ed: TH / sa:YM CW, CS
Time to fly • Management of CapitaLand and its managed REITs
spent a fruitful day in Bangkok meeting investors
• Business conditions remain conducive; the groupstands ready to capitalise on any opportunities thatmay arise
• The REITs are reviving their growth engines and hungryfor growth
CapitaLand and REITs Bangkok Day. We hosted the management of CapitaLand (CAPL) and its managed REITs to a bespoke investor outreach conference in Bangkok. Building on a successful conference last year, the 2018 version was even bigger with more investor meetings. The meetings were engaging and focused generally on the outlook and CAPL and its REITs ability to ride through the current market uncertainties owing to heightened global trade tensions, which might weigh on business sentiment and operations.
Business condition remains conducive; group stands ready to capitalise on any acquisition opportunities that may arise. A common theme that we gather from the meetings with management of CAPL and its REITs is that operational outlook for most business segments are turning up, supporting higher earnings growth in 2H18 and 2019. For CAPL, the group looks to keep an even balance between developed and emerging market exposures, so as to achieve resilience against business cycles across different geographies. With close to c.80% of its assets in commercial and lodging properties churning out consistent cashflows, we believe that CAPL remains on a strong footing to weather through any market dislocations and seize opportunities when they arise. In addition, a boost to returns will come from regularly reconstituting its portfolio, which we believe will plot CAPL’s path towards delivering its target sustainable return of equity (ROE) of 8.0-8.5%.
The REITs are reviving their growth engines. The group (CAPL and its REITs) takes an active role in reviewing and optimising portfolio returns on an annual basis. Capital recycling aside, asset enhancements (AEI) and M&A are also key pillars of value creation for the group. Over the past year, ART, CRCT, CCT and CMT have divested non-core assets at good prices, recapitalising their balance sheets in the process. Looking forward, these REITs remain on the hunt for more acquisitions to further diversify their exposures and with an aim to deliver accelerating DPU growth profiles. CMMT has also undertaken a major AEI at Sungei Wang to reposition the asset and underpin its dominant position in the submarket.
STI : 3,243.92
Analyst Derek TAN +65 6682 3716 [email protected]
Carmen Tay +65 6682 3719 [email protected]
Siti Ruzanna Mohd Faruk +603 2604 3965 [email protected]
DBS Group Research . Equity 30 Aug 2018
Singapore Industry Focus
CapitaLand Limited & REITsRefer to important disclosures at the end of this report
STOCKS
12-mth
Price Mkt Cap Target Price Performance (%)
LCY US$m LCY 3 mth 12 mth Rating
Ascott Residence Trust 1.08 1,710 1.25 (2.7) (8.5) BUY
CapitaLand 3.43 10,481 3.62 (1.4) (8.0) BUY
CapitaLand Commercial Trust 1.77 4,853 2.12 4.1 6.6 BUY
CapitaLand Malaysia Mall Trust 1.16 574 1.40 (4.9) (21.6) BUY
CapitaLand Mall Trust 2.17 5,641 2.30 3.3 1.9 BUY
CapitaLand Retail China Trust 1.45 1,030 1.70 (8.8) (8.8) BUY
Source: DBS Bank, AllianceDBS, Bloomberg Finance L.P. Closing price as of 29 Aug 2018
Legend: CapitaLand Limited (CAPL) Ascott Residence Trust (ART) CapitaLand Mall Trust (CMT) CapitaLand Retail China Trust (CRCT) CapitaLand Commercial Trust (CCT) CapitaLand Malaysia Mall Trust (CMMT)
Page 1
Industry Focus
CapitaLand Limited & REITs
Page 2
CapitaLand Limited (CAPL)
Rebalancing the portfolio to enhance resilience against market
cycles. Business cycles across its different geographies may not
move in sync, and management targets to achieve resilience in
operational performance with a 50%-50% balance through
exposures in developed markets (DM) and emerging markets
(EM), which will plot CAPL’s path towards delivering its target
ROE of 8.0-8.5%. In addition, CAPL, having 70-80% of its
income anchored from its commercial portfolio, should boost
income visibility and resilience across market fluctuations. We
believe that the group’s strategy of optimising portfolio
returns through active management and deployment of
capital will help to boost ROE towards the management’s
longer-term target of c.8%.
China remains a key market; adding selectively to land bank to
boost income visibility and returns. China is still showing signs
of stabilisation in recent times. CAPL's fortunes are closely tied
to the operational outlook for the residential and retail markets
there. The group has RMB16.2bn of unrecognised pre-sales; of
which >50% will be recognised in 2H18. Most recently, CAPL
secured development sites in Guangzhou and Chongqing,
adding another c.2,400 homes to its pipeline.
In the retail space, tenant sales growth has remained strong,
achieving a high of 20.2% in 1H18, while same-store mall net
property income (NPI) grew by 7.2% in 1H18, building on the
strength in 2017. With a number of newly opened malls which
have yet to achieve stabilisation, we believe that tenant sales
will continue to grow.
Asset recycling to optimise returns. CAPL continues to look to
recycle its capital to optimise portfolio returns and crystallise
value from past investments or developments to drive returns.
In 1H18, CAPL and its REITs had divested S$3.1bn of assets
and will be redeploying the proceeds into close to S$1.8bn
worth of income-producing and development projects in
China (sites in Guangzhou and Chongqing) and Singapore
(Peal Bank en bloc) and more investments are expected in
2H18 as CAPL looks to replenishing its land bank of trading
properties and grow its commercial portfolio opportunistically.
Scaling up Vietnam. Building on the positive sales momentum
at its residential projects in Vietnam, management remains
positive and see significant opportunities to scale up its
business and targets the country to reach a high of c.10% of
exposure (2% currently) in the longer term. Key supporting
factors fuelling demand for homes include (i) positive
macroeconomic environment (combination of stable GDP
growth, inflation and currency) supported by foreign
investment, and (ii) a fast urbanisation rate coupled with a
young and dynamic workforce contributing to housing
demand.
Top-line growth Asset breakdown (S$62.5bn)
Source: DBS Bank Source: DBS Bank
P/NAV Discount to RNAV
Source: DBS Bank
Source: DBS Bank
+1 SD: 1.05
Mean: 0.89
-1 SD: 0.72
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.40
0.90
1.40
1.90
2.40
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18
(X) Discount
Diff between P/NAV and P/RNAV P/NAV P/NAV (mean) P/NAV (+1 SD) P/NAV (-1 SD)
-80%
-60%
-40%
-20%
0%
20%
40%
CAPL Disc to RNAV Mean -1 SD +1 SD
Residential & Strata Sales,
13%
Retail , 42%Commercial , 27%
Serviced Residences ,
14%
Others, 4%
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
15A 16A 17A 18F 19F 20F
S$'m
Page 2
Industry Focus
CapitaLand Limited & REITs
Page 3
Ascott Residence Trust (ART)
Undervalued gem offering downside protection with upside
participation. Part of The Ascott Limited, ART is a dominant
player with an industry-leading S$5.3bn asset portfolio
comprising serviced residences, rental housing properties and
other income-producing hospital assets.
ART’s resilience is anchored by its diversified network of
c.11,430 units (and growing) over 73 properties across 37
gateway cities currently. Balanced stable (c.46% of gross
profit) vs growth-oriented contract profiles further underpin
income stability while enabling upside participation. Growth
via acquisitions would further cement the group’s position as a
leading global serviced residence operator.
Crystallising value through active asset recycling. Over the past
year, ART has successfully divested two assets in China at low
cap rates of c.2%, implying conservative portfolio valuations.
Despite this, ART continues to trade at a discount to book, at
c.0.9x NAV, which we mainly attribute to investors’ more
cautious stance towards hospitality REITs and ART’s weaker-
than-expected 2Q18 results. To crystallise value, capital
recycling is set to remain a core focus for the group as
proceeds from the divestment of assets with limited growth
are redeployed towards higher-yielding properties, which could
restore investors' confidence in ART ahead of a pick-up in its
core markets.
Acquisitions and AEI to drive DPU recovery over medium term.
Capital recycling aside, AEI and M&A are also key pillars of
value creation for ART. AEIs are typically undertaken every
seven years and have unlocked double-digit ADR (average daily
rate) growth for the REIT post-refurbishment historically.
Opportunities are also abound on the acquisition front from
both the Sponsor and third parties. This includes “lyf”, a new
co-living concept slated for launch by the Sponsor in 2020,
which if acquired, could provide ART with inroads into an
exciting new segment. Currently low gearing of 35.7% also
provides the REIT with the financial flexibility to pursue these
accretive opportunities as they arise, and drive DPUs higher
over the medium term.
The manager is also casting an eye on Europe, Australia and
even the US for opportunities from both Sponsor and third
parties, which when acquired, will drive DPUs higher in the
medium term.
DPU Growth profile Income contribution by contract type (2Q18)
Source: DBS Bank Source: DBS Bank
P/NAV range Yield Trading range
Source: DBS Bank Source: DBS Bank
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2006 2008 2010 2012 2014 2016 2018
P/NAV Multiple (x)
Ascott P/BV Mean +1 SD -1 SD
0.0%
5.0%
10.0%
15.0%
2006 2008 2010 2012 2014 2016 2018
Ascott Yield Mean Yield -1 SD +1 SD
6.50
6.60
6.70
6.80
6.90
7.00
7.10
7.20
17 18F 19F 20F
DPU (scts)
Management Contracts, 54%
Management Contracts with
minimum guarantee, 14%
Master Leases, 32%
Page 3
Industry Focus
CapitaLand Limited & REITs
Page 4
CapitaLand Commercial Trust (CCT)
Riding on the upturn. CCT remains on track to benefit from
the office upturn over 2018-2020 with the planned new
office completions falling to c.0.8m sqft per annum, which is
below the average demand of 0.7m sqft per annum (5-year
average). In addition, in the near term, with new office supply
completing in 2018, Frasers Towers and 18 Robinson Road
reported c.80% and c.55% take-ups respectively. We project
Grade A office rents to rise by up to S$13-14psf by 2020,
implying up to a 40% rise over the next three years, from the
S$10.10psf as of 2Q18. In the longer term, as the government
focuses on decentralising the central business district (CBD),
there will likely be more supply in the fringe and suburban
areas compared to CBD, which should keep further supply risk
in check.
Overseas exposure – adding a lever of growth. The key
consideration in heading overseas is to diversify the REIT’s
earnings and exposure in order to reduce its reliance cyclicality
to the Singapore office cycle. With the acquisition of Gallileo
in Frankfurt, we believe that the long asset WALE of 10.6
years will infuse CCT with greater income visibility and
stability. Management’s choice to expand into Germany is
supported by robust property market fundamentals with
expectations that market rents will continue to rise in the
future on the back of low vacancy levels and limited new
builds in the future.
Asset recycling strategy to crystallise value and CapitaSpring
redevelopment to underpin longer-term upside. Management
has taken advantage of the demand for commercial assets by
selling non-core assets in Singapore at good premiums above
book values. The redevelopment of golden shoe car park into
a Grade A office building CapitaSpring saw its first tenant in
JP Morgan which has committed to take up 25% of the office
tower. The S$1.82bn integrated development, when
completed in 2021 will be an earnings driver to CCT. With a
target yield on cost of 5.0% and with an option to acquire the
property post completion, we believe that there are ample
opportunities to cement CCT’s position as one of Singapore’s
premier office landlords in the CBD.
DPU Growth profile Weighted Average Lease Expiry (WALE)
Source: DBS Bank
Source: DBS Bank
P/NAV range Yield Trading range
Source: Bloomberg Finance L.P.,DBS Bank
Source: Bloomberg Finance L.P.,DBS Bank
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2004 2006 2008 2010 2012 2014 2016 2018
P/NAV Multiple (x)
CCT P/BV Mean +1 SD -1 SD0%
5%
10%
2004 2006 2008 2010 2012 2014 2016 2018
CCT Yield Mean Yield -1 SD +1 SD
8.00
8.25
8.50
8.75
9.00
9.25
9.50
17A 18F 19F 20F
DPU (Scts)
2%
20%17%
21%
8%11%
1%
6%
4%
3%
7%
11%
4%
0%
5%
10%
15%
20%
25%
30%
35%
2018 2019 2020 2021 2022 >2023
Office Retail Hotel Completed
Page 4
Industry Focus
CapitaLand Limited & REITs
Page 5
CapitaLand Mall Trust (CMT)
Resilient in the face of competition. With a balanced portfolio
of suburban and downtown-centric assets catering to the
mass-market segment, CMT serves as a strong proxy to the
Singapore retail scene and has emerged as a leader with a
c.14% market share. While supply remains a key risk for the
sector, we see two potential “disruptors” in Paya Lebar
Quarter and Jewel Changi Airport which will complete in
2019. Given their sheer size, the manager acknowledges that
visitor traffic could see temporal disruptions in favour of these
new assets in their first year of launch but reckons that the
positive rental reversionary outlook will likely remain intact
given high pre-commitments for upcoming supply and CMT’s
well-located assets. Coupled with strategies to cluster retailers
with complimentary offerings and introduce new, experiential
concepts, these should further augment the REIT’s resilience
and premium positioning ahead.
Funan mall when completed in 2H19 will be a re-rating
catalyst. With Funan still undergoing redevelopment, only 14
of CMT’s 15 assets are in operation currently. Regarding the
progress on Funan, the manager shared that it could be ready
for launch in the earlier part of 2H19, ahead of initial
expectations. Pre-commitment for the retail podium has risen
beyond 50%, in line with the manager’s goal of 80% by year-
end. While take-up for office space has been more modest at
c.20%, the manager has been seeing an uptick in enquiries in
recent months and remains cautiously optimistic that its goal
of 70% by end-2018 is achievable. Post launch, we estimate
that Funan alone could contribute c.9-10% of NPI (vs FY17
levels) - a substantial earnings catalyst which could spur a re-
rating in the stock over the near term.
Positioning ahead for the future - Westgate acquisition to
drive growth. Given substantial debt headroom of >S$1bn
(based on 2Q18 gearing of 31.5%), CMT could be on the
lookout for value-accretive assets and announced the
proposed acquisition of a 70% stake in Westgate mall for
S$805m (all in cost), implying a S$2,745 psf. At a 4.3% yield
compared to funding cost of 3.2%, the deal is expected to be
accretive to earnings.
Management shared that full ownership of the mall could be
interesting for CMT given longer-term benefits and
operationally, reversions and occupancy rates appear to be
bottoming out.
Rental Reversion profile DPU (scts)
Source: DBS Bank
Source: DBS Bank
P/NAV range Yield Trading range
Source: Bloomberg Finance L.P.,DBS Bank
Source: Bloomberg Finance L.P.,DBS Bank
0.0
0.5
1.0
1.5
2.0
2.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
P/NAV Multiple (x)
CMT P/BV Mean +1 SD -1 SD
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Yield
CMT Yield Mean Yield -1 SD +1 SD
10.50
10.70
10.90
11.10
11.30
11.50
11.70
11.90
15A 16A 17A 18F 19F 20F
DPU (scts)
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2011 2012 2013 2014 2015 2016 2017 1H18
(%)
Page 5
Industry Focus
CapitaLand Limited & REITs
Page 6
CapitaLand Retail China Trust (CRCT)
Proxy to the Chinese consumption story. The first S-REIT to
invest in Chinese malls in 2006, CRCT has come a long way
since. Through a combination of organic and inorganic
growth initiatives, distributable income has nearly tripled on
the back of a fourfold increase in assets. Except for partially-
closed CapitaMall Wuhu, the 11 malls in CRCT’s portfolio are
generally well located within China’s key cities – each serving
a unique catchment area and well connected via major
transportation access. Given its premium offering and
positioning, we see CRCT as a beneficiary of China’s
burgeoning middle-class population – a trend which is set to
continue ahead.
Capturing higher wallet share amid e-commerce threats.
Discussions on the operating environment were mainly
centred around e-commerce, which has been gaining market
share quickly in China. Addressing this, the manager noted
that opportunities for landlords remain as ground
observations reveal that physical channels continue to
dominate and are still on growth mode.
To capture greater wallet share, CRCT has been revamping its
existing mall offerings through selective AEI and active tenant
remixing to cater to evolving consumption patterns. This
includes deliberate shifts away from department stores –
traditional strongholds towards more experiential offerings
and standalone brands with strong brand equity. Tenant
exposures have also risen in favour of the beauty, wellness
and services segments, which are harder to replicate online.
Portfolio reconstitution underway; potential acceleration of
growth via acquisitions. CapitaMall Wuhu has been
operationally challenged post the resettlement of its
immediate catchment population and lacks growth catalysts.
To be objective, the manager has taken steps to partially close
the asset and is on the lookout for opportunities to monetise
and exit from this market. The management has also
expressed intent to acquire assets with growth potential in
tier-1/2 cities such as Guangzhou and Chengdu. Provincial
cities with positive demographic trends, particularly cities
where the Sponsor already has a presence, will also be of
interest to the group.
DPU Growth profile Gearing profile
Source: DBS Bank
Source: DBS Bank
P/NAV range Yield Trading range
Source: Bloomberg Finance L.P.,DBS Bank
Source: Bloomberg Finance L.P.,DBS Bank
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
P/NAV Multiple (x)
CRCT P/BV Mean +1 SD -1 SD
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
CRCT Yield Mean Yield -1 SD +1 SD
9.6
9.8
10.0
10.2
10.4
10.6
10.8
11.0
11.2
2017A 2018F 2019F 2020F
DPU (Scts)
0%
5%
10%
15%
20%
25%
30%
35%
40%
2017A 2018F 2019F 2020F
(%)
Page 6
Industry Focus
CapitaLand Limited & REITs
Page 7
CapitaLand Malaysia Mall Trust (CMMT)
Cautious on Klang Valley malls. CMMT has noted that the
operating environment will continue to remain challenging
especially in the Klang Valley area due to oversupply in the
vicinity. Both The Mines and 3 Damansara (contributing to
33% of top line) had negative rental reversions in 1HFY18
ranging from -4% to -5% mainly due to management’s
strategy to retain tenants. Looking ahead, we note that the
REIT has 27% of its total portfolio’s NLA up for renewal in
2H18, which we believe will see continued rental reversion
pressures. A majority of the leases expiring will come from The
Mines and Gurney Plaza.
