Should You Invest In CapitaLand Mall Trust?
 
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Should You Invest In CapitaLand Mall Trust?

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Listed in July 2002, CapitaLand Mall Trust or CMT (SGX: C38U) is the first and the largest retail REIT to be listed on the SGX. It derives income from a portfolio of 15 retail malls worth S$11.1 billion located across Singapore.

I recently received its latest 2018 annual report and in this article, I’ll give an update on CMT’s latest financial results, growth plans, and valuation. Here are 15 things to know about CapitaLand Mall Trust before you invest.

Disclaimer: This is not a sponsored post. Opinions expressed in the article should not be taken as investment advice. Please do your own due diligence.

Portfolio

1. CMT achieved a compound annual growth rate (CAGR) of 5.4% in its portfolio valuation for the last 10 years, from S$6.9 billion in 2009 to S$11.1 billion in 2018. This is due to the stable capital appreciation of its existing properties and acquisition of key assets such as Clarke Quay, Bugis+, Westgate, and Bedok Mall during the period.

CapitaLand Mall Trust Property Valuation
Source: CapitaLand Mall Trust annual reports

2. The five largest properties contributed to 54.0% of CMT’s total revenue in 2018:

PropertyRevenue (S$ millions)% Of Total Revenue
40% Of Raffles City Singapore92.211.4
Plaza Singapura91.511.3
IMM Building85.810.6
Bugis Junction84.910.5
Tampines Mall81.410.1
CMT's 10 Other Properties371.846.0

3. 40% Interest in Raffles City Singapore (RCS): Gross revenue increased 0.2% to S$92.2 million in 2018 from S$92.0 million in 2017. Net property income (NPI) dipped marginally by 0.3% to S$69.9 million in 2018 from S$70.1 million in 2017. This marks the fifth consecutive year where RCS generated S$65-70 million in NPI. As of 31 December 2018, RCS reported 99.7% and 99.4% in office and retail occupancy rates respectively. The property remains a key source of stable income for CMT.

CapitaLand Mall Trust Stake in Raffles City
Source: CapitaLand Mall Trust annual reports

4. Plaza Singapura: Gross revenue increased by 2.0% to S$91.5 million in 2018 from S$89.7 million in 2017. NPI grew 2.4% to S$68.3 million in 2018 from S$66.7 million in 2017. It is also the fifth consecutive year where Plaza Singapura generated S$65-70 million in NPI. As of 31 December 2018, Plaza Singapura had a 99.9% in occupancy rate; the mall has recorded at least 95% in occupancy rates over the past 10 years.

Plaza Singapura Analysis
Source: CapitaLand Mall Trust annual reports

5. IMM Building: Gross revenue increased by 3.5% to S$85.8 million in 2018 from S$82.9 million in 2017. NPI grew 5.4% to S$60.3 million in 2018 from S$57.2 million in 2017. IMM Building has posted slow and steady growth in gross revenue and NPI over the past 10 years and remains a key income contributor to CMT. As of 31 December 2018, the building recorded an occupancy rate of 99.7%.

IMM Building Analysis
Source: CapitaLand Mall Trust annual reports

6. Bugis Junction: In 2018, Bugis Junction has contributed S$84.9 million in gross revenue and S$61.4 million in NPI, which is at par with results achieved in 2017. The mall remains a popular retail spot; as at 31 December 2018, it recorded an occupancy rate of 99.8%, maintaining its track record of posting near 100% occupancy rates over the last 10 years.

Bugis Junction Analysis
Source: CapitaLand Mall Trust annual reports

7. Tampines Mall: Gross revenue increased by 2.6% to S$81.4 million in 2018 from S$79.3 million in 2017. NPI grew 3.6% to S$60.4 million in 2018 from S$58.3 million in 2017. Over the last 10 years, Tampines Mall has also enjoyed near full occupancy rates and contributed sustainable growth in revenue to CMT. As of 31 December 2018, Tampines Mall had a 100% occupancy rate.

