 quarters DPU of 9.94 cents will get S$ 1.93. If we take the DPU without retention for COVID situation, then DPU would be 11.96 cents, which translates into S$ 2.32

ii) Average Price/NAV 

Average value is at 1.1, apply latest NAV of S$ 2.10 will get S$ 2.31

Author's Opinion

Although the retail sector is hit hard by the restriction on COVID, I believe its performance would return higher than pre-COVID time. And its fundamental would definitely be improved after the merger. For valuation:

i) Fundamental Intrinsic Value = (Removed)

ii) Relative Valuation - Dividend Yield = S$ 2.32

iii) Relative Valuation - Price/NAV = S$ 2.31

At the current price of S$ 2.02, it is considered undervalued. 

*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.