Healthy occupancy rate. The occupancy rate at CMMT’s retail
portfolio remained healthy at 91.5% as at end-June 2018,
slightly lower than 93.7% as at end-March 2018. This is
predominantly supported by its shopping malls outside Klang
Valley, namely Gurney Plaza (96.2%) in Penang and East
Coast Mall (98.7%) in Kuantan, both of which are the leading
retail malls in their respective regions. In order to drive
shopper traffic and sales, management’s strategy is to tweak
its trade mix towards F&B and aims to grow it to c.30% of
gross rental income from c.20.1% currently.
This is to address the growing e-commerce business which has
shifted consumer shopping trend towards lifestyle and
entertainment. They also believe the F&B segment has been
more resilient as compared to the Fashion segment. This could
see reduction in contribution of Fashion currently at 31.9% of
gross rental income, which we believe to be most impacted by
the e-commerce trend.
Improving fortunes at Sungei Wang post planned AEI. Sungei
Wang Plaza remains a drag on CMMT’s portfolio with
negative rental reversions of 12% for 1HFY18 and the
management has embarked on a major asset enhancement
initiative costing RM55m with the aim of repositioning the
mall with new offerings. This is expected to complete in
1Q19. There will be a new annex area which will offer
diversified retail, curated F&B, athleisure and family
entertainment to capture young active shoppers and tourists.
This could see improvement in Sungei Wang’s footfall and
eventually translate into better rental reversions.
DPU Growth profile Gearing profile
Source: AllianceDBS, Company Source: AllianceDBS, Company
P/NAV range Yield (%)
Source: AllianceDBS, Company, Bloomberg Finance L.P. Source: Bloomberg Finance L.P.,DBS Bank
8.91
8.60
8.43
8.22 8.19 8.27
8.47
7.80
8.00
8.20
8.40
8.60
8.80
9.00
FY14A FY15A FY16A FY17A FY18F FY19F FY20F
DPU (sen)
Avg: 5.9%
+1sd: 6.5%
+2sd: 7.1%
-1sd: 5.3%
-2sd: 4.7%
4.0
5.0
6.0
7.0
8.0
9.0
2014 2015 2016 2017
(%)
Avg: 1.09x
+1sd: 1.19x
+2sd: 1.29x
-1sd: 0.99x
-2sd: 0.89x
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Aug-14 Aug-15 Aug-16 Aug-17
(x)
Page 7
ed: TH / sa:YM, CW, CS
BUYLast Traded Price ( 24 Jul 2018): S$1.13 (STI : 3,292.65)
Price Target 12-mth: S$1.25 (11% upside and 5.9% yield)
(Prev S$1.30)
Analyst Mervin SONG, CFA +65 6682 3715 [email protected] Derek TAN +65 6682 3716 [email protected]
What’s New • 2Q18 DPU of 1.84 Scts (flat y-o-y) below expectations
• Results impacted by weaker-than-expected margins and FX headwinds
• Working assets harder to drive future share price performance
Price Relative
Forecasts and Valuation FY Dec (S$m) 2017A 2018F 2019F 2020F
Gross Revenue 496 513 537 559 Net Property Inc 227 243 255 268 Total Return 195 108 115 122 Distribution Inc 152 145 149 154 EPU (S cts) 5.12 5.00 5.30 5.61 EPU Gth (%) (12) (2) 6 6 DPU (S cts) 7.09 6.74 6.89 7.06 DPU Gth (%) (11) (5) 2 2 NAV per shr (S cts) 125 123 122 121 PE (X) 22.1 22.6 21.3 20.2 Distribution Yield (%) 6.3 6.0 6.1 6.3 P/NAV (x) 0.9 0.9 0.9 0.9 Aggregate Leverage (%) 35.4 35.1 35.3 35.4 ROAE (%) 4.5 4.0 4.3 4.6
Distn. Inc Chng (%): (5) (5) (5) Consensus DPU (S cts): 7.00 7.30 7.40 Other Broker Recs: B: 3 S: 2 H: 5
Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P
Waiting to be rediscovered
Oversold. We maintain our BUY call on Ascott Residence Trust
(ART) with a revised TP of S$1.25. We believe the recent share
price correction has been overdone as investors have ignored
the conservative valuation of ART’s portfolio, now pricing it at a
discount to book. Beyond this, we also believe the expected
multi-year recovery of Singapore's hospitality market from
2018, should boost sentiment in the sector, and based on
historical correlations, should lift all boats including ART.
Where we differ – Ability to crystallise book value. Consensus
has a HOLD call with the majority of TPs below ART’s book
value, given its disappointing DPU performance over the past
few years. While acknowledging this concern, we believe DPU
should be on a recovery path soon. More importantly, we
believe the critical factor that would drive ART’s share price is
the trust’s more aggressive execution over the past year of
selling properties that have limited growth and recycling the
proceeds into better-yielding assets. This ability to sell its
properties above book value, and at the same time reduce its
reliance on equity raising to drive growth, warrants ART to trade
above its book value as implied in our TP of S$1.25 in our view.
Recovery in DPU. Beyond crystallising its book value, we believe
the resumption of DPU growth from FY19 onwards, delayed
from our original assumption in FY18, as ART works its assets
harder should prompt a further re-rating. We forecast a two-
year DPU CAGR of 2% over 2018-2020.
Valuation:
On account of weaker-than-expected 2Q18 results, we lowered
our DCF-based TP to S$1.25 from S$1.30.
Key Risks to Our View:
The key risk to our call is potential oversupply in ART’s key
markets and impact from forex volatility. These risks are
mitigated by ART’s diversified portfolio, with no single country
contributing more than 20% of its net property income.
At A Glance Issued Capital (m shrs) 2,160
Mkt. Cap (S$m/US$m) 2,440 / 1,787
Major Shareholders (%)
CapitaLand 44.6
Free Float (%) 55.4
3m Avg. Daily Val (US$m) 2.3
ICB Industry : Financials / Real Estate Investment Trust
DBS Group Research . Equity 24 Jul 2018
Singapore Company Guide
Ascott Residence Trust Version 12 | Bloomberg: ART SP | Reuters: ASRT.SI Refer to important disclosures at the end of this report
77
97
117
137
157
177
197
217
0.9
1.0
1.0
1.1
1.1
1.2
1.2
1.3
1.3
1.4
1.4
Jul-14 Jul-15 Jul-16 Jul-17 Jul-18
Relative IndexS$
Ascott Residence Trust (LHS) Relative STI (RHS)
Page 8
Company Guide
Ascott Residence Trust
WHAT’S NEW
2Q18 softer than expected
(-) 2Q18 DPU flat y-o-y
• 2Q18 DPU was flat y-o-y coming in at 1.84 Scts but
after adjusting for the rights issue and one-off FX gain
last year, 2Q18 DPU would have been up 13% y-o-y.
• However, with 1H18 DPU at 3.19 Scts (-5% y-o-y) and
representing c.45% of our FY18F DPU, the results
were below expectations. While the first half is
typically the seasonally weaker quarter, its usual
contribution is c.47%.
• The weaker-than-expected performance was due to
softer contribution from Australia (depreciation of
AUD) as well as slower recovery in margins at the US,
UK and Singapore operations.
(+/-) Key markets generally flat or up
• ART’s key markets were generally flat or up with the
exception of China and Vietnam.
• UK gross profit in GBP and SGD terms (10% of 2Q18
gross profit) rose 6% and 5% y-o-y respectively,
mainly due to the impact of the refurbished
apartments at Citadines Barbican London and uplift in
leisure demand. This also resulted in a 6% y-o-y
growth in revenue per available unit (RevPAU) in GBP
terms.
• The Singapore operations (11% of 2Q18 gross profit)
saw a 78% y-o-y increase in gross profit but this was
mainly due to the acquisition of Ascott
Orchard. However, NPI and RevPAU for the properties
under management contract (Somerset Liang Court
and Citadines Mount Sophia) were stable.
• Earnings from the Chinese portfolio (9% of 2Q18
gross profit) fell 11% but this was mainly due to the
divestment of Citadines Biyun Shanghai and Citadines
Gaoxin Xian in January 2018. Excluding these two
properties, revenue and RevPAU on a same-store basis
would have increased by 2% and 4% y-o-y
respectively. However, NPI on a same-store basis fell
6% y-o-y in RMB terms due to one-off tax refund and
lower depreciation in 2Q17.
• Gross profit for the Japan portfolio fell 4% y-o-y in
SGD terms (13% of 2Q18 gross profit), mainly due to
a weaker JPY and impact from the divestment of 18
rental housing properties in April 2017. On a same-
store basis, RevPAU was down 1% due to increased
competition and new supply in Kyoto. However, gross
profit increased marginally (+1%) owing to lower
operating and maintenance costs.
• Contribution in SGD terms from US properties (14%
of 2Q18 gross profit) jumped 32% y-o-y due to the
acquisition of DoubleTree by Hilton Hotel New York in
August 2017. The results were also boosted by a 3%
y-o-y improvement in RevPAU to US$243, due to
stronger market demand. However, on a same-store
basis, gross profit remained stable owing to higher
staff costs and marketing expenses.
• Earnings in SGD terms for the Vietnam operations (8%
of 2Q18 gross profit) disappointed, down 19% y-o-y.
This was mainly attributed to fewer project groups in
Hanoi which resulted in RevPAU falling 11% y-o-y to
VND1,528.
(+) Lower gearing
• On the back of higher valuation of properties in
Vietnam, UK, France and Philippines due to higher
earnings following various renovations, gearing fell to
35.7% from 36.1% in 1Q18.
• Borrowing cost was stable at 2.3% with the
proportion of fixed rate debt at 84%.
• NAV per unit now stands at S$1.23 or excluding
distributions at S$1.23.
(+/-) Disappointing results but renewed focus on working assets
harder should drive future earnings growth
• On the back of weaker-than-expected 2Q18 results,
we cut our FY18-20F DPU by 5% after tweaking our
margin assumptions lower and reducing our FX
assumptions on the back of AUD depreciation. As a
consequence of the lower earnings estimates, we also
reduced our DCF-based TP to S$1.25 from S$1.30.
• While we are disappointed with lowering our earnings
estimates again after doing so in 1Q18, we believe
management’s increased focused on working its
existing assets harder should eventually translate into a
return of DPU next year, which should act as a catalyst
for a share price re-rating.
• We also sense a de-emphasis by ART on acquisitions
but rather on asset recycling to crystallise value. A
successful execution on this strategy, should also
restore investor confidence in the stock.
Maintain BUY, revised TP of S$1.25
• With 10% capital upside and decent 5.9% yield, we
maintain our BUY call with a revised TP of S$1.25.
Page 9
Company Guide
Ascott Residence Trust
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 1Q2018 2Q2018 % chg yoy % chg qoq
Gross revenue 124 113 130 5.6 15.7
Property expenses (64.6) (64.1) (67.4) 4.3 5.1
Net Property Income 59.0 48.7 63.1 7.0 29.7
Other Operating expenses (7.8) (7.3) (18.5) 138.6 153.4
Other Non Opg (Exp)/Inc 18.2 2.60 (6.1) nm (334.6)
Net Interest (Exp)/Inc (10.9) (11.2) (11.4) (4.7) (1.7)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Net Income 58.5 32.7 27.1 (53.7) (17.2)
Tax (8.3) (3.2) (14.1) 69.7 346.8
Minority Interest (3.3) (1.4) (3.5) (6.7) 148.2
Net Income after Tax 46.9 28.1 9.48 (79.8) (66.3)
Total Return 70.8 28.1 46.5 (34.3) 65.4
Non-tax deductible Items (28.7) 5.77 (11.5) (59.9) (300.0)
Net Inc available for Dist. 46.9 29.2 39.8 (15.1) 36.4
Ratio (%)
Net Prop Inc Margin 47.7 43.2 48.4
Dist. Payout Ratio 100.0 100.0 100.0
Source of all data: Company, DBS Bank
Page 10
Company Guide
Ascott Residence Trust
CRITICAL DATA POINTS TO WATCH
Critical Factors
Asset reconstitution. ART has engaged in a more active asset
reconstitution strategy whereby it sells properties which are low
yielding or have limited growth potential and recycle the
proceeds into assets which are better yielding and/or provide a
longer sustainable growth profile. Beyond increasing its overall
portfolio earnings power and a resultant higher DPU, the
strategy has allowed the trust to crystallise the value of its book.
In addition, the ability to recycle capital reduces the reliance on
equity raising to fund ART’s expansion plans. These two factors
should help reduce doubts that investors may have on the true
value of ART’s NAV per share and eliminate the discount to
book that the market has placed on ART over the past few
years.
Boost from recent acquisitions. ART recently announced several
acquisitions including Ascott Orchard Singapore, Citadines
Michel Hamburg, Citadines City Centre Frankfurt, and
DoubleTree by Hilton New York, Times Square South. These
acquisitions should help to underscore DPU growth over the
next 1-2 years.
Steady income base. Around 39% of ART’s NPI come from
properties under master leases in France, Germany, Singapore,
and Japan (rental properties). With the prudent use of forex
hedges and having properties under management contracts
with minimum guaranteed income (11% of group NPI) in
Belgium, Spain and UK, ART provides investors with a solid
income base.
Key markets stable if not up. We expect the recovery in the
Singapore hospitality market to help drive ART’s earnings higher
going forward. Furthermore, the changes in regulations for
share accommodation in Japan should also moderate the level
competition which had been a headwind over the last few
quarters, resulting in a more stable earnings profile going
forward. In the medium term, we remain bullish on the
prospects for the Japanese operations given the growing
amount of inbound international tourists into the country. For
the US operations, while supply is expected to grow by 5% p.a.
over FY18 and FY19 in Manhattan presenting potential
downside risks to RevPAR, the market seems to have stabilised
with strong demand resulting in 2Q18 RevPAU rising 3% y-o-y.
Meanwhile, Brexit remains a risk for ART’s UK properties,
however in our view the impact of recent renovations and
continued growth in leisure demand, should provide a steady if
not increasing contribution over the next two years.
Furthermore, with the sale of some of the lower-yielding
properties in China, the stronger performance of ART’s assets in
Tier 1/1.5 cities should shine through. Combined with the boost
from acquisitions, we project ART to deliver a steady two-year
DPU CAGR of 2% over 2018-2020.
Net Property Income and Margins (%)
Net Property Income and Margins (%)
Distribution Paid / Net Operating CF
Interest Cover (x)
Source: Company, DBS Bank
43.4%
44.4%
45.4%
46.4%
47.4%
48.4%
49.4%
50.4%
51.4%
52.4%
0
50
100
150
200
250
300
2016A 2017A 2018F 2019F 2020F
S$ m
Net Property Income Net Property Income Margin %
39%
40%
41%
42%
43%
44%
45%
46%
47%
48%
49%
45
50
55
60
65
1Q20
16
2Q20
16
3Q20
16
4Q20
16
1Q20
17
2Q20
17
3Q20
17
4Q20
17
1Q20
18
2Q20
18
Net Property Income Net Property Income Margin %
0.3
0.4
0.5
0.6
0.7
0.8
2016A 2017A 2018F 2019F 2020F
(x)
3.80
3.90
4.00
4.10
4.20
4.30
4.40
2016A 2017A 2018F 2019F 2020F
(x)
Page 11
Company Guide
Ascott Residence Trust
Balance Sheet:
Gearing to stabilise at around 36-37%. Post ART’s recent rights
issue as well as announced acquisitions and asset sales in 2017
ART’s gearing settled between 36-37%, which is comfortably
below the regulatory limit of 45%.
Modest refinancing risk near term. As at 30 June 2018, around
9% of loans are to be refinanced in FY18. As a consequence of
ART’s active management of its debt maturity profile, no more
than 25% of borrowings mature in any given year.
Share Price Drivers:
Crystallisation of book value. ART’S share price corrected c.10%
from the middle of January after the strong rally in 2017. We
believe this is an opportunity to increase exposure given there is
hidden value in ART as its properties are conservatively valued.
This can be demonstrated by the several properties being sold at
16-69% premium to book in the past year. Going forward, we
believe as ART continues to demonstrate its ability to sell its
assets at or above the latest valuations as it executes its
portfolio reconstitution strategy, we believe ART will trade up at
a premium to book.
Key Risks:
Interest-rate risks. Any increase in interest rates will result in
higher interest payments and reduce the income available for
distribution, which will result in lower distribution per unit
(DPU) for unitholders. As at 30 June 2018, 84% of ART’s debts
are on fixed rates.
Currency risk. As ART earns rental income in various
currencies, a depreciation of any foreign currency against the
SGD could negatively impact DPU. Nevertheless, through the
use of currency hedges for EUR- and JPY-sourced income, as
well as the benefits from having a diversified portfolio, FX
volatility has had a minimal impact on ART’s earnings
historically. In FY13-FY17, changes in ART’s basket of
currencies had only a net 0.8-1.5% negative impact on
earnings.
Company Background
Ascott REIT's (ART's) investment portfolio primarily comprises
real estate used mainly as serviced residences or rental housing
properties (including investments in real estate-related assets
and/or other related value-enhancing assets or instruments). It
currently has 73 properties located in 37 cities in 14 countries
worth c.S$5.2bn.
Aggregate Leverage (%)
ROE (%)
Distribution Yield (%)
PB Band (x)
Source: Company, DBS Bank
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
2016A 2017A 2018F 2019F 2020F
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2016A 2017A 2018F 2019F 2020F
Avg: 6.6%
+1sd: 7.1%
+2sd: 7.6%
-1sd: 6.2%
-2sd: 5.7%
5.0
5.5
6.0
6.5
7.0
7.5
8.0
2014 2015 2016 2017 2018
(%)
Avg: 0.86x
+1sd: 0.92x
+2sd: 0.98x
-1sd: 0.8x
-2sd: 0.74x
0.6
0.7
0.8
0.9
1.0
1.1
1.2
Jul-14 Jul-15 Jul-16 Jul-17 Jul-18
(x)
Page 12
Company Guide
Ascott Residence Trust
ART share price versus Singapore RevPAR Remarks
Source: Bloomberg Finance L.P., STB, DBS Bank
While only 8% of ART’s
FY17 NPI is sourced from
Singapore, ART’s share
price is highly correlated to
changes in the Singapore
hospitality market,
specifically overall industry
RevPAR performance.
