EUR 850.00 For Business Accounts Only

Morningstar | CMT's 2018 Results in Line; Westgate and Funan Underpin Near-Term Growth

CapitaLand Mall Trust owns a portfolio of high-quality malls and retail properties in Singapore and boasts the greatest market share in retail space. Its malls are well managed, situated in densely populated areas, and close to mass transport hubs with high footfall. These attributes are attractive for its diverse tenant base, resulting in high retention rates and near-full occupancy across its properties through business cycles. Nondiscretionary products and services such as food and beverage drive repeat customer visits and account for 30% of gross rental income. The high occupancy and staggered lease expiry profile reduce rental cyclicality and are conducive to stable distributions to unitholders.While Singapore's economy has slowed, economic conditions remain stable to support retail sales and rental income for retail landlords. The unemployment rate remains below the historical average, and income growth is steady. We consider the downtown malls of Plaza Singapura on Orchard Road, a prominent shopping district, and Raffles City in the central business district to be well positioned to benefit from tourism exposure. Uniquely positioned assets, such as IMM (focusing on outlet shopping), Clarke Quay (focusing on bars and clubs), and the redevelopment of Funan (focusing on future technology), are attractive to consumers looking for niche experiences. Its consumer rewards program, which involves 14 of its 15 properties, also encourages consumers to spend at its malls.CMT has a record of generating value for investors from asset-enhancement initiatives. This is achieved through better utilization of floor space, increasing net leasable area by expanding existing properties, and improving tenant and trade mix. Previous asset enhancement works at Tampines Mall, Bugis Junction, and Bukit Panjang Plaza were projected to result in 8%-9% return on investment. In our view, these projects are low-risk growth strategies in delivering higher rent and increasing property value. We expect these asset-enhancement initiatives to remain part of CMT's operations over the long term. Current initiatives include the face-lift at Tampines Mall and the redevelopment of Funan.