CAPITAMALL TRUST, citi upgrade to BUY with target price $3.30
- Upgrade to Buy ¡V We are upgrading CMT from Hold/2L to Buy/1L
following a
sharp decline in price; the stock has fallen 27% from its recent high.
At
the current price, we think market concerns over higher funding costs
and
retail sales are overdone. Asset enhancements are likely to continue to
drive growth.
- Asset enhancements have been key growth drivers ¡V Since its IPO in
2002,
42% of CMT¡¦s DPU growth has been driven by asset enhancements,
reconfiguration and others. Acquisitions accounted for 33% and active
leasing just 20%.
- Just 5% of revenue due to gross turnover ¡V Although approximately
85% of
CMT¡¦s tenants have GTO in their lease agreement, most of their lease
agreements are based on the higher of 1) step-up rental + gross
turnover;
or 2) pure gross turnover. However, in reality, 95% of CMT¡¦s rental
revenue
is due to base rent (step-up rental) and just 5% is due to gross
turnover.
- Refinancing in place ¡V CMT¡¦s current gearing stands at 43.9% with
an
average cost of debt at 3.2%. Approximately S$267.5m (or 8.4%) worth of
debt is due for refinancing, which could be covered by available
facilities
and drawings under the unsecured multicurrency MTN programme. CMT has
also
locked in a 5-year swap for the debt quantum of S$320m due in August
2009.
- CAGR of 12% driven by AEIs ¡V We are projecting a CAGR of 12% pa
driven
largely by asset enhancements. Sembawang Shopping Centre, Plaza
Singapura
and Lot One should drive growth in 2009, while Raffles City, Jurong
Entertainment and The Atrium should drive growth in 2010 and 2011.