The weak Singapore market
over the past three years
has been a headwind for
ART’s share price
performance.
With the Singapore market
expected to recover from
2018 onwards due to
easing supply pressures
which should result an
upturn in RevPAR, we
expect a rising tide to also
drive ART’s share price
higher.
90
110
130
150
170
190
210
230
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
ART share price (S$) - LHS
12 month rolling industry RevPar (S$) - RHS
Page 13
Company Guide
Ascott Residence Trust
Income Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Gross revenue 476 496 513 537 559
Property expenses (253) (269) (270) (282) (291)
Net Property Income 222 227 243 255 268
Other Operating expenses (28.4) (30.6) (29.6) (30.1) (30.7)
Other Non Opg (Exp)/Inc 4.39 17.3 0.0 0.0 0.0
Net Interest (Exp)/Inc (48.2) (45.1) (50.2) (53.0) (56.4)
Exceptional Gain/(Loss) 0.0 20.8 0.0 0.0 0.0
Net Income 150 189 163 172 181
Tax (31.8) (51.9) (28.6) (30.2) (31.8)
Minority Interest (4.5) (8.3) (7.7) (8.2) (8.6)
Preference Dividend (19.3) (19.2) (19.2) (19.2) (19.2)
Net Income After Tax 94.6 110 108 115 122
Total Return 124 195 108 115 122
Non-tax deductible Items 10.9 (49.4) 31.1 31.4 31.6
Net Inc available for Dist. 135 152 145 149 154
Growth & Ratio
Revenue Gth (%) 12.9 4.4 3.4 4.6 4.1
N Property Inc Gth (%) 8.7 2.0 7.0 5.2 5.1
Net Inc Gth (%) 33.0 16.3 (2.1) 6.6 6.2
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Net Prop Inc Margins (%) 46.8 45.7 47.3 47.5 48.0
Net Income Margins (%) 19.9 22.2 21.0 21.4 21.8
Dist to revenue (%) 28.4 30.7 28.3 27.8 27.5
Managers & Trustee’s fees to sales %)
6.0 6.2 5.8 5.6 5.5
ROAE (%) 4.3 4.5 4.0 4.3 4.6
ROA (%) 2.0 2.1 2.0 2.1 2.2
ROCE (%) 3.3 2.9 3.4 3.6 3.8
Int. Cover (x) 4.0 4.4 4.2 4.2 4.2
Source: Company, DBS Bank
Boost from recent acquisitions
Page 14
Company Guide
Ascott Residence Trust
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018
Gross revenue 124 127 134 113 130
Property expenses (64.6) (68.2) (72.7) (64.1) (67.4)
Net Property Income 59.0 58.7 61.8 48.7 63.1
Other Operating expenses (7.8) (6.8) (9.2) (7.3) (18.5)
Other Non Opg (Exp)/Inc 18.2 10.4 (3.5) 2.60 (6.1)
Net Interest (Exp)/Inc (10.9) (10.8) (11.8) (11.2) (11.4)
Exceptional Gain/(Loss) 0.0 0.0 0.03 0.0 0.0
Net Income 58.5 51.4 37.4 32.7 27.1
Tax (8.3) (29.7) (8.9) (3.2) (14.1)
Minority Interest (3.3) (1.5) (2.0) (1.4) (3.5)
Net Income after Tax 46.9 20.3 26.6 28.1 9.48
Total Return 70.8 96.0 29.8 28.1 46.5
Non-tax deductible Items (28.7) (54.8) 18.9 5.77 (11.5)
Net Inc available for Dist. 46.9 36.3 43.9 29.2 39.8
Growth & Ratio
Revenue Gth (%) 11 3 6 (16) 16
N Property Inc Gth (%) 25 0 5 (21) 30
Net Inc Gth (%) 168 (57) 31 6 (66)
Net Prop Inc Margin (%) 47.7 46.3 45.9 43.2 48.4
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Balance Sheet (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Investment Properties 4,504 4,908 4,818 4,818 4,818
Other LT Assets 68.3 65.7 68.0 71.1 74.8
Cash & ST Invts 143 257 309 322 338
Inventory 0.20 0.21 0.21 0.21 0.21
Debtors 68.7 66.6 68.8 72.0 75.0
Other Current Assets 6.55 195 195 195 195
Total Assets 4,791 5,493 5,459 5,478 5,501
ST Debt 147 264 264 264 264
Creditor 133 237 245 256 267
Other Current Liab 1.57 3.76 3.76 3.76 3.76
LT Debt 1,716 1,681 1,651 1,667 1,684
Other LT Liabilities 112 135 135 135 135
Unit holders’ funds 2,598 3,082 3,063 3,046 3,033
Minority Interests 84.5 89.4 97.2 105 114
Total Funds & Liabilities 4,791 5,493 5,459 5,478 5,501
Non-Cash Wkg. Capital (59.1) 20.8 15.0 6.82 (0.7)
Net Cash/(Debt) (1,720) (1,688) (1,606) (1,609) (1,610)
Ratio
Current Ratio (x) 0.8 1.0 1.1 1.1 1.1
Quick Ratio (x) 0.8 0.6 0.7 0.8 0.8
Aggregate Leverage (%) 38.9 35.4 35.1 35.3 35.4
Z-Score (X) 0.8 0.8 0.9 0.9 0.9
Source: Company, DBS Bank
Page 15
Company Guide
Ascott Residence Trust
Cash Flow Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Pre-Tax Income 150 189 163 172 181
Dep. & Amort. 12.9 13.3 13.3 13.3 13.3
Tax Paid (22.5) (20.2) (28.6) (30.2) (31.8)
Associates &JV Inc/(Loss) 0.01 0.04 (0.2) (0.2) (0.2)
Chg in Wkg.Cap. (12.4) (42.2) 5.78 8.18 7.55
Other Operating CF 72.1 41.0 17.9 18.1 18.4
Net Operating CF 200 181 171 182 189
Net Invt in Properties (57.4) (26.2) (15.4) (16.1) (16.8)
Other Invts (net) (140) (621) 90.2 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0
Other Investing CF 2.09 257 0.0 0.0 0.0
Net Investing CF (195) (390) 74.8 (16.1) (16.8)
Distribution Paid (126) (145) (145) (149) (154)
Chg in Gross Debt 19.0 106 (30.0) 16.1 16.8
New units issued 99.1 438 0.0 0.0 0.0
Other Financing CF (75.8) (71.9) (19.2) (19.2) (19.2)
Net Financing CF (84.2) 328 (195) (152) (156)
Currency Adjustments 1.53 (2.2) 0.0 0.0 0.0
Chg in Cash (77.4) 117 51.6 13.2 16.0
Operating CFPS (S cts) 13.0 10.4 7.68 8.01 8.33
Free CFPS (S cts) 8.76 7.21 7.24 7.64 7.91
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank
Analyst: Mervin SONG, CFA
Derek TAN
S.No.Date of
Report
Closing
Price
12-mth
Target
Price
Rat ing
1: 16 Aug 17 1.18 1.28 BUY
2: 25 Oct 17 1.21 1.28 BUY
3: 29 Jan 18 1.26 1.34 BUY
4: 19 Apr 18 1.14 1.30 BUY
Note : Share price and Target price are adjusted for corporate actions.
1
2 3
4
0.99
1.04
1.09
1.14
1.19
1.24
1.29
1.34
Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18
S$
Includes the acquisition of Ascott Orchard Singapore, Citadines City Centre Frankfurt and Citadines Michel Hamburg
Page 16
Company Guide
Ascott Residence Trust
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 24 Jul 2018 18:10:23 (SGT) Dissemination Date: 24 Jul 2018 18:11:33 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
Page 17
Company Guide
Ascott Residence Trust
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary
position in Ascott Residence Trust recommended in this report as of 29 Jun 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
3. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share
capital in Ascott Residence Trust recommended in this report as of 29 Jun 2018.
4. DBS Bank Ltd, DBS HK, DBSVS, DBSVUSA or their subsidiaries and/or other affiliates beneficially own a total of 1% of any class of common
equity securities of Ascott Residence Trust as of 29 Jun 2018.
Compensation for investment banking services:
5. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months
for investment banking services from Ascott Residence Trust as of 29 Jun 2018.
6. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
7. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Page 18
ed: TH / sa: MA, CW, CS
BUYLast Traded Price ( 8 Aug 2018): S$3.30 (STI : 3,326.74) Price Target 12-mth: S$3.62 (10% upside)
Analyst Derek TAN +65 6682 3716 [email protected] Rachel TAN +65 6682 3713 [email protected]
What’s New • 2Q18 PATMI ahead on strong revaluation gains
• Targeting a balance of 50%-50% exposure indeveloped and emerging markets to ride throughmarket cycles better
• Strong pipeline of pre-sold residential projects in Chinato underpin near-term returns
• Retail malls showing resilient operational performance
Price Relative
Forecasts and Valuation FY Dec (S$m) 2017A 2018F 2019F 2020F Revenue 4,610 5,264 5,654 5,555 EBITDA 3,118 2,939 2,351 2,430 Pre-tax Profit 2,624 2,191 1,593 1,640 Net Profit 1,551 1,258 875 901 Net Pft (Pre Ex.) 1,551 1,258 875 901 Net Pft Gth (Pre-ex) (%) 30.3 (18.9) (30.4) 3.0 EPS (S cts) 36.5 29.6 20.6 21.2 EPS Pre Ex. (S cts) 36.5 29.6 20.6 21.2 EPS Gth Pre Ex (%) 31 (19) (30) 3 Diluted EPS (S cts) 36.4 29.5 20.6 21.2 Net DPS (S cts) 12.0 13.0 14.0 12.0 BV Per Share (S cts) 433 450 458 465 PE (X) 9.0 11.2 16.0 15.6 PE Pre Ex. (X) 9.0 11.2 16.0 15.6 P/Cash Flow (X) 6.5 7.1 nm 22.9 EV/EBITDA (X) 13.7 14.7 19.2 19.0 Net Div Yield (%) 3.6 3.9 4.2 3.6 P/Book Value (X) 0.8 0.7 0.7 0.7 Net Debt/Equity (X) 0.5 0.5 0.5 0.5 ROAE (%) 8.6 6.7 4.5 4.6 Earnings Rev (%): 27 (9) 5 Consensus EPS (S cts): 21.8 22.6 25.7 Other Broker Recs: B: 19 S: 0 H: 3
Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P
Rebalancing strategy bearing fruit
Maintain BUY, TP S$3.62. With only one project to be launched in 2019, we see limited impact on CapitaLand Limited (CAPL) from the recent tightening policy measures given its Singapore residential exposure forms only 5% of RNAV. With its core retail business and development business in Singapore and China on an uptrend in 1H18, we believe that CAPL will deliver strong earnings momentum in 2018. A strong balance sheet with low gearing offers financial capacity to undertake opportunities. Our TP is based on a 25% discount to RNAV.
Where we differ: Further potential for higher dividends which will surprise investors. The 20% increase in dividend payment in FY17, which is sustainable, has provided investors with confidence that all business units are on an uptrend. We believe that CAPL's consistent recycling activities to boost ROEs and returns have set the stage for a further uplift in dividends come 2018. The group has also obtained a share buyback mandate (2% of shares) from its shareholders which should support prices.
Rebalancing its portfolio. Management has articulated a strategy to maintain a 50%-50% exposure to developed markets (DM) and emerging markets (EM) which they believe will offer the group the right balance to ride through market uncertainties and cycles better. Supported by a c.56% exposure to DM markets in 2Q18 offering steady returns (capital upside and income visibility), we believe that CAPL can look for projects in EM exposures to generate alpha and returns over time.
Valuation: Our target price of S$3.62 is based on a 25% discount to our adjusted RNAV of S$4.83/share.
Key Risks to Our View: Slowdown in Asian economies. The risk to our view is if there is a slowdown in Asian economies, especially China, which could dampen demand for housing and private consumption.
At A Glance Issued Capital (m shrs) 4,172 Mkt. Cap (S$m/US$m) 13,767 / 10,066 Major Shareholders (%) Temasek Holdings Private Ltd 40.2 Blackrock 7.0
Free Float (%) 53.0 3m Avg. Daily Val (US$m) 27.4 ICB Industry : Financials / Real Estate
DBS Group Research . Equity
10 Aug 2018
Singapore Company Guide
CapitaLand Version 16 | Bloomberg: CAPL SP | Reuters: CATL.SI Refer to important disclosures at the end of this report
82
102
122
142
162
182
202
222
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
Aug-14 Aug-15 Aug-16 Aug-17 Aug-18
Relative IndexS$
CapitaLand (LHS) Relative STI (RHS)
Page 19
Company Guide
CapitaLand
WHAT’S NEW
A fruitful strategy
2Q18 PATMI ahead on revaluation gains: CapitaLand Limited (CAPL) reported a profit after tax and minority interest (PATMI) of S$605.5m, a 4.4% growth y-o-y. Operating PATMI was down 6.0% y-o-y to S$196.0m. On a 1H18 basis, CAPL's PATMI and operating PATMI were down by 5% and 23% to S$924.6m and S$424.7m respectively.
In 2Q18, the stronger performance was largely driven by its core markets China and Singapore which collectively contributed c.74.8% of revenue (2Q17: 74.5%). This was on the back of higher recognition in China and higher handovers (Century Park in Chengdu, New Horizon in Shanghai) in the quarter followed by stronger recurring revenue streams from newly acquired properties in Singapore, China and new office properties in Germany.
Uplift in fair values from properties in China, Singapore and Europe. 2Q18 EBIT rose 36.6% largely on the back of higher contribution from an expanded portfolio and the consolidations of three REITs from August 2017 and boosted by the revaluations of its investment properties. The group reported a revaluation gain of S$620.1m (S$383.7m from its subsidiaries and S$236.4m from its share of associates and JVs) which mainly arose from CAPL’s assets in Singapore, China and Europe.
Capital recycling strategy ahead of initial expectations. The group sold S$3.1bn of projects in 1H18, across its REITs (CapitaLand Commercial Trust [CCT] and CapitaLand Mall Trust) and selected projects on the balance sheet and funds, which freed up capital to be invested into other opportunities with higher potential returns. As of 1H18, the group had reinvested c.S$1.8bn largely into development projects, namely Pearl Bank Apartments (S$728m), mixed-use site in Chongqing (S$459m) and into Vietnam (S$40.4m) and also added new recurring income streams in Germany (S$569.6m into Galileo through CCT).
Targeting a balance between EM and DM exposures. Management has articulated a strategy to maintain a 50%-50% exposure to developed markets (DM) and emerging markets (EM) which it believes will offer the group the right balance to ride through market uncertainties and cycles better. The group had 56.9% of its exposure to DM as of 2Q18, which implies that the group should be looking to add more EM exposures (higher risk and potential returns) in its capital allocation in the coming months.
Handovers of close to 8,000 units to drive revenues higher: CAPL handed over 1,486 units to home buyers (2Q18: 1,108) mainly from Century Park in Chengdu, New Horizon in Shanghai and Citta Di Mare in Guangzhou. These units have a sales value of Rmb2.2bn. The group has another 8,000 units sold worth Rmb16.2bn which will be handed over
progressively of which more than 50% of the units will be recognised in the coming six months.
Selected China residential launches delayed and continues to grow with new acquisitions. The group launched 746 units in 2Q18 with a sales value of Rmb3,231m. About 97% of the launched units had been sold as of 30 June 2018. The group has a further launch pipeline of 4,000 units which will be timed according to market conditions. The group has also replenished its land bank recently with the acquisition of a 32-hectare site in Chongqing for S$459m. The site, when completed by 2022, is expected to yield 2,100 units with office and retail space.
Strong pipeline in Vietnam. In Vietnam, the group secured S$209m in sales in 1H18 (sold 619 units). About 93% of the projects in Vietnam have another S$811m (2,680 units) to be handed over of which 30% of the units will be handed over in 2018.
Pearl Bank Apartment (Singapore) en-bloc purchase on track. We understand that the group is close to completing the en-bloc purchase of Pearl Bank Apartments by 4Q18 of which the project should be ready to hit the market by 2Q19. While the recent cooling measures are likely to put a dent on potential investors' demand, the unique attributes of the project coupled with its location close to the central business district (CBD) might attract buyers if priced well. We estimate a breakeven of S$2,200-2,300 psf.
Steady net property income (NPI) growth for its retail mall business. Retail Mall business continued to gain traction with 1H18 tenant sales growing by 2.0% in Singapore and 20.2% in China. The group reported steady same-mall NPI growth of 1.7% and 7.2% in Singapore and China respectively, while Malaysia and Japan fell by 5.0% and 5.3% respectively. CAPL continues to add to the growth from this business through the addition of new third-party contracts in China (Chengdu and Guangzhou) and Cambodia (Phnom Penh).
Ascott to grow steadily. Overall RevPAU rose by 4.0% y-o-y mainly from its properties in Singapore (+12%), China (+8%) and Europe (+13%) which more than offset the declines in countries in Southeast Asia (-6%) and Gulf region & India (-9%). The healthy pipeline of over 29,400 units under development is expected to more than double the recurring management fees from S$86.4m to c.S$150m when completed.
