BUY S$1.46
Price Target : S$ 2.51
At a Glance
• In line with expectation, with maiden interim dividend of 1.5cts
• China and Singapore portfolio to further drive earnings growth
• BUY call maintained, TP of S$2.51
Comment on Results
Within expectations. CMA reported a 13.9% yoy drop in revenue to $62.8m largely due to divestment of 3 Malaysian malls to CMMT and sale of Clarke Quay. However, net profit doubled to $164.9m in 1Q11, mostly from revaluation gain of S$143.3m for its China and Singapore properties. On a qoq basis, revenue and net profit rose by 25.2% and 235.9% respectively. The group announced a maiden interim dividend of 1.5cts.
China powering earning growth Operations-wise, the malls achieved average occupancies of 91.6% to 98%. In the 1H11, China and India saw 11.6% and 10.1% yoy growths in revenue respectively. The China malls recorded 22.2% NPI growth powered by strong retail sales (+15.2%) and shopper traffic (+10.4%) resulting in an average NPI yield of 5.3%. Meanwhile, revenue from Singapore and Malaysia dropped by 13.6% and 74.4% respectively due to a smaller portfolio. Japan saw a 12.5% decline in NPI due to higher operating cost.
Large cash hoard, new malls to boost earnings. Going forward, the opening of Minhang Plaza in Shanghai and Celebration Mall in India in 2Q, as well as completions of 3 additional malls in the 2H and 8 next year should underpin earnings stream. The group is in strong financial position with gross cash of S$1.2b and no refinancing requirement this year, ready to undertake development activities at the recently acquired Bedok Mall and Jurong gateway sites.
Recommendation
Maintain Buy. Current valuation at 1.0x P/BV appears undemanding when compared to Hang Lung Properties’ 1.25x. Our target price of $2.51 is based on a 10% premium to RNAV of $2.29.
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