HOLD S$1.23 STI : 3,084.24
Price Target : 12-month S$ 1.29 (Prev S$ 1.30)
Reason for Report : 2Q11 result
Potential Catalyst: Better-than-expected rental reversion
DBSV vs Consensus: In line, factoring the expected appreciating SGD
• Robust revenue growth from strong rental reversions, but net impact eroded by strong SGD
• Healthy leasing market backed by AEI efforts and strong consumption
• Maintain Hold, S$1.29 TP
2Q11 in line. Gross revenue (in RMB) grew 10.9% yoy and NPI 11.3%. But a 7% stronger SGD led to smaller 3.8% and 4.1% reported numbers, respectively. The trust also recorded a 4.8% revaluation gain from Dec 2010. Excluding that, 2Q11 DPU increased by 3.9% to 2.15cts. Result was relatively flat qoq.
Reaping asset enhancement benefits. CRCT’s malls saw stronger 17% rental reversions for 104 new and renewal leases in Q2. Occupancy was stable at 98.1%. Tenant sales jumped 29.9% yoy (+2.1% qoq) on improving shopper traffic (+14% yoy, +2.5% qoq), supported by China’s robust consumption trend and growing urbanisation. The trust has another 320 leases, or 11.5% of gross income up for renewal in 2H11. With Saihan Mall in its 1st rental reversion cycle, and Wuhu and Xizhimen malls enjoying the benefits of earlier asset enhancement efforts, CRCT should continue to see positive rental reversions. The purchase of New Minzhong Leyuan Mall is completed and will see maiden contribution in 3Q11. Meanwhile, the trust has also successfully refinanced its RMB onshore term loan with an unsecured 3-year onshore term loan at a slight premium to PBOC rate.
Maintain HOLD, $1.29 TP. Balance sheet remains robust with 29.7% gearing post-placement. We nudged down DPU by <1% after imputing the enlarged unit base, which lowered our DCFvalue by 1ct to S$1.29. We are pleased with the result of the trust’s efforts to revamp its malls into multi-tenanted properties for better leverage to rising rents and retail sales, but its nearterm performance is likely to continue to be affected by the strong SGD.
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