Page 20
Company Guide
CapitaLand
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 1Q2018 2Q2018 % chg yoy % chg qoq
Revenue 992 1,376 1,342 35.3 (2.4)
Cost of Goods Sold (616) (773) (771) 25.2 (0.2)
Gross Profit 377 603 572 51.7 (5.2)
Other Oper. (Exp)/Inc (97.9) (101) (93.0) (5.0) (7.7)
Operating Profit 279 502 479 71.6 (4.7)
Other Non Opg (Exp)/Inc 356 21.2 519 45.9 2,349.9
Associates & JV Inc 340 179 330 (2.7) 84.4
Net Interest (Exp)/Inc (91.1) (131) (133) (46.3) (1.4)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Pre-tax Profit 883 571 1,195 35.3 109.2
Tax (72.6) (76.2) (116) 59.2 51.5
Minority Interest (232) (176) (474) (104.8) 169.5
Net Profit 579 319 606 4.5 89.8
Net profit bef Except. 579 319 606 4.5 89.8
EBITDA 992 720 1,346 35.6 86.9
Margins (%)
Gross Margins 38.0 43.8 42.6
Opg Profit Margins 28.1 36.5 35.6
Net Profit Margins 58.4 23.2 45.1
Source of all data: Company, DBS Bank
Page 21
Company Guide
CapitaLand
CRITICAL DATA POINTS TO WATCH
Critical Factors Growing recurring revenues from retail mall portfolio and Ascott. While trading properties (residential development and strata offices) account for 24% of assets, we see continued strength from CMA (CAPL’s retail mall division) and commercial integrated developments, including Ascott Group (its successful serviced residence brand) which form a significant 76% of total assets and are expected to contribute to growing recurring income for the group.
Retail malls seeing good tenant sales growth, operational outlook remains stable. The group’s retail malls in China and Singapore are seeing improving operating metrics - tenant sales in Singapore and China increased by 2.0% and 20.2% respectively in 1H18, while portfolio tenant sales and traffic growth were generally positive across the portfolio. Looking ahead, we expect CMA to drive earnings mainly on the back of the stabilisation of more than 1m sqm of retail space that was completed back in 2017.
Capital recycling strategy ahead of initial expectations. The group sold S$3.1bn of projects in 1H18, across its REITs (CapitaLand Commercial Trust [CCT] and CapitaLand Mall Trust) and selected projects on the balance sheet and funds, which freed up capital to be invested into other opportunities with higher potential returns. As of 1H18, the group had reinvested c.S$1.8bn largely into development projects, namely Pearl Bank Apartments (S$728m), mixed-use site in Chongqing (S$459m) and into Vietnam (S$40.4m) and also added new recurring income streams in Germany (S$569.6m into Galileo through CCT).
Targeting a balance between EM and DM exposures. Management has articulated a strategy to maintain a 50%-50% exposure to developed markets (DM) and emerging markets (EM) which it believes will offer the group the right balance to ride through market uncertainties and cycles better. The group currently has 56.9% of its exposure in DM as of 2Q18, which implies that the group should be looking to add more EM exposures (higher risk and potential returns) in its capital allocation in the coming months.
Residential sales see strong uplift as property market sentiment improves. CAPL continues to see strong momentum in its residential division in China. In Singapore, the group has successfully added to its land bank through the en-bloc purchase of Pearl Bank Apartments which will be launched in 2019 despite the property curbs. In China, the group has locked in more than c.S$3.0bn in sales, offering strong earnings visibility. In 2018, CAPL will be launching a further 4,000 units for sale.
Revenue(S$’m)
Breakdown of Revenue
Retail properties Current 2018 2019 and
beyond
total
Singapore 17 0 2 19
China 41 2 8 51
Malaysia 7 0 9 16
Japan 5 0 9 14
Cambodia 0 0 1 1
Total 70 2 29 101
RNAV of CapitaLand S$'bn
Value of CapitaLand Singapore 8,489.6
Value of CapitaLand China 9,774.7
CapitaMalls Asia 17,409.6
Ascott 4,166.3
Others 735.0
GDV of CAPL Group 40,575.2
Less: Net Debt (11,552.3)
Less: devt capex (8,444.8)
RNAV of CAPL 20,578.1
Total Shares 4,258.6
RNAV per share 4.83
Discount to RNAV 25%
Target price 3.62 Source: Company, DBS Bank
4,000.0
4,200.0
4,400.0
4,600.0
4,800.0
5,000.0
5,200.0
5,400.0
5,600.0
15A 16A 17A 18F 19F 20F
S$'m
CL Singapore35%
CL China42%
CL Vietnam 2%
CL International
19%
Others-2%
2Q18 revenue breakdown by geography
Page 22
Company Guide
CapitaLand
Appendix 1: A look at Company's listed history – what drives its share price?
CAPL's P/NAV vs volumes
Source: Company, DBS Bank
CAPL's P/MAV and RANV
Source: Company, DBS Bank
-
0.50
1.00
1.50
2.00
2.50
3.00
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Units Sold (x)
Volumes transacted (Primary and Secondary) (LHS) CAPL P/NAV (x)
Property upcycle, CAPL's P/NAV rises
on the back of strong pipeline
Global financial crisis A strong pipeline
of unsold inventory weighs on performance
Strong sales of projects at the
start of property upturn
+1 SD: 1.05
Mean: 0.89
-1 SD: 0.72
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.40
0.90
1.40
1.90
2.40
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18
(X) Discount
Diff between P/NAV and P/RNAV P/NAV P/NAV (mean) P/NAV (+1 SD) P/NAV (-1 SD)
Stock trades in a range due to its dwindling residential inventories.
Page 23
Company Guide
CapitaLand
Balance Sheet: Balance sheet remains strong. We forecast debt/equity ratio to remain stable, at below c.0.6x in the coming years. Debt maturity profile remains long at 3.0 years with an average cost of 3.4%. The group aims to maintain a higher level of interest cost hedged.
Share Price Drivers: Strong residential sales to translate into higher prices. CAPL has taken advantage of the improved property sentiment in Singapore to sell most of its existing inventory. The key will be potential land-banking opportunities to replenish its balance sheet. In addition, strong sales in China, we believe, will result in higher prices.
M&A and acquisitions. CAPL is looking at opportunities across the region and with the strong residential sales recorded in recent years across Singapore, China and Vietnam, it makes sense to be replenishing land banks in these countries. Acknowledging strong competition for land, management is looking at opportunities to acquire land through JVs or mergers & acquisitions (M&A) which will offer the group an alternative and lower entry price. The group remains keen to build on its recurring income base and we could see acquisitions in that space.
Asset recycling into listed S-REITs/funds. CAPL will continue to demonstrate its ability to crystallise value through strategic divestments of mature assets to its listed REITs, which are market leaders in their respective subsectors of retail, office and hospitality. The ability to recycle capital efficiently will enable the group to free up capital, improve its balance sheet position and deploy capital to projects with higher returns.
Key Risks: Slowdown in Asian economies. The risk to our view is a further slowdown in Asian economies which could dampen demand for housing and private consumption expenditure and retail sales. This could, in turn, result in slower-than-expected projections.
Company Background CapitaLand (CAPL) is one of Asia’s largest real estate companies headquartered and listed in Singapore. Its two core markets are Singapore and China; while Indonesia, Malaysia and Vietnam have been identified as new growth markets.
Leverage & Asset Turnover (x)
Capital Expenditure
ROE (%)
Forward PE Band (x)
PB Band (x)
Source: Company, DBS Bank
0.0
0.0
0.0
0.1
0.1
0.1
0.1
0.1
0.2
0.2
0.2
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
2016A 2017A 2018F 2019F 2020F
Gross Debt to Equity (LHS) Asset Turnover (RHS)
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
2016A 2017A 2018F 2019F 2020F
Capital Expenditure (-)
S$m
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2016A 2017A 2018F 2019F 2020F
Avg: 11.5x
+1sd: 13.1x
+2sd: 14.8x
-1sd: 9.9x
-2sd: 8.2x7.3
8.3
9.3
10.3
11.3
12.3
13.3
14.3
15.3
16.3
Aug-14 Aug-15 Aug-16 Aug-17
(x)
Avg: 0.8x
+1sd: 0.87x
+2sd: 0.93x
-1sd: 0.74x
-2sd: 0.67x
0.5
0.6
0.7
0.8
0.9
1.0
1.1
Aug-14 Aug-15 Aug-16 Aug-17
(x)
Page 24
Company Guide
CapitaLand
Segmental Breakdown FY Dec 2016A 2017A 2018F 2019F 2020F
Revenues (S$m) CapitaLand Singapore 1,192 1,190 1,787 1,699 1,695 CapitaLand China 2,376 1,356 1,633 2,073 1,938 CMA 588 1,034 874 889 905 Ascott 1,032 1,000 811 830 851 Others 65.3 29.2 160 163 165 Total 5,252 4,610 5,264 5,654 5,555
Income Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Revenue 5,252 4,610 5,264 5,654 5,555 Cost of Goods Sold (3,654) (2,772) (2,671) (3,252) (3,055) Gross Profit 1,598 1,838 2,593 2,402 2,499 Other Opng (Exp)/Inc (435) (455) (478) (501) (527) Operating Profit 1,163 1,383 2,115 1,900 1,973 Other Non Opg (Exp)/Inc 437 789 580 200 200 Associates & JV Inc 708 877 174 181 188 Net Interest (Exp)/Inc (401) (425) (678) (688) (720) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 1,907 2,624 2,191 1,593 1,640 Tax (403) (298) (394) (287) (295) Minority Interest (314) (775) (539) (431) (444) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 1,190 1,551 1,258 875 901 Net Profit before Except. 1,190 1,551 1,258 875 901 EBITDA 2,374 3,118 2,939 2,351 2,430 Growth Revenue Gth (%) 10.3 (12.2) 14.2 7.4 (1.8) EBITDA Gth (%) 2.1 31.4 (5.8) (20.0) 3.4 Opg Profit Gth (%) 11.3 19.0 52.9 (10.2) 3.8 Net Profit Gth (Pre-ex) (%) 11.7 30.3 (18.9) (30.4) 3.0 Margins & Ratio Gross Margins (%) 30.4 39.9 49.3 42.5 45.0 Opg Profit Margin (%) 22.1 30.0 40.2 33.6 35.5 Net Profit Margin (%) 22.7 33.6 23.9 15.5 16.2 ROAE (%) 6.7 8.6 6.7 4.5 4.6 ROA (%) 2.6 2.9 2.0 1.4 1.4 ROCE (%) 2.2 2.6 3.1 2.7 2.8 Div Payout Ratio (%) 35.7 32.9 43.9 68.0 56.6 Net Interest Cover (x) 2.9 3.3 3.1 2.8 2.7
Source: Company, DBS Bank
Income visibility from pre-sold residential units in China and recurring income from its investment properties.
Page 25
Company Guide
CapitaLand
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018
Revenue 992 1,507 1,213 1,376 1,342 Cost of Goods Sold (616) (1,000) (592) (773) (771) Gross Profit 377 507 621 603 572 Other Oper. (Exp)/Inc (97.9) (114) (202) (101) (93.0) Operating Profit 279 393 418 502 479 Other Non Opg (Exp)/Inc 356 265 37.2 21.2 519 Associates & JV Inc 340 136 232 179 330 Net Interest (Exp)/Inc (91.1) (129) (126) (131) (133) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 883 664 561 571 1,195 Tax (72.6) (87.2) (82.4) (76.2) (116) Minority Interest (232) (260) (211) (176) (474) Net Profit 579 317 268 319 606 Net profit bef Except. 579 317 268 319 606 EBITDA 992 810 705 720 1,346
Growth Revenue Gth (%) 10.6 51.9 (19.5) 13.4 (2.4) EBITDA Gth (%) 56.6 (18.3) (13.0) 2.1 86.9 Opg Profit Gth (%) 14.3 40.8 6.5 20.0 (4.7) Net Profit Gth (Pre-ex) (%) 47.5 (45.3) (15.5) 19.2 89.8 Margins Gross Margins (%) 38.0 33.6 51.2 43.8 42.6 Opg Profit Margins (%) 28.1 26.1 34.5 36.5 35.6 Net Profit Margins (%) 58.4 21.0 22.1 23.2 45.1
Balance Sheet (S$m) FY Dec 2016A 2017A 2018F 2019F 2020F
Net Fixed Assets 781 840 935 1,029 1,124 Invts in Associates & JVs 12,617 10,197 10,510 10,828 11,150 Other LT Assets 20,577 38,182 38,539 39,039 39,539 Cash & ST Invts 5,067 6,648 7,017 5,660 5,162 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 1,859 1,471 1,755 1,885 1,852 Other Current Assets 4,839 4,108 3,986 4,093 4,491 Total Assets 45,741 61,446 62,742 62,534 63,318
ST Debt 2,373 2,739 2,739 2,739 2,739 Creditor 4,685 5,442 5,245 4,065 3,819 Other Current Liab 670 622 716 703 698 LT Debt 12,479 18,956 19,456 19,956 20,456 Other LT Liabilities 1,233 1,604 1,604 1,604 1,604 Shareholder’s Equity 17,605 18,382 19,130 19,453 19,759 Minority Interests 6,696 13,701 13,852 14,014 14,242 Total Cap. & Liab. 45,741 61,446 62,742 62,534 63,318
Non-Cash Wkg. Capital 1,343 (485) (220) 1,210 1,825 Net Cash/(Debt) (9,785) (15,047) (15,177) (17,035) (18,033) Debtors Turn (avg days) 114.1 131.8 111.8 117.5 122.8 Creditors Turn (avg days) 444.9 684.0 749.7 533.9 481.9 Inventory Turn (avg days) N/A N/A N/A N/A N/A Asset Turnover (x) 0.1 0.1 0.1 0.1 0.1 Current Ratio (x) 1.5 1.4 1.5 1.6 1.6 Quick Ratio (x) 0.9 0.9 1.0 1.0 1.0 Net Debt/Equity (X) 0.4 0.5 0.5 0.5 0.5 Net Debt/Equity ex MI (X) 0.6 0.8 0.8 0.9 0.9 Capex to Debt (%) 0.5 0.7 0.7 0.7 0.7 Z-Score (X) 1.1 0.8 0.8 0.8 0.8
Source: Company, DBS Bank
Gearing remains steady.
Page 26
Company Guide
CapitaLand
Cash Flow Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Pre-Tax Profit 1,907 2,624 2,191 1,593 1,640 Dep. & Amort. 66.0 69.7 69.7 69.7 69.7 Tax Paid (350) (300) (300) (300) (300) Assoc. & JV Inc/(loss) (708) (877) (174) (181) (188) Chg in Wkg.Cap. 2,292 961 184 (1,416) (611) Other Operating CF 97.5 (311) 0.0 0.0 0.0 Net Operating CF 3,305 2,166 1,971 (234) 611 Capital Exp.(net) (75.2) (149) (164) (164) (164) Other Invts.(net) (575) (2,893) (357) (500) (500) Invts in Assoc. & JV 65.3 1,402 (200) (200) (200) Div from Assoc & JV 393 262 60.9 63.2 65.9 Other Investing CF 121 (392) 0.0 0.0 0.0 Net Investing CF (71.4) (1,770) (661) (801) (799) Div Paid (752) (1,022) (898) (822) (811) Chg in Gross Debt (809) 1,705 500 500 500 Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (901) 297 0.0 0.0 0.0 Net Financing CF (2,462) 979 (398) (322) (311) Currency Adjustments (153) (62.9) 0.0 0.0 0.0 Chg in Cash 619 1,313 912 (1,358) (498) Opg CFPS (S cts) 23.8 28.4 42.0 27.8 28.8 Free CFPS (S cts) 75.8 47.5 42.5 (9.4) 10.5
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank Analyst: Derek TAN
Rachel TAN
S.No.Date of Report
Closing Price
12-mthTargetPrice
Rat ing
1: 16 Aug 17 3.82 4.35 BUY
2: 25 Aug 17 3.71 4.35 BUY
3: 12 Sep 17 3.74 4.35 BUY
4: 08 Nov 17 3.64 4.35 BUY
5: 20 Dec 17 3.53 4.35 BUY
6: 08 Jan 18 3.72 4.35 BUY
7: 14 Feb 18 3.53 4.35 BUY
8: 19 Feb 18 3.63 4.35 BUY
9: 02 May 18 3.76 4.35 BUY
10: 16 May 18 3.57 4.35 BUY
11: 27 Jun 18 3.13 4.35 BUY12: 06 Jul 18 2.99 4.35 BUY
Note : Share price and Target price are adjusted for corporate actions.
12
34
5
6
7
89 10
1112
2.84
3.04
3.24
3.44
3.64
3.84
4.04
Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18
S$
Page 27
Company Guide
CapitaLand
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 10 Aug 2018 09:01:39 (SGT) Dissemination Date: 10 Aug 2018 09:36:57 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
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warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
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associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
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Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
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which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
Page 28
Company Guide
CapitaLand
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
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banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary
position in CapitaLand recommended in this report as of 29 Jun 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
Compensation for investment banking services:
3. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months
for investment banking services from CapitaLand as of 29 Jun 2018.
4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of
securities for CapitaLand in the past 12 months, as of 29 Jun 2018.
5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
Directorship/trustee interests:
6. Euleen Goh Yiu Kiang, a member of DBS Group Holdings Board of Directors, is a Non-Exec Director of CapitaLand as of 30 Jun 2018
Disclosure of previous investment recommendation produced:
7. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Page 29
ed: TH / sa: AS, CW, CS
BUY Last Traded Price ( 19 Jul 2018): S$1.75 (STI : 3,277.58)
Price Target 12-mth: S$2.12 (21% upside)
Analyst Mervin SONG, CFA +65 6682 3715 [email protected] Derek TAN +65 6682 3716 [email protected]
What’s New • 2Q18 DPU of 2.16 Scts (-1.6% y-o-y adjusted for rights
issue impact) in line with expectations
• Benefit from Asia Square Tower 2 and Gallileo
acquisitions not fully realised yet
• Negative rental reversions but narrowing gap between
expiring and spot rents bodes well for positive rental
reversions in the future
• Upside risk to DPU estimates from deployment of
proceeds from sale of Twenty Anson
Price Relative
Forecasts and Valuation FY Dec (S$m) 2017A 2018F 2019F 2020F
Gross Revenue 337 394 409 430 Net Property Inc 265 313 327 345 Total Return 579 302 267 326 Distribution Inc 289 322 331 347 EPU (S cts) 7.57 8.13 8.30 8.70 EPU Gth (%) (4) 7 2 5 DPU (S cts) 8.66 8.69 8.85 9.26 DPU Gth (%) (2) 0 2 5 NAV per shr (S cts) 178 177 177 177 PE (X) 23.1 21.5 21.1 20.1 Distribution Yield (%) 4.9 5.0 5.1 5.3 P/NAV (x) 1.0 1.0 1.0 1.0 Aggregate Leverage (%) 37.3 38.7 38.9 39.2 ROAE (%) 4.5 4.6 4.7 4.9 Distn. Inc Chng (%): - - - Consensus DPU (S cts): 9.0 9.0 9.0 Other Broker Recs: B: 13 S: 1 H: 10
Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P
Leader of the pack
Undervalued. We keep our BUY call on CapitaLand Commercial
Trust (CCT) with a TP of S$2.12. With the correction over the
past few months, we believe CCT remains undervalued ahead
of a multi-year upturn in office rents in Singapore. In addition,
with its property valuations below physical market transactions,
CCT is trading at attractive valuations at the current share price.