Tampines Mall Analysis
Source: CapitaLand Mall Trust annual reports

REIT Financials

8. Overall, CMT has achieved a CAGR of 4.3% in gross revenues, inclusive of joint venture properties, over the last 10 years, from S$552.7 million in 2009 to S$807.6 million in 2018. This is due to slow and stable growth from its properties and the acquisitions of Clarke Quay, Bugis+, Westgate, and Bedok Mall.

CapitaLand Mall Trust Group Results
Source: CapitaLand Mall Trust annual reports

9. Distributable income has also grown by a CAGR of 4.3% over the last 10 years, from S$282.0 million in 2009 to S$410.7 million in 2018. Distributions per unit (DPU) increased steadily from 8.85 cents in 2009 to 11.50 cents in 2018.

CapitaLand Mall Trust DPU
Source: CapitaLand Mall Trust annual reports

10. CMT has achieved a CAGR of 3.0% in net asset value (NAV) per unit, from S$1.53 in 2009 to S$2.00 in 2018. As of 31 December 2018, CMT reported total borrowings of S$3.64 billion and a gearing ratio of 34.2%. Its average cost of debt is 3.1% a year. As at 28 August 2018, Moody’s affirmed an ‘A2’ credit rating for CMT, the highest among Singapore REITs.

Income Visibility

11. As of 31 December 2018, CMT recorded a portfolio occupancy rate of 99.2%. The REIT has close to 2,800 leases and CMT’s 10 largest tenants account for 19.8% of gross rental income.

Tenant% Of Gross Rental Income
RC Hotels (Pte.) Ltd3.3
Temasek Holdings (Private) Limited2.9
Cold Storage Singapore (1983) Pte Ltd2.4
NTUC Enterprise2.2
Robinson & Company (Singapore) Private Limited2.0
BHG (Singapore) Pte Ltd1.7
Wing Tai Retail Management Pte Ltd1.5
Auric Pacific Group Limited1.3
BreadTalk Group Limited1.3
Isetan (Singapore) Limited1.2

Growth Drivers

Westgate CapitaLand Mall
Source: CapitaLand

12. On 1 November 2018, CMT completed the acquisition of a 70% stake in Westgate for S$789.6 million. The REIT now has a 100% interest in Westgate. Hence, the property will contribute its first full set of financial results as a subsidiary in 2019. As at 31 December 2018, Westgate enjoyed a 99.4% in occupancy rate.

Funan Mall
Source: CapitaLand

13. Funan mall, which has been undergoing redevelopment since 2016, is slated to reopen ahead of schedule by June 2019. The redevelopment will increase the mall’s gross floor area to 887,000 square feet upon completion, from 482,097 square feet previously. Presently, Funan mall has achieved more than 80% in lease commitments ahead of its opening.

Valuation

As of 17 April 2019, CMT is trading at S$2.35 a unit.

14. P/B ratio: As at 31 December 2018, CMT has a NAV per unit of S$2.00. Thus, its current P/B ratio is 1.18, which is slightly higher than its 10-year average of 1.14.

CapitaLand Mall Trust PB Ratio
Source: CapitaLand Mall Trust annual reports

15. Dividend Yield: In 2018, CMT paid 11.5 cents in DPU. Assuming CMT maintains its distribution, its yield is 4.89%, which is below its 10-year average of 5.24%.

CapitaLand Mall Trust Dividend Yields
Source: CapitaLand Mall Trust annual reports

The Fifth Perspective

CapitaLand Mall Trust has delivered slow and steady growth in revenue, NPI, and DPU to its unitholders for the last 10 years. Moving forward, Westgate and the reopening of Funan will serve as immediate growth drivers in the near term.

However, based on its current valuation, CMT looks slightly expensive compared to its historical averages. It should also be noted that at 4.89% per annum, CMT is also among the lowest yielding REITs compared to the rest of Singapore REITs.


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