Also, the recent expansion into Europe provides another growth
avenue which we believe the market has not fully appreciated.
Where we differ – Deserves a bigger premium. Consensus’ TPs
have moved from a discount to a premium to CCT’s book value
since we advocated that CCT should trade at a premium, as it
demonstrated the conservative valuation of its properties via the
sale of three office buildings at 14-39% premiums to book. But
the 1.08x P/Bk accorded by the market is still too low and CCT
should trade at a P/Bk of 1.2x which is a typical level during
upcycles. Its book also remains understated with buildings such
as Capital Tower and 999-year leasehold HSBC Building priced
at S$1,847 and S$2,275 psf respectively, a discount to recent
transactions of S$2,400-2,700 for comparable buildings.
Multi-year upturn in rents. With Singapore office rents rising
faster than expected and increasing for the fourth consecutive
quarter, hitting S$10.10 psf/mth at end-2Q18, up 13% from
the lows in 1H17, we believe this should generate increased
investor interest in CCT. Focus should turn to the expected
multi-year recovery in office rents as new supply over the
coming three years is limited. This, and the continued rise in
office rents, should act as re-rating catalyst for CCT’s share
price.
Valuation:
We maintain our DCF-based TP of S$2.12. With 20% capital
upside and 4.9% yield, we retain our BUY call and CCT as our
top pick in the office sector.
Key Risks to Our View:
Key risks to our positive view are weaker-than-expected rents.
At A Glance Issued Capital (m shrs) 3,743
Mkt. Cap (S$m/US$m) 6,550 / 4,798
Major Shareholders (%)
CapitaLand Limited 30.0
BlackRock 7.4
Free Float (%) 62.6
3m Avg. Daily Val (US$m) 15.6
ICB Industry : Financials / Real Estate Investment Trust
DBS Group Research . Equity
19 Jul 2018
Singapore Company Guide
CapitaLand Commercial Trust Version 15 | Bloomberg: CCT SP | Reuters: CACT.SI Refer to important disclosures at the end of this report
Page 30
Company Guide
CapitaLand Commercial Trust
WHAT’S NEW
2Q18 results in line
(+/-) 2Q18 DPU of 2.16 Scts
• CCT delivered 2Q18 DPU of 2.16 Scts which was
down 4% y-o-y or adjusting for the rights issue in the
prior year, down 1.6% y-o-y. This took 1H18 DPU to
4.28 Scts (-6.1% y-o-y or -3.7% after adjustment for
rights issue) which represents c.48% of our FY18F
forecasts and is in line with our expectations.
• The decline in 2Q18 DPU was mainly due to the drag
from the higher shares on issue from the recent equity
placement and rights issue in the prior year as well as
loss of income from the sale of Wilkie Edge and
redevelopment of Golden Shoe.
• However, underlying 2Q18 revenue and NPI rose
12.0% and 12.5% y-o-y respectively, largely due to
the acquisition of Asia Square Tower 2 (AST2) and
Gallileo. Excluding the acquisitions and asset sales,
CCT’s core Singapore portfolio revenue and NPI would
have fallen 1.4% and 1.0% y-o-y respectively. This
was largely due to the impact from the negative rental
reversions over the past year.
• Overall portfolio occupancy remains healthy at 97.8%,
marginally up from 97.3% and 97.6% at end-1Q18
and 2Q17 respectively. The uptick in occupancy was
largely due to improvements at 6 Battery Road (99.9%
versus 98.5% in 2Q17) and Twenty Anson (95.8%
versus 84.2% in 2Q17). Further progress has been
made at AST2 with occupancy now at 91.9%
compared to 90.8% at the end of 1Q18.
(+/-) Negative rental reversions but gap between expiring rent
and spot rents narrowing
• Based on the disclosed expiring rents and committed
rents achieved over the quarter, it appears CCT may
have faced negative rental reversions in 2Q18,
following small positive rental reversions in 1Q18.
• However, the gap between spot Grade A office rents
and average expiring rents has narrowed. For 2Q18,
spot rents of S$10.10 psf/mth are now marginally
below average expiring rents of S$10.73 psf/mth. This
compares to spot rents of S$9.40 psf/mth and average
expiring rents of S$11.09 psf/mth in 4Q17. The
narrowing gap and if spot rents continue to climb as
expected, should bode well for CCT starting to deliver
positive rental reversions ahead.
• In addition, signing rents for CCT’s various buildings
remain above the various sub market rents. Over the
quarter, AST2 achieved committed rents of S$11.00-
12.00 psf/mth versus average expiring rents of
S$13.26 psf/mth and submarket rents of S$9.50-
10.95. For CapitaGreen, signing rents were S$10.50-
14.00 psf/mth versus average expiring rents of
S$12.30 psf/mth and submarket rents of S$9.50-10.00
psf/mth. Meanwhile, at Six Battery Road, signing rents
achieved was between S$10.00-13.80 psf/mth versus
average expiring rents of S$12.37 psf/mth and
submarket rents of S$8.40-9.86 psf/mth. Finally, One
George Street, reported committed rents of S$9.10-
9.50 psf/mth versus average expiring rents of S$9.22
and submarket rents of S$8.40-9.86 psf/mth.
• Post the leases signed in 2Q18, only 2% and 24% of
office leases by gross rental income are up for renewal
for the remainder of FY18 and FY19, down from 5%
and 31% respectively.
(+) Revaluation gains from further compression of cap rates
• On the back of a 10-bp compression in cap rates for
CCT’s Singapore office buildings, CCT reported a
1.3% increase in property values for its Singapore
portfolio, resulting in NAV per unit (excluding
distribution income) rising to S$1.80 from S$1.74.
CCT’s Singapore office buildings are now valued using
a cap rate of between 3.5-4.0% versus 3.6-4.10%
previously.
• The higher property values resulted in aggregate
leverage being stable at 37.9% offsetting the impact
from higher borrowings to fund the acquisition of
Gallileo.
• On the back of higher benchmark interest rates,
average borrowing costs ticked up marginally to 2.8%
from 2.7% at end-2Q18.
• The proportion of fixed rate borrowings fell to 85%
from 90% in the preceding quarter.
(+) Upside risk to earnings estimates
• Following the divestment of Twenty Anson on an exit
yield of 2.7%, CCT’s gearing is projected to drop to
c.35%, should it use the proceeds from the sale to
pare down debt. Completion of the sale is expected to
be in 3Q18.
• This provides debt headroom should it deploy its
strong balance sheet for acquisitions in Europe which
we assume would be around the 3-4% yield, leading
to upside risk to our earnings/DPU estimates.
• We believe the likelihood of CCT expanding into
Europe is high given the need to build scale in Europe
following its maiden acquisition there, the lack of
investment opportunities for prime Grade A offices in
Singapore and the better yield spreads on offer in
Europe.
Page 31
Company Guide
CapitaLand Commercial Trust
• Europe currently represents c.5% of CCT’s portfolio by
asset value versus its long-term target of having 10-
20% of assets outside Singapore.
• Given our view that CCT is likely to buy in Europe
sometime in 2H18, we maintain our earnings and DPU
estimates for now.
Maintain BUY
• With 2Q18 results in line with expectations, we
maintain our BUY call with TP of S$2.12.
• CCT remains out top pick in the office space, as it is
the largest and most liquid office REIT. Furthermore,
we continue to like CCT for its exposure to the
expected multi-year recovery in office rents due to
minimal new office supply over the next three years.
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 1Q2018 2Q2018 % chg yoy % chg qoq
Gross revenue 87.5 91.8 98.0 12.0 6.8
Property expenses (18.4) (19.2) (20.3) 10.3 5.6
Net Property Income 69.1 72.6 77.7 12.5 7.1
Other Operating expenses (5.2) (5.6) (5.8) 10.2 3.1
Other Non Opg (Exp)/Inc (4.2) 1.65 0.0 nm nm
Net Interest (Exp)/Inc (17.4) (18.1) (21.2) (21.5) (16.7)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Net Income 68.1 73.5 98.7 45.0 34.3
Tax (0.2) (1.1) (2.2) 1,172.0 96.5
Minority Interest 0.0 0.0 (0.4) nm nm
Net Income after Tax 67.9 72.4 96.1 41.5 32.8
Total Return 0.0 0.0 0.0 - -
Non-tax deductible Items 0.0 0.0 0.0 - -
Net Inc available for Dist. 69.5 76.6 79.4 14.3 3.6
Ratio (%)
Net Prop Inc Margin 79.0 79.1 79.3
Dist. Payout Ratio 100.0 100.0 100.0
Source of all data: Company, DBS Bank
Page 32
Company Guide
CapitaLand Commercial Trust
CRITICAL DATA POINTS TO WATCH
Critical Factors
Recovery in spot office rents. Thus far, we have had four
consecutive quarterly increases in rents. Spot office rents have
increased 12% from the lows in 1H17, reaching S$10.10
psf/mth at the end of 2Q18, according to CBRE estimates.
Given CCT’s share price has historically led a recovery in spot
rents by 6-12 months, with a potential multi-year upturn in
rents due to limited new supply over the next 3-4 years, this
should result in a rally in CCT’s share price.
Staggered weighted lease expiry profile. In 1Q18, CCT surprised
on the upside by reporting positive rental reversions. However,
there are still high expiring rents over the next few quarters
which present some risk of negative rental reversions.
Nevertheless, with a staggered lease expiry profile, only 5% and
31% of office leases are up for renewal (by GRI) for the
remainder of FY18 and FY19 respectively, Thus, the impact of
these negative reversions is contained. Beyond this, a weighted
average lease expiry (WALE) of 5.7 years by net lettable area
(NLA) provides the REIT some measure of earnings stability.
Medium-term upside from redevelopment of Golden Shoe Car
Park. CCT has announced that it has entered into a JV with its
sponsor, CapitaLand Limited (CAPL) and Mitsubishi Estate Co.,
Ltd (MEC), to redevelop its Golden Shoe Car Park property into
a 635,000-sqft office tower with a 299-room serviced
apartment block. CCT and CAPL will hold 45% interest each,
with MEC owning 10%. Costing S$1.82bn with a targeted yield
on cost of 5% and to be completed in 1H21, the property will
provide a medium-term uplift to CCT’s earnings and its current
NAV per unit (excluding distributions) of S$1.74. To date, CCT
has secured an anchor tenant in the form of JP Morgan which
will take 24% of the office space in the building.
Acquisition of Asia Square Tower 2 to provide additional
leverage to office upturn. While we expect dilution to
underlying FY18 DPU due to the recent rights issue to fund the
acquisition of AST2, we believe the acquisition is a medium-
term boost to CCT. Specifically, it improves the quality and
resilience of CCT’s portfolio, given it provides CCT the option to
offer a property in the Marina Bay area should tenants decide to
move from Shenton Way or Raffles Place. The expansion of
CCT’s portfolio also provides additional leverage to the
recovering Singapore office market over the coming 3-4 years.
Overseas expansion. CCT recently expanded overseas with its
maiden acquisition of an office building, Gallileo in Frankfurt
Germany on a 4% NPI yield. We expect this to provide another
leg of growth for the trust but more importantly limit downside
risk to CCT’s book value given Gallileo's freehold status. With
the recent sale of Twenty Anson, we believe further expansion
into Europe would provide additional upside to our earnings
estimates.
Net Property Income and Margins (%)
Net Property Income and Margins (%)
Distribution Paid / Net Operating CF
Interest Cover (x)
Source: Company, DBS Bank
Page 33
Company Guide
CapitaLand Commercial Trust
Balance Sheet:
Gearing to settle around 38-39%. Post the recent divestment of
Twenty Anson, gearing is expected to fall to c.35%. However,
we expect CCT’s gearing to stabilise at around 38-39% should
it use these sale proceeds for an acquisition in Europe.
High proportion of fixed rate debt. As at 30 June 2018, around
85% of CCT’s borrowings were on fixed rates.
Share Price Drivers:
Recovery in the office market. With CCT’s share price historically
tracking the office market by 6-12 months, we believe a
recovery in office rents next year will lead to a further re-rating
in CCT’s share price. In our view, further market transactions,
which are above the implied price per sqft of CCT’s Singapore
office portfolio, should also drive CCT’s share price higher.
Acquisitions. Should CCT identify more DPU-accretive
acquisitions in Europe, we believe this will act as a re-rating
catalysts as it would accelerate CCT’s medium-term growth
profile.
Key Risks:
Competition from other landlords. While pre-commitment
levels of the recently completed office buildings in Singapore
are high, CCT could face higher competition from buildings
which had lost tenants to the new office buildings.
Pressure on rents from shadow space. We see some
downsizing activity from banks and financial institutions, and
shadow space (particularly in the Marina Bay area) could put
some pressure on rents for CCT’s portfolio, which is located
primarily in the Raffles Place/Tanjong Pagar areas.
Interest rate risk. Any increase in interest rates will result in
higher interest payments that the REIT has to make annually to
service its loans. Nevertheless, the risk is partially mitigated by
the fact that c.85% of CCT’s debts are on fixed rates.
Company Background
CapitaLand Commercial Trust (CCT) is the first and largest
commercial REIT listed in Singapore. It owns nine properties
located in Singapore’s CBD worth c.S$10bn and recently
expanded into Europe with the purchase of an office building
in Frankfurt.
Aggregate Leverage (%)
ROE (%)
Distribution Yield (%)
PB Band (x)
Source: Company, DBS Bank
Page 34
Company Guide
CapitaLand Commercial Trust
CCT’s share price versus Singapore office rents Remarks
Source: Bloomberg Finance L.P., CBRE, DBS Bank
CCT’s share price has
historically led the upturn
and downturn in spot office
rents by 6-12 months.
Over the past year, CCT’s
share price has rebounded
in anticipation of a recovery
in the office market, which
we believe has been
validated by the four
consecutive quarterly
increases in spot rents since
2Q17.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
0.00
0.50
1.00
1.50
2.00
2.50
CCT share price (S$) - LHS Grade A office rents (S$ psf/mth) - RHS
Page 35
Company Guide
CapitaLand Commercial Trust
Income Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Gross revenue 299 337 394 409 430
Property expenses (67.3) (72.0) (81.6) (81.8) (85.8)
Net Property Income 231 265 313 327 345
Other Operating expenses (17.6) (19.0) (24.9) (25.8) (26.5)
Other Non Opg (Exp)/Inc 3.59 (0.5) 3.06 3.06 3.06
Net Interest (Exp)/Inc (46.2) (66.0) (70.6) (76.8) (80.8)
Exceptional Gain/(Loss) (22.1) 0.0 0.0 0.0 0.0
Net Income 235 265 309 318 334
Tax (1.2) (3.7) (6.8) (6.9) (7.3)
Minority Interest 0.0 0.0 (0.7) (0.7) (0.8)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Income After Tax 234 261 302 311 326
Total Return 261 579 302 267 326
Non-tax deductible Items 8.41 (294) 20.5 64.7 20.9
Net Inc available for Dist. 269 289 322 331 347
Growth & Ratio
Revenue Gth (%) 9.3 13.0 16.9 3.6 5.3
N Property Inc Gth (%) 8.7 14.8 17.9 4.5 5.4
Net Inc Gth (%) (3.0) 11.8 15.5 3.0 4.9
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Net Prop Inc Margins (%) 77.5 78.7 79.3 80.0 80.1
Net Income Margins (%) 78.2 77.4 76.5 76.0 75.7
Dist to revenue (%) 90.1 85.6 81.6 81.1 80.6
Managers & Trustee’s fees to sales %)
5.9 5.6 6.3 6.3 6.2
ROAE (%) 4.4 4.5 4.6 4.7 4.9
ROA (%) 3.2 3.0 3.1 3.1 3.3
ROCE (%) 2.9 2.8 2.9 3.0 3.1
Int. Cover (x) 4.6 3.7 4.1 3.9 3.9
Source: Company, DBS Bank
Increase in earnings due to the acquisition of AST2 and Gallileo partially offset by sale of Wilkie Edge, Golden Shoe Car Park and 50% interest in OGS
Page 36
Company Guide
CapitaLand Commercial Trust
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018
Gross revenue 87.5 74.1 86.3 91.8 98.0
Property expenses (18.4) (15.6) (18.3) (19.2) (20.3)
Net Property Income 69.1 58.6 68.0 72.6 77.7
Other Operating expenses (5.2) (3.5) (4.8) (5.6) (5.8)
Other Non Opg (Exp)/Inc (4.2) 1.32 (0.1) 1.65 0.0
Net Interest (Exp)/Inc (17.4) (13.7) (17.2) (18.1) (21.2)
Exceptional Gain/(Loss) 0.0 72.6 0.0 0.0 0.0
Net Income 68.1 139 61.4 73.5 98.7
Tax (0.2) (0.2) (3.2) (1.1) (2.2)
Minority Interest 0.0 0.0 0.0 0.0 (0.4)
Net Income after Tax 67.9 139 58.2 72.4 96.1
Total Return 0.0 0.0 0.0 0.0 0.0
Non-tax deductible Items 0.0 0.0 0.0 0.0 0.0
Net Inc available for Dist. 69.5 73.1 75.0 76.6 79.4
Growth & Ratio
Revenue Gth (%) (2) (15) 16 6 7
N Property Inc Gth (%) (1) (15) 16 7 7
Net Inc Gth (%) 3 104 (58) 24 33
Net Prop Inc Margin (%) 79.0 79.0 78.8 79.1 79.3
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Balance Sheet (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Investment Properties 6,591 7,408 7,961 7,921 7,931
Other LT Assets 1,259 1,781 1,812 1,844 1,875
Cash & ST Invts 160 123 134 191 197
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 41.9 42.7 45.4 47.0 49.5
Other Current Assets 0.0 0.0 0.0 0.0 0.0
Total Assets 8,051 9,354 9,952 10,003 10,053
ST Debt 173 0.0 0.0 0.0 0.0
Creditor 52.8 90.3 94.0 97.4 103
Other Current Liab 9.92 7.27 7.27 7.27 7.27
LT Debt 2,457 2,720 3,099 3,139 3,183
Other LT Liabilities 79.3 119 119 119 119
Unit holders’ funds 5,279 6,417 6,632 6,639 6,639
Minority Interests 0.0 0.0 0.75 1.49 2.25
Total Funds & Liabilities 8,051 9,354 9,952 10,003 10,053
Non-Cash Wkg. Capital (20.8) (54.8) (55.9) (57.7) (60.3)
Net Cash/(Debt) (2,471) (2,598) (2,965) (2,948) (2,986)
Ratio
Current Ratio (x) 0.9 1.7 1.8 2.3 2.2
Quick Ratio (x) 0.9 1.7 1.8 2.3 2.2
Aggregate Leverage (%) 37.5 37.3 38.7 38.9 39.2
Z-Score (X) 1.2 1.3 1.3 1.3 1.3
Source: Company, DBS Bank
Increase in gearing due to debt funding of contribution to the Golden Shoe redevelopment project and Gallileo excluding potential repayment of debt from the divestment of Twenty Anson
Page 37
Company Guide
CapitaLand Commercial Trust
Cash Flow Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Pre-Tax Income 235 265 309 318 334
Dep. & Amort. 3.51 3.51 3.51 3.51 3.51
Tax Paid (1.2) (3.7) (6.8) (6.9) (7.3)
Associates &JV Inc/(Loss) (85.7) (84.9) (88.7) (90.8) (93.6)
Chg in Wkg.Cap. 18.7 32.3 1.09 1.77 2.66
Other Operating CF 33.0 38.7 20.5 64.7 20.9
Net Operating CF 203 251 239 291 260
Net Invt in Properties (374) (837) (556) (8.2) (12.9)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 (159) (31.6) (31.6) (31.6)
Div from Assoc. & JVs 115 98.9 88.7 90.8 93.6
Other Investing CF 0.0 (5.3) 0.0 7.00 0.0
Net Investing CF (259) (902) (499) 58.0 49.1
Distribution Paid (257) (280) (322) (331) (347)
Chg in Gross Debt 464 271 379 39.7 44.5
New units issued 0.0 689 215 0.0 0.0
Other Financing CF (71.5) (66.9) 0.0 0.0 0.0
Net Financing CF 135 614 271 (292) (302)
Currency Adjustments 0.0 0.0 0.0 0.0 0.0
Chg in Cash 78.8 (37.4) 10.9 57.0 6.93
Operating CFPS (S cts) 6.22 6.33 6.41 7.72 6.87
Free CFPS (S cts) (5.8) (17.0) (8.6) 7.55 6.60
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank
Analyst: Mervin SONG, CFA
Derek TAN
Includes acquisition of Gallileo
Page 38
Company Guide
CapitaLand Commercial Trust
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 19 Jul 2018 18:13:57 (SGT) Dissemination Date: 19 Jul 2018 18:17:10 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
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The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
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UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
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Page 39
Company Guide
CapitaLand Commercial Trust
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
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primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary
position in CapitaLand Commercial Trust recommended in this report as of 29 Jun 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
3. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share
capital in CapitaLand Commercial Trust recommended in this report as of 29 Jun 2018.
4. DBS Bank Ltd, DBS HK, DBSVS, DBSVUSA or their subsidiaries and/or other affiliates beneficially own a total of 1% of any class of common
equity securities of CapitaLand Commercial Trust as of 29 Jun 2018.
Compensation for investment banking services:
5. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months
for investment banking services from CapitaLand Commercial Trust as of 29 Jun 2018.
6. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of
securities for CapitaLand Commercial Trust in the past 12 months, as of 29 Jun 2018.
7. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
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information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
8. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Page 40
ed: CK / sa:BC, PY, CS
BUY (Upgrade from Hold)
Last Traded Price ( 24 Apr 2018): RM1.14 (KLCI : 1,865.34)
Price Target 12-mth: RM1.40 (22% upside) (Prev RM1.50)
Analyst Siti Ruzanna Mohd Faruk +603 2604 3965 [email protected]
What’s New 1Q18 profit below expectations; cut FY18-20F earnings
by 4-9%
Expect stronger 2H earnings on asset enhancements
and better occupancies
Stock oversold and provides attractive 7% yield
Upgrade to BUY with lower TP of RM1.40
Price Relative
Forecasts and Valuation FY Dec (RMm) 2017A 2018F 2019F 2020F
Gross Revenue 369 375 382 393 Net Property Inc 237 239 243 249 Total Return 158 157 159 163 Distribution Inc 163 167 170 174 EPU (sen) 7.95 7.66 7.73 7.93 EPU Gth (%) (4) (4) 1 2 DPU (sen) 8.21 8.19 8.27 8.47 DPU Gth (%) (2) 0 1 2 NAV per shr (sen) 132 131 131 131 PE (X) 14.3 14.9 14.7 14.4 Distribution Yield (%) 7.2 7.2 7.3 7.4 P/NAV (x) 0.9 0.9 0.9 0.9 Aggregate Leverage (%) 33.3 33.5 33.7 33.8 ROAE (%) 6.0 5.8 5.9 6.1
Distn. Inc Chng (%): (4) (5) (9) Consensus DPU (sen): 8.20 8.30 8.50 Other Broker Recs: B: 2 S: 2 H: 7
Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P
Keep an eye on yields
Selldown overdone. We believe the recent correction in
CMMT’s share price is overdone as most negativity from the
Klang Valley malls has already been priced in. We cut FY18F-20F
earnings by 4%-9% to factor in the lower contribution from
Sungei Wang Plaza, Tropicana City Mall and The Mines. Despite
these adjustments, the stock offers attractive yields of c.7% for
FY18F. This is highest in our Malaysian REIT universe. We
upgrade our call to BUY (from Hold) with TP of RM1.40. The
projected upside of 22% and 7% yield translates into total
returns of 29%.
Where we differ. Consensus is neutral on the stock. We believe
the stock’s reaction (-37% YTD) to the weakness in the Klang
Valley malls has been excessive. We expect upcoming asset
enhancements and better occupancies would lead to stronger
2H earnings.
Potential Catalyst: Stronger-than-expected rental reversion and
better occupancies would lift earnings. Tropicana City Property
(TCP) presents CMMT with a good growth avenue. The
property’s current occupancy of 90.2% has room to rise, while
rental rates have upside potential in view of impending asset-
enhancement initiatives. As for Tropicana Tower, occupancy
should hit 100% by 2QFY18 from 95.2% in 1QFY18.
Valuation:
Our DDM-derived TP (7.3% cost of equity, 1.5% terminal
growth) drops to RM1.40 as we trimmed FY18-20F earnings.
The share price is supported by attractive FY18 DPU yield of
7.2%.
Key Risks to Our View:
Weak consumer sentiment. The soft retail spending outlook
may impact CMMT, as it is largely retail-focused. Tenants’
capacity to absorb rental increases may be affected by their
lower sales, and this would negatively impact CMMT as it also
derives 3-4% of its top-line from turnover rent.
At A Glance Issued Capital (m shrs) 2,038 Mkt. Cap (RMm/US$m) 2,323 / 594 Major Shareholders (%) CapitaMalls Asia Ltd (%) 35.4 Employee Provident Fund (%) 9.7 Skim Amanah Saham Bumiputera 6.6
Free Float (%) 42.7 3m Avg. Daily Val (US$m) 0.71 ICB Industry : Financials / Real Estate Investment Trust
DBS Group Research . Equity 25 Apr 2018
Malaysia Company Guide
CapitaLand Malaysia Mall Trust Version 8 | Bloomberg: CMMT MK | Reuters: CAMA.KL Refer to important disclosures at the end of this report
Page 41
Company Guide
CapitaLand Malaysia Mall Trust
WHAT’S NEW
1QFY18 earnings below expectations
1QFY18 distributable income came in at RM41.4m (-
2.4% y-o-y), which is below our and consensus
expectations.
The decline in NPI was mainly due to the negative rental
reversion and lower occupancy rates from Sungei Wang
Plaza (SWP) and Tropicana City Property.
Lower contribution from assets in portfolio
1Q18 portfolio NPI declined 4.5% y-o-y to RM57m,
mainly due to the lower contribution from Tropicana City
Property and SWP.
Gurney Plaza (GP) also recorded a lower NPI (-1.8% y-o-y)
despite positive rental reversions due to one-off property
assessment fees of RM1.3m for prior years at GP.
Occupancy rates for GP however remained stable at
98.9% (99.4% in 4Q17).
SWP continued to struggle in 1Q18, with NPI dropping
8.1% y-o-y from lower rental rates (-5.5%) and lower
occupancy rates at 80% (90.1% in 4Q17). This was partly
mitigated by a one-off compensation and forfeiture of
rental deposit for premature termination of a mini anchor
tenant in SWP.
Excluding SWP, rental reversions for the portfolio were
positive at +2.6%. There are 39.9% of overall leases by
NLA expiring in FY18. However, lease expiries from SWP
are mitigated at 8.3% of overall leases by NLA.
We expect upcoming reversions to be flat with minimal
portion of expiries coming from GP/East Coast Mall
(ECM), with 5.5%/3.6% of overall leases by NLA
respectively. We understand that GP and ECM registered
positive reversions of 4% and 2%, respectively, in
1QFY18.
Outlook
Still room to grow from Tropicana assets
Over the medium term, Tropicana City Property (TCP) still
presents CMMT with a good growth avenue. The
property’s current occupancy of 90.2% has room to rise,
while rental rates of c.RM7/psf/mth have upside potential in
view of impending asset-enhancement initiatives.
Assets-enhancement works in the pipeline
Management has included a new initiative for the
Tropicana City Mall (TCM) called nulnu which is a beauty
service provider with more than 300 services housed under
one roof. This could increase shopper traffic to TCM. It has
also managed to attract new brands to GP (Furla, Awa Mee
Bar, Moonshot and Squid Boy), The Mines (The Rollz) and
East Coast Mall (Yoshinoya Japanese Kitchen).
Furthermore, management plans to carry out major asset-
enhancement works on SWP with an estimated cost of
RM55m. The new area will be called Jumpa with NLA of
170k sq ft. It will house new retail, F&B, atheleisure as well
as family entertainment space. It targets to complete this
enhancement by 1H19. We believe this will contribute
positively to overall rental reversion in FY18/19F.
Cut earnings to reflect lower contribution
We have cut our earnings by 4%/5%/9% for
FY18F/19F/20F as we factor in lower contribution from
SWP, The Mines as well as Tropicana City Mall.
Valuation:
Our DDM-derived TP falls to RM1.40 following our earnings cut,
with 7.3% cost of equity and 1.5% terminal growth. As we
have factored in the weaker contribution from the Klang Valley
malls, yields of 7.2% for FY18F remain attractive – in the wake
of the recent selldown of the stock. We believe the selldown
was overdone. With this, we upgrade our HOLD call to BUY.
Page 42
Company Guide
CapitaLand Malaysia Mall Trust
Breakdown by Property
Quarterly / Interim Income Statement (RMm)
FY Dec 1Q2017 4Q2017 1Q2018 % chg yoy % chg qoq
Gross revenue 92.4 92.0 89.7 (2.9) (2.5)
Property expenses (32.7) (34.4) (32.7) (0.1) (5.1)
Net Property Income 59.7 57.6 57.1 (4.5) (0.9)
Other Operating expenses (6.2) (6.1) (6.1) (1.7) 0.0
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 N/A N/A
Net Interest (Exp)/Inc (13.3) (13.8) (13.7) N/A N/A
Exceptional Gain/(Loss) 0.0 16.0 0.0 N/A N/A
Net Income 40.2 53.7 37.3 (7.4) (30.6)
Tax 0.0 0.0 0.0 N/A N/A
Minority Interest 0.0 0.0 0.0 N/A N/A
Net Income after Tax 40.2 53.7 37.3 (7.4) (30.6)
Total Return 40.2 53.7 37.3 (7.4) (30.6)
Non-tax deductible Items 0.0 0.0 0.0 nm nm
Net Inc available for Dist. 42.4 40.6 41.4 (2.4) 1.9
Ratio (%)
Net Prop Inc Margin 64.6 62.6 63.6
Dist. Payout Ratio 0.0 100.1 0.0
Source of all data: Company, AllianceDBS
1Q18 4Q17 1Q17 Q/Q chg Y/Y chg Comme nts
Re ve nue (RM m)
Gurney Plaza 37.2 37.0 36.5 0.5% 2.1%
Sungei Wang Plaza 8.7 8.4 10.2 4.2% -14.2% Lower occupancy rates as well as negative rental reversions
The Mines 18.0 18.5 19.2 -2.8% -6.1%
East Coast Mall 14.2 15.5 14.0 -8.9% 1.1%
Tropicana assets 11.6 12.6 12.6 -7.3% -7.9% Lower occupancy rates
Total 89.7 92.0 92.4 -2.5% -2.9%
NPI (RM m)
Gurney Plaza 26.0 26.2 26.5 -0.5% -1.8% Incurred one-off additional property assessment fees
Sungei Wang Plaza 4.4 2.9 4.8 53.4% -8.1%
The Mines 11.2 11.2 11.9 -0.2% -6.4%
East Coast Mall 9.2 10.1 9.1 -9.0% 1.5%
Tropicana assets 6.2 7.2 7.4 -13.9% -15.9%
Total 57.0 57.6 59.7 -0.9% -4.5%
NPI ma rg in
Gurney Plaza 69.9% 70.6% 72.7%
Sungei Wang Plaza 50.6% 34.4% 47.3%
The Mines 62.1% 60.5% 62.3%
East Coast Mall 65.2% 65.3% 64.9%
Tropicana assets 53.2% 57.3% 58.3%
Total 63.6% 62.6% 64.6%
Page 43
Company Guide
CapitaLand Malaysia Mall Trust
CRITICAL DATA POINTS TO WATCH
Positive rental reversion. In FY17, CMMT managed to secure
positive rental reversion for three of its five malls, with reversions of
c.0.6% (excluding SWP). SWP was the drag with a negative
reversion of 16.9%. But this is a strategic decision by management
to retain key tenants, as the ongoing MRT construction works
nearby have reduced shopper footfall. In addition, The Mines also
registered negative reversions at 7.2% y-o-y. The negative
reversions were due to management’s efforts to realign the mall
and include mini anchor tenants in the mix. Looking at
FY18F/FY19F, we expect reversion rates to be relatively flattish
(excluding SWP) due to near-term rental pressure from the weak
market.
Maintaining occupancy levels. Occupancy rates directly affect the
income received by mall owners. It is also an indicator of the quality
of the mall, which is determined by shopper footfall, pace of
vacancy-replenishment, and general attractiveness of the asset as a
retail hub. CMMT has a decent track record of securing c.96% to
full occupancy of net lettable area (NLA). Occupancy at SWP has
fallen over the last few quarters to c.90% because of the MRT
construction works which were only completed in mid-FY17.
Asset-enhancement initiatives. Besides regular rent increases, the
REIT’s earnings would also be boosted by enhancement works for
its assets. This encompasses a wide range of actions, including
increasing NLA, improving facilities and amenities, refreshing
external appearances, and restructuring rentable space and tenant
mix. CMMT has a good track record in this space, with successful
enhancement works done on Gurney Plaza and East Coast Mall,
leading to NPI growth of 8% and 7%, respectively for FY17.
Sensible financing rates, the bulk of which are already locked in.
About 80% of CMMT’s debts have fixed interest rates that range
from 4.1% to 4.6%, and the rest are at floating rates. Its average
financing cost was c.4.4% in FY17, and we expect this to increase
to 4.6% over the next few years due to rate fluctuations from
floating-rate debt.
Net Property Income and Margins (%)
Net Property Income and Margins (%)
Distribution Paid / Net Operating CF
Interest Cover (x)
Source: Company, AllianceDBS
Page 44
Company Guide
CapitaLand Malaysia Mall Trust
Appendix 1: Factors driving historical share price performance
Source: Company, AllianceDBS
CMMT’s share price versus distribution per share Remarks
The correlation between distribution per
share and CMMT share price is 0.47. This
shows share price does not move in
tandem with the distribution.
CMMT’s share price versus 10-year bond yield Remarks
Interestingly, CMMT share price and the
10Y MGS yields have minimal correlation
over a long period. However, we note that
the negative correlation is particularly
strong during periods of rising or declining
bond yields which may explain investors’
preference for REITs as a defensive play.
Source: Company, AllianceDBS
60
70
80
90
100
110
120
130
Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
CMMT MK 10Y MGS FBMKLCI AcquisitionIndexed at June 12
Announced SPAs for 2 assets from TropicanaCity namely Tropicana assets
Share price performed as 10Y MGS yield dropped
0.08
0.08
0.08
0.09
0.09
0.09
0.09
0.09
0.10
0.10
0.10
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.90
CMMT MK (LHS) CMMT Forward DPU (RHS)
RM RMRM RM
3.20
3.40
3.60
3.80
4.00
4.20
4.40
4.60
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.90
CMMT MK (LHS) 10Y MGS (RHS)
RM %
Page 45
Company Guide
CapitaLand Malaysia Mall Trust
Balance Sheet:
Staying conservative. CMMT has kept gearing at about 33% in
recent years, and financed the purchase of the Tropicana assets
with a 30:70 debt-equity mix to keep gearing within that limit.
We expect its balance sheet to remain strong going forward.
Decent maturity profile. Interest rates are fixed for 80% of its
debt, with the remaining debts on floating rate. More than
70% of borrowings mature in 2022 and beyond.
Share Price Drivers:
DPU growth. The steady occupancy levels and positive rental
reversions will help lift DPU, which would in turn translate into a
higher unit price.
Key Risks:
Weak consumer sentiment. The soft retail spending outlook
may impact CMMT, as it is largely retail-focused. Tenants’
capacity to absorb rental increases may be affected by their
lower sales, and this would negatively impact CMMT as it also
derives 3-4% of its top-line from turnover rent.
Deteriorating performance at SWP. SWP has been affected by
construction works for a new MRT station nearby as well as
the closure of BB Plaza which forms one of the access points to
SWP. Footfall at SWP will improve once asset enhancement
work completes.
Company Background
CMMT is a retail-focused real estate investment trust with
malls in Kuala Lumpur, Selangor, Penang, and Pahang. Its malls
employ a mass-market profile, but it is moving up to the
middle- to upper-income segments.
Aggregate Leverage (%)
ROE (%)
Distribution Yield (%)
PB Band (x)
Source: Company, AllianceDBS
Page 46
Company Guide
CapitaLand Malaysia Mall Trust
Key Assumptions
FY Dec 2016A 2017A 2018F 2019F 2020F
Lease expiry (% NLA) 32.6 45.6 37.9 24.1 30.7
Avg rental growth (%) 0.11 (3.3) 0.54 1.74 319
Occupancy rate (%) 96.6 95.1 95.9 95.9 95.9
Segmental Breakdown
FY Dec 2016A 2017A 2018F 2019F 2020F
Revenues (RMm)
Gurney Plaza 138 146 147 152 155
Mines 80.2 75.6 77.6 78.2 80.2
Sungai Wang Plaza 45.3 37.9 36.5 36.7 37.4
East Coast Mall 57.1 59.5 61.8 64.0 67.5
Others 52.3 50.3 51.7 51.7 52.3
Total 373 369 375 382 393
NPI (RMm) Gurney Plaza 96.9 105 105 108 110
Mines 51.7 47.7 48.8 48.5 49.7
Sungai Wang Plaza 27.3 16.5 14.5 14.0 14.0
East Coast Mall 36.7 39.4 41.3 43.1 46.1
Others 30.0 29.1 29.5 29.0 29.0
Total 242 237 239 243 249
NPI Margins (%) Gurney Plaza 70.4 71.8 71.2 71.3 71.1
Mines 64.4 63.0 62.9 62.1 61.9
Sungai Wang Plaza 60.2 43.5 39.6 38.0 37.5
East Coast Mall 64.2 66.2 66.8 67.3 68.4
Others 57.3 57.8 57.1 56.0 55.4
Total 65.1 64.3 63.7 63.5 63.5
Income Statement (RMm)
FY Dec 2016A 2017A 2018F 2019F 2020F
Gross revenue 373 369 375 382 393
Property expenses (130) (132) (136) (140) (143)
Net Property Income 242 237 239 243 249
Other Operating expenses (25.0) (25.0) (25.9) (26.3) (26.8)
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc (53.8) (54.3) (56.1) (57.8) (59.4)
Exceptional Gain/(Loss) 4.03 4.24 0.0 0.0 0.0
Net Income 168 162 157 159 163
Tax 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Income After Tax 168 162 157 159 163
Total Return 164 158 157 159 163
Non-tax deductible Items 0.0 0.0 0.0 0.0 0.0
Net Inc available for Dist. 167 163 167 170 174
Growth & Ratio
Revenue Gth (%) 8.1 (1.0) 1.5 2.0 2.7
N Property Inc Gth (%) 7.1 (2.2) 0.7 1.6 2.7
Net Inc Gth (%) (25.8) (3.4) (3.3) 1.2 2.8
Dist. Payout Ratio (%) 102.4 102.6 100.0 100.0 100.0
Net Prop Inc Margins (%) 65.1 64.3 63.7 63.5 63.5
Net Income Margins (%) 45.0 43.9 41.8 41.5 41.5
Dist to revenue (%) 44.9 44.2 44.7 44.3 44.4
Managers & Trustee’s fees to sales %)
6.7 6.8 6.9 6.9 6.8
ROAE (%) 6.3 6.0 5.8 5.9 6.1
ROA (%) 4.1 3.9 3.7 3.8 3.9
ROCE (%) 5.4 5.2 5.2 5.3 5.4
Int. Cover (x) 4.0 3.9 3.8 3.7 3.7
Source: Company, AllianceDBS
Page 47
Company Guide
CapitaLand Malaysia Mall Trust
Quarterly / Interim Income Statement (RMm)
FY Dec 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Gross revenue 92.4 91.8 92.7 92.0 89.7
Property expenses (32.7) (32.0) (32.6) (34.4) (32.7)
Net Property Income 59.7 59.8 60.1 57.6 57.1
Other Operating expenses (6.2) (6.3) (6.3) (6.1) (6.1)
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc (13.3) (13.5) (13.7) (13.8) (13.7)
Exceptional Gain/(Loss) 0.0 (11.8) 0.0 16.0 0.0
Net Income 40.2 28.1 40.1 53.7 37.3
Tax 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Income after Tax 40.2 28.1 40.1 53.7 37.3
Total Return 40.2 28.1 40.1 53.7 37.3
Non-tax deductible Items 0.0 0.0 0.0 0.0 0.0
Net Inc available for Dist. 42.4 41.9 42.5 40.6 41.4
Growth & Ratio
Revenue Gth (%) (1) (1) 1 (1) (2)
N Property Inc Gth (%) (1) 0 0 (4) (1)
Net Inc Gth (%) (5) (30) 42 34 (31)
Net Prop Inc Margin (%) 64.6 65.1 64.8 62.6 63.6
Dist. Payout Ratio (%) 0.0 99.9 0.0 100.1 0.0
Balance Sheet (RMm)
FY Dec 2016A 2017A 2018F 2019F 2020F
Investment Properties 3,938 3,966 4,018 4,069 4,121
Other LT Assets 2.76 2.04 2.29 2.55 2.80
Cash & ST Invts 192 186 144 104 65.8
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 16.0 23.5 23.9 24.4 25.0
Other Current Assets 0.0 0.0 0.0 0.0 0.0
Total Assets 4,149 4,178 4,188 4,200 4,215
ST Debt 43.7 58.2 68.2 78.2 88.2
Creditor 57.2 60.1 61.0 62.2 63.9
Other Current Liab 53.4 54.9 55.8 56.9 58.5
LT Debt 1,268 1,279 1,279 1,279 1,279
Other LT Liabilities 40.9 38.4 38.4 38.4 38.4
Unit holders’ funds 2,686 2,687 2,686 2,686 2,687
Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Funds & Liabilities 4,149 4,178 4,188 4,200 4,215
Non-Cash Wkg. Capital (94.6) (91.5) (92.9) (94.8) (97.4)
Net Cash/(Debt) (1,120) (1,151) (1,203) (1,253) (1,302)
Ratio
Current Ratio (x) 1.3 1.2 0.9 0.7 0.4
Quick Ratio (x) 1.3 1.2 0.9 0.7 0.4
Aggregate Leverage (%) 32.9 33.3 33.5 33.7 33.8
Z-Score (X) 1.3 1.3 1.3 1.3 1.3
Source: Company, AllianceDBS
Page 48
Company Guide
CapitaLand Malaysia Mall Trust
Cash Flow Statement (RMm)
FY Dec 2016A 2017A 2018F 2019F 2020F
Pre-Tax Income 168 162 157 159 163
Dep. & Amort. 1.33 1.34 1.35 1.35 1.35
Tax Paid 0.0 0.0 0.0 0.0 0.0
Associates &JV Inc/(Loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (1.5) (7.6) 1.39 1.89 2.59
Other Operating CF 59.6 59.4 65.6 67.4 69.2
Net Operating CF 227 215 225 229 236
Net Invt in Properties (54.9) (22.3) (53.3) (53.3) (53.3)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0
Other Investing CF 5.74 5.42 5.16 3.96 2.80
Net Investing CF (49.1) (16.9) (48.1) (49.3) (50.5)
Distribution Paid (166) (170) (167) (168) (172)
Chg in Gross Debt (2.4) (37.2) (51.3) (51.7) (52.2)
New units issued (1.0) 0.0 0.0 0.0 0.0
Other Financing CF 0.0 0.0 0.0 0.0 0.0
Net Financing CF (169) (207) (219) (220) (224)
Currency Adjustments 0.0 0.0 0.0 0.0 0.0
Chg in Cash 8.62 (9.0) (41.8) (40.4) (38.4)
Operating CFPS (sen) 11.3 10.9 10.9 11.1 11.4
Free CFPS (sen) 8.48 9.47 8.40 8.58 8.89
Source: Company, AllianceDBS
Target Price & Ratings History
Source: AllianceDBS
Analyst: Siti Ruzanna Mohd Faruk
Page 49
Company Guide
CapitaLand Malaysia Mall Trust
AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 24 Apr 2018 22:35:11 (MYT) Dissemination Date: 25 Apr 2018 08:29:41 (MYT)
Sources for all charts and tables are AllianceDBS unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by AllianceDBS Research Sdn Bhd (''AllianceDBS''). This report is solely intended for the clients of DBS Bank Ltd, its
respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in
any form or by any means or (ii) redistributed without the prior written consent of AllianceDBS Research Sdn Bhd (''AllianceDBS'').
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
Page 50
Company Guide
CapitaLand Malaysia Mall Trust
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
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banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates do not
have a proprietary position in the securities recommended in this report as of 30 Mar 2018.
2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research
Report.
Compensation for investment banking services:
3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
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1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Page 51
ed: TH / sa:YM, CW, CS
BUY Last Traded Price ( 20 Jul 2018): S$2.16 (STI : 3,297.83)
Price Target 12-mth: S$2.30 (6% upside,6% yield) (Prev S$2.19)
Analyst Derek TAN +65 6682 3716 [email protected] Carmen Tay +65 6682 3719 [email protected] Mervin SONG, CFA +65 6682 3715 [email protected]
What’s New • Steady 2Q18 results imply that operations are
bottoming out
• Rental reversions stable at +0.8%; ahead of
expectations, which is a positive
• Gearing inches down to 31.5%; ample capacity to
acquire properties opportunistically
• TP raised to S$2.30
Price Relative
Forecasts and Valuation FY Dec (S$m) 2017A 2018F 2019F 2020F
Gross Revenue 682 682 691 741 Net Property Inc 478 473 478 514 Total Return 658 420 425 436 Distribution Inc 413 424 429 440 EPU (S cts) 11.4 11.8 12.0 12.3 EPU Gth (%) 1 4 1 3 DPU (S cts) 11.2 11.4 11.7 11.8 DPU Gth (%) 0 2 3 0 NAV per shr (S cts) 195 196 196 196 PE (X) 18.9 18.2 18.1 17.6 Distribution Yield (%) 5.2 5.3 5.4 5.4 P/NAV (x) 1.1 1.1 1.1 1.1 Aggregate Leverage (%) 31.2 30.2 31.1 31.0 ROAE (%) 5.9 6.1 6.1 6.3 Distn. Inc Chng (%): - 1 1 Consensus DPU (S cts): 11.0 11.3 12.1 Other Broker Recs: B: 15 S: 1 H: 7
Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P
A safe harbour
BUY with TP of S$2.30. CapitaLand Mall Trust (CMT) remains a
safe harbour for investors, supported by a resilient and
attractive yield of c.5.5%. With signs that the retail sector is
bottoming out, we believe that investors’ concerns on the
potential earnings downside risk will dissipate. BUY call
maintained, TP is raised to S$2.30 as we roll forward valuations.
Where we differ: We remain positive despite a divided street.
While the street remains divided on the stock given the
uncertainties over the impact of the surge in new retail supply
over 2018-2019, we believe the new supply may not be as
threatening to CMT. According to our analysis, only less than
50% of the incoming new supply is relevant competition to
CMT’s properties. With new malls seeing strong pre-
commitments ahead of completion, we believe that risks to
CMT’s earnings has also minimised.
Potential catalyst: Better-than-expected reversions or
acquisitions. Expectations for CMT are low, with most investors
not anticipating any rental reversion growth, in our view. The
recent uptick in retail sales, if sustained, could mean that
downside to rental reversions is likely to be minimal and result
in a share price re-rating. The utilisation of its balance sheet to
fund acquisitions (e.g. sponsor's 70% stake in West Gate) might
present an upside surprise to our estimates. Valuation:
Maintain TP at S$2.30 as we roll forward valuations. The stock
offers an FY18F DPU yield of 5.5% and total potential return in
excess of 10%.
Key Risks to Our View:
More aggressive rate hikes than consensus expectations may
cause ripples in the market. Being a proxy for interest-rate
investment, CMT may then suffer from selling pressures. At A Glance Issued Capital (m shrs) 3,549
Mkt. Cap (S$m/US$m) 7,665 / 5,624
Major Shareholders (%)
CapitaLand Ltd 28.2
BlackRock Inc 7.1
National trades Union Congress 5.0
Free Float (%) 59.7
3m Avg. Daily Val (US$m) 17.1
ICB Industry : Financials / Real Estate Investment Trust
DBS Group Research . Equity
23 Jul 2018
Singapore Company Guide
CapitaLand Mall Trust Version 10 | Bloomberg: CT SP | Reuters: CMLT.SI Refer to important disclosures at the end of this report
84
104
124
144
164
184
204
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
Jul-14 Jul-15 Jul-16 Jul-17 Jul-18
Relative IndexS$
CapitaLand Mall Trust (LHS) Relative STI (RHS)
Page 52
Company Guide
CapitaLand Mall Trust
WHAT’S NEW
A Safe Habour
CapitaLand Mall Trust's 2Q18 results in line
• CMT reported an improved set of operating results, which
we believe will be well received by investors. 2Q18 DPU
came in at 2.81 Scts (a 2.2% improvement y-o-y and 1.0%
q-o-q). On 1H18 basis, DPU came in at 2.0% y-o-y to 5.59
Scts, forming 50% of our forecasts.
• The better 1H18 distributions were driven by an organic
improvement with a c.1.7% and c.3.7% rise in gross
revenues and net property income to S$346.5m and
S$246.4m respectively.
(+) Gearing inches down
• Portfolio valuations firmed up slightly on the back of a 10-
15bps compression in cap rates (ranging from 4.7-5.2% as
of 1H18), largely driven by valuers’ assessment of market
values achieved in the retail space.
• Therefore, NAV increased slightly to S$1.99/unit, while
gearing dipped to 31.5%.
(+) Operations are bottoming out; tweaking estimates higher.
• Strong rental income from its major malls (Plaza Singapura,
Bedok Mall, Bugis Junction and Tampines Mall) which more
than offset lower revenues at Jcube and Bukit Panjang
Plaza and the income vacuum from the sale of Sembawang
Shopping Centre in June 2018.
• 1H18 portfolio rental reversions came in at +0.8% (1Q18
+0.8%); which we see as an emerging sign of dissipating
risk of further pressures in the retail scene.
• While rental reversions at selected assets remained
negative, we understand that it was largely due to the
ongoing tenant remixing strategies. We however note a q-
o-q improvement at Westgate (-2.1% in 1H18, -3.3% in
1Q18).
• Portfolio retention rate remained steady at 83.8% (82.9%
in 1Q18) while occupancy rates remain at a sustained high
level at close to 100%.
• Selected assets saw a slight dip in occupancy rates (Clarke
Quay saw an 8-ppt q-o-q drop in occupancy rates to
90.4% but is likely to be transitionary in nature.
• Proceeds from the sale of Sembawang Shopping Centre in
June 2018 will be used to pay down debt, thus resulting in
net savings for the REIT. Our estimates are thus raised
slightly to account for (i) interest savings, and (ii) slightly
improved operational numbers for a number of retail assets
across the portfolio.
(+) AEI at Westgate to improve traffic flow; a potential low-
hanging opportunity for acquisition.
• The manager plans to start AEI at Westgate and hopes to
improve shopper accessibility to the mall; it is more
defensive in nature and aims to redirect traffic flow across
the mall. Capex spent is expected to be minimal at
<S$10m.
• The manager is continuing to re-look at its current tenant
mix to improve the trading performance.
• With property seeing increasing stability in operations, we
believe that the manager might look to acquire the
remaining 70% from the sponsor (valued at c.S$675m) in
the medium term.
• With gearing reaching at a low of 31.5% post the sale of
Sembawang Shopping Centre and portfolio revaluations,
the REIT has ample headroom to acquire the property.
Page 53
Company Guide
CapitaLand Mall Trust
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 1Q2018 2Q2018 % chg yoy % chg qoq
Gross revenue 169 175 171 1.6 (2.2)
Property expenses (51.1) (49.5) (50.6) (1.0) 2.1
Net Property Income 118 126 121 2.8 (3.9)
Other Operating expenses (12.4) (12.0) (11.9) (4.1) (1.1)
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - -
Net Interest (Exp)/Inc (23.8) (22.3) (21.8) 8.4 2.4
Exceptional Gain/(Loss) 0.07 0.36 120 N/A N/A
Net Income 95.0 110 240 153.1 117.6
Tax 0.0 0.0 0.0 - -
Minority Interest 0.0 0.0 0.0 - -
Net Income after Tax 95.0 110 240 153.1 117.6
Total Return 303 110 296 (2.2) 167.9
Non-tax deductible Items 2.41 1.96 3.00 24.8 53.4
Net Inc available for Dist. 99.8 109 105 4.8 (4.1)
Ratio (%)
Net Prop Inc Margin 69.7 71.7 70.5
Dist. Payout Ratio 97.4 90.7 95.6
Source of all data: Company, DBS Bank
Page 54
Company Guide
CapitaLand Mall Trust
CRITICAL DATA POINTS TO WATCH
Critical Factors
A bellwether for REITs. CMT, being the first and longest-
running REIT in Singapore which has gone through different
growth phases at a market cap of close to S$7.0bn and an asset
base of over S$10bn, remains a bellwether for the REIT industry.
While CMT had seen better growth days back in 2003-2009
and saw increased challenges disrupting the retail sector over
the past few years, we believe that the worst could be over,
given the REIT’s improving rental reversionary prospects in
recent times. Most importantly, we believe that given the REIT’s
track record and having positioned its exposure towards more
non-discretionary spending, we remain confident on the REIT’s
ability to continue paying steady distributions across market
cycles.
Supply risk dissipating, rental reversions a key driver for further
outperformance. While supply in retail remains high in 2018-
2019, we note that pre-commitment rates are for upcomings
have been strong (Paya Lebar Quarters Mall pre-leasing c.40%
of its retail mall) with strong anchors. Apart from Paya Lebar
Quarters Mall, we believe most of the other major retail assets
coming on stream do not pose a direct competition to the
catchment areas of CMT’s malls. We expect consensus to
gradually converge to our view over time.
As such, with supply risk dissipating and ongoing tenant
remixing, we believe that CMTs’ mall will continue to achieve
stable rental reversions with the possibility of seeing a sustained
improvement from 2019 onwards.
Re-introducing inorganic growth; Westgate stake from sponsor
could be an opportunity. In the medium term, we believe CMT
will look to re-introduce growth engines to stimulate its
portfolio earnings growth in order to drive share price
performance. The redevelopment of Funan is such an initiative
and is projected to start contributing from FY20 onwards.
Supported by a low gearing of <35%, the manager continues
to look for inorganic opportunities across the region.
We believe that a low-hanging opportunity for the REIT is the
70% stake in Westgate mall from the Sponsor, which appears
to show signs of stabilisation after the second renewal cycle.
The 70% stake in the mall is estimated to cost c.S$700m and
the REIT has ample capacity to acquire.
Net Property Income and Margins (%)
Net Property Income and Margins (%)
Distribution Paid / Net Operating CF
Interest Cover (x)
Source: Company, DBS Bank
Page 55
Company Guide
CapitaLand Mall Trust
Appendix 1: A look at Company's listed history – what drives its share price?
Share price and rental reversions
Source: Company, DBS Bank
Share price and Yield spread
Source: Company, DBS Bank
0
0.5
1
1.5
2
2.5
3
3.5
4
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
(%) S$/shareRental Reversion vs Share Price
Share Price (S$) (RHS) Yield Spread (%) (LHS)
Share price weakness due to the fall in reversions due to 2008-2009 crisis.
Strong organic growth driving re-rating in share
Share price traded in a tight range largely due to expectations of weakening rents and oversupply
Should pick up afterexpected recovery in the retail market
Page 56
Company Guide
CapitaLand Mall Trust
Balance Sheet:
Gearing to remain stable. Post the sale of Sembawang
Shopping Centre, CMT’s gearing ratio is forecast to remain
fairly stable at <35% over FY18-19F. This is after assuming
100% debt financing for the redevelopment of Funan. Gearing
level is within management's comfortable level of between
35% and 40%.
Cost of debt to remain stable. The average debt cost is 3.2%,
which should remain stable in the immediate term. With
interest rates on the rise, we have priced in a 20-bp increase in
average interest cost once hedges are rolled over in the coming
two years.
Share Price Drivers:
Acquisitions to drive earnings. CMT has the right of first refusal
to acquire its Sponsor’s retail assets in Singapore. CapitaLand
has several retail assets in its portfolio which could be injected
into the REIT, including Star Vista and the remaining 70% stake
in Westgate. With operational performance stabilising,
Westgate might be an attractive acquisition target for CMT.
Better-than-expected operational results. We believe that CMT’s
portfolio will remain resilient despite headwinds. The trust's
ability to maintain a steady growth in top line while holding
occupancies will be a strong testament to the manager's
capability to stand out among its peers.
Key Risks:
Downside risk to rental reversions. A worse-than-expected
slowdown in consumer sentiment and consumption outlook
may result in lower reversionary potential (vs our 1.5%
estimate) for leases expiring in FY18/19. Funan’s
redevelopment could be a catalyst in the medium term as the
mall comes to completion towards the end of FY19.
Upside from interest savings. Further upside risk is from
interest savings. The trust has been proactive in extending its
debt profile, locking in long-tenure MTNs at lower rates than
previously achieved. Further interest savings from refinancing
associate debt would offer upside to our estimates.
Company Background
CapitaLand Mall Trust (CMT) is a real estate investment trust
which owns and invests in retail properties in the suburban
areas and downtown core of Singapore.
Aggregate Leverage (%)
ROE (%)
Distribution Yield (%)
PB Band (x)
Source: Company, DBS Bank
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2016A 2017A 2018F 2019F 2020F
Avg: 1.08x
+1sd: 1.13x
+2sd: 1.19x
-1sd: 1.02x
-2sd: 0.97x
0.8
0.9
1.0
1.1
1.2
1.3
1.4
Jul-14 Jul-15 Jul-16 Jul-17
(x)
Page 57
Company Guide
CapitaLand Mall Trust
Income Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Gross revenue 690 682 682 691 741
Property expenses (210) (204) (209) (213) (228)
Net Property Income 480 478 473 478 514
Other Operating expenses (49.0) (48.9) (51.3) (51.5) (53.3)
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc (95.0) (94.0) (74.2) (75.3) (100.0)
Exceptional Gain/(Loss) (0.6) (0.6) 0.0 0.0 0.0
Net Income 402 405 420 425 436
Tax (1.0) (0.2) 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Income After Tax 401 405 420 425 436
Total Return 469 658 420 425 436
Non-tax deductible Items 23.5 8.05 3.90 3.92 3.95
Net Inc available for Dist. 424 413 424 429 440
Growth & Ratio
Revenue Gth (%) 3.1 (1.1) (0.1) 1.3 7.3
N Property Inc Gth (%) 2.9 (0.3) (1.1) 1.0 7.5
Net Inc Gth (%) (15.2) 1.0 3.8 1.0 2.6
Dist. Payout Ratio (%) 92.9 95.8 95.0 97.0 95.0
Net Prop Inc Margins (%) 69.5 70.1 69.4 69.2 69.3
Net Income Margins (%) 58.1 59.3 61.7 61.5 58.8
Dist to revenue (%) 61.5 60.5 62.2 62.1 59.3
Managers & Trustee’s fees to sales %)
7.1 7.2 7.5 7.5 7.2
ROAE (%) 6.0 5.9 6.1 6.1 6.3
ROA (%) 3.9 3.9 4.0 4.0 4.1
ROCE (%) 4.2 4.2 4.1 4.1 4.4
Int. Cover (x) 4.5 4.6 5.7 5.7 4.6
Source: Company, DBS Bank
Driven by the full-year contribution of Funan
Page 58
Company Guide
CapitaLand Mall Trust
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018
Gross revenue 169 169 172 175 171
Property expenses (51.1) (48.0) (53.1) (49.5) (50.6)
Net Property Income 118 121 119 126 121
Other Operating expenses (12.4) (12.1) (12.3) (12.0) (11.9)
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc (23.8) (23.9) (22.9) (22.3) (21.8)
Exceptional Gain/(Loss) 0.07 0.03 (0.5) 0.36 120
Net Income 95.0 104 102 110 240
Tax 0.0 0.0 (0.2) 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Income after Tax 95.0 104 102 110 240
Total Return 303 104 127 110 296
Non-tax deductible Items 2.41 (2.8) (5.7) 1.96 3.00
Net Inc available for Dist. 99.8 105 100 109 105
Growth & Ratio
Revenue Gth (%) (2) 0 2 2 (2)
N Property Inc Gth (%) (2) 3 (2) 5 (4)
Net Inc Gth (%) (8) 10 (3) 9 118
Net Prop Inc Margin (%) 69.7 71.6 69.2 71.7 70.5
Dist. Payout Ratio (%) 97.4 93.8 102.8 90.7 95.6
Balance Sheet (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Investment Properties 8,509 8,770 8,678 8,816 8,826
Other LT Assets 1,301 1,149 1,149 1,149 1,149
Cash & ST Invts 483 523 662 676 714
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 33.7 32.4 32.2 32.6 35.0
Other Current Assets 0.0 29.4 29.4 29.4 29.4
Total Assets 10,327 10,504 10,551 10,704 10,754
ST Debt 250 535 287 287 287
Creditor 160 156 276 279 300
Other Current Liab 55.9 57.9 57.6 57.6 57.6
LT Debt 3,038 2,648 2,804 2,942 2,952
Other LT Liabilities 130 180 180 180 180
Unit holders’ funds 6,692 6,928 6,947 6,958 6,978
Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Funds & Liabilities 10,327 10,504 10,551 10,704 10,754
Non-Cash Wkg. Capital (183) (152) (272) (275) (293)
Net Cash/(Debt) (2,805) (2,660) (2,429) (2,553) (2,525)
Ratio
Current Ratio (x) 1.1 0.8 1.2 1.2 1.2
Quick Ratio (x) 1.1 0.7 1.1 1.1 1.2
Aggregate Leverage (%) 32.8 31.2 30.2 31.1 31.0
Z-Score (X) 5.6 5.6 5.4 5.3 5.3
Source: Company, DBS Bank
Gearing remains low
Page 59
Company Guide
CapitaLand Mall Trust
Cash Flow Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Pre-Tax Income 402 405 420 425 436
Dep. & Amort. 1.11 0.70 0.0 0.0 0.0
Tax Paid (3.6) 0.0 0.0 0.0 0.0
Associates &JV Inc/(Loss) (66.9) (70.4) (72.9) (73.9) (75.4)
Chg in Wkg.Cap. 1.01 (2.3) 120 3.18 18.1
Other Operating CF 0.0 0.0 0.0 0.0 0.0
Net Operating CF 334 333 467 354 378
Net Invt in Properties (76.0) (99.0) 91.9 (138) (10.0)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 98.5 0.0 0.0 0.0
Div from Assoc. & JVs 92.1 80.9 72.9 73.9 75.4
Other Investing CF 11.3 8.77 0.0 0.0 0.0
Net Investing CF 27.3 89.2 165 (63.9) 65.4
Distribution Paid (394) (395) (403) (416) (418)
Chg in Gross Debt (85.6) 21.6 (91.9) 138 10.0
New units issued 3.88 6.50 1.86 1.87 1.88
Other Financing CF (105) (111) 0.0 0.0 0.0
Net Financing CF (581) (478) (493) (276) (406)
Currency Adjustments 0.0 0.0 0.0 0.0 0.0
Chg in Cash (220) (55.3) 139 14.0 38.0
Operating CFPS (S cts) 9.39 9.46 9.79 9.88 10.1
Free CFPS (S cts) 7.27 6.61 15.8 6.09 10.4
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank
Analyst: Derek TAN
Carmen Tay
Mervin SONG, CFA
S.No.Date of
Report
Closing
Price
12-mth
Target
Price
Rat ing
1: 24 Jul 17 2.05 2.17 BUY
2: 04 Aug 17 2.02 2.19 BUY
3: 16 Aug 17 2.11 2.19 BUY
4: 23 Oct 17 2.06 2.19 BUY
5: 25 Jan 18 2.10 2.19 BUY
6: 19 Apr 18 2.12 2.19 BUY
7: 23 Apr 18 2.10 2.19 BUY
8: 05 Jul 18 2.05 2.19 BUY
Note : Share price and Target price are adjusted for corporate actions.
1
2
3 45
6
7 8
1.85
1.90
1.95
2.00
2.05
2.10
2.15
2.20
2.25
Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18
S$
Page 60
Company Guide
CapitaLand Mall Trust
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 23 Jul 2018 08:51:52 (SGT) Dissemination Date: 23 Jul 2018 08:58:52 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
Page 61
Company Guide
CapitaLand Mall Trust
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary
position in CapitaLand Mall Trust recommended in this report as of 29 Jun 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
Compensation for investment banking services:
3. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months
for investment banking services from CapitaLand Mall Trust as of 29 Jun 2018.
4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of
securities for CapitaLand Mall Trust in the past 12 months, as of 29 Jun 2018.
5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
6. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Page 62
ed: JS / sa:YM, CW, CS
BUYLast Traded Price ( 30 Jul 2018): S$1.57 (STI : 3,307.15)
Price Target 12-mth: S$1.70 (8% upside) (Prev S$1.80)
Analyst Derek TAN +65 6682 3716 [email protected] Mervin SONG, CFA +65 6682 3715 [email protected] Carmen Tay +65 6682 3719 [email protected]
What’s New • 2Q18 DPU of 2.64 Scts in line with expectations
• Positive organic growth momentum; tenant remix
strategy to bear fruits
• Headroom to acquire offers upside
Price Relative
Forecasts and Valuation FY Dec (S$m) 2017A 2018F 2019F 2020F
Gross Revenue 229 228 243 256 Net Property Inc 149 146 159 169 Total Return 145 92.4 99.8 106 Distribution Inc 91.1 105 107 113 EPU (S cts) 11.2 9.47 10.0 10.4 EPU Gth (%) 47 (16) 6 4 DPU (S cts) 10.1 10.7 10.8 11.1 DPU Gth (%) 1 6 1 3 NAV per shr (S cts) 160 157 156 155 PE (X) 14.0 16.6 15.7 15.1 Distribution Yield (%) 6.4 6.8 6.9 7.1 P/NAV (x) 1.0 1.0 1.0 1.0 Aggregate Leverage (%) 28.0 33.7 34.9 35.0 ROAE (%) 6.9 6.0 6.4 6.7
Distn. Inc Chng (%): (1) (1) 0 Consensus DPU (S cts): 10.3 10.7 11.0 Other Broker Recs: B: 6 S: 1 H: 0
Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P
Time to shine
Time to shine. After the divestment of CapitaMall Anzhen,
CapitaLand Retail China Trust (CRCT) has acquired a much
younger asset, Rock Square, in the first-tier city of Guangzhou.
Although the initial yield is lower in comparison, we believe the
asset has greater growth potential and is also an indication of
CRCT embarking on a growth path. In addition, with a
recapitalised balance sheet, we believe that the time is ripe for
CRCT to take on a more aggressive acquisition-led growth
strategy.
Where we differ: Our TP is among the higher end of consensus
estimates as we believe new acquisitions have higher growth
potential. With a visible pipeline from the Sponsor, we believe
that it is an opportune time for CRCT to look at acquisitions.
We have priced in an acquisition of S$100m (vs S$250m
previously) to kick 2019 with 4.5% initial yield. We have also
tweaked our estimates to account for the closure of CapitaMall
Wuhu. As such, we revised our TP to S$1.70.
Potential catalysts: more acquisitions in the near term. CRCT’s
gearing is around 32% after the Rock Square acquisition. This
translates into a debt headroom of over S$550m, which
provides flexibility for further acquisitions. We have booked in
an additional S$100m acquisition in FY18. We believe
management’s move to divest Anzhen and acquire Rock Square
signals its shift in focus from stability from master leases to
growth generated from more actively managed assets. More of
such acquisitions would confirm such a move.
Valuation:
We cut DCF-based TP from S$1.80 to S$1.70. DPUs in the next
few years should grow steadily given the flexibility of
distribution of disposal gains from Anzhen. Maintain BUY.
Key Risks to Our View:
A significant depreciation of the RMB versus SGD, and a
downturn in Chinese consumption.
At A Glance Issued Capital (m shrs) 970
Mkt. Cap (S$m/US$m) 1,523 / 1,119
Major Shareholders (%)
CapitaLand Limited 24.1
CapitaMall Trust 12.7
Matthews Int’l Capital Management 5.6
Free Float (%) 57.6
3m Avg. Daily Val (US$m) 1.1
ICB Industry : Financials / Real Estate Investment Trust
DBS Group Research . Equity 31 Jul 2018
Singapore Company Guide
CapitaLand Retail China Trust Version 14 | Bloomberg: CRCT SP | Reuters: CRCT.SI Refer to important disclosures at the end of this report
Page 63
Company Guide
CapitaLand Retail China Trust
WHAT’S NEW
Time to shine
(+) 2Q18 DPU of 2.64 Scts (+0.8% y-o-y). While gross revenue and NPI fell on a y-o-y basis following the divestment of Anzhen in July 2017, it remained supported at the distribution level as contributions from Rock Square (acquired on 31 Jan 2018) kicked in. Distributable income grew 10% y-o-y to S$25.7m in 2Q18 from S$23.3m in 2Q17.
Post the private placement in Dec 2017, CRCT’s 2Q18 DPU on the enlarged share base was 0.8% y-o-y higher at 2.64 Scts. Barring one-off effects such as the receipt of government subsidies for Grand Canyon in 2Q17, CRCT’s 2Q18 DPU growth would have been more pronounced. Overall, 1H18 DPU of 5.39 Scts formed 50.4% of our FY18F estimates and was in line.
(+) Strong portfolio occupancy; broad-based positive reversions. Excluding CapitaMall Wuhu, which is set to close following the exit of its anchor tenant, portfolio occupancy remained firm at 97.4%. The Manager shared that plans to exit this market is currently in the final stages. A further update to investors is expected in 3Q
– we think a divestment of the asset is plausible over the longerterm.
After a strong showing in 1Q18, reversion trends continued to track expectations in 2Q18. Led by Rock Square (+24.3%) and Wangjing (+14.1%), portfolio rental reversion of +10.5% was broad based, with the exception of Minzhongleyuan (-1.8%) due to ongoing initiatives to differentiate the mall’s offerings. Anchored by Rock Square, Xizhimen and Wangjing, we expect reversions in 2H18 to be sustained near current levels.
(+) Substantial debt headroom on gearing of 32.1% provides CRCT with the financial flexibility to take on further AEIs and acquisition opportunities as they arise.
As sponsor CapitaLand ramps up on its capital recycling strategy, this presents CRCT with a firm pipeline of mature assets which are ripe for acquisition over the near term.
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 1Q2018 2Q2018 % chg yoy % chg qoq
Gross revenue 59.0 55.4 56.3 (4.6) 1.6
Property expenses (19.0) (18.2) (18.6) (2.0) 2.6
Net Property Income 40.0 37.2 37.6 (5.9) 1.2
Other Operating expenses (3.2) (4.1) (4.3) 32.6 5.0
Other Non Opg (Exp)/Inc 0.0 0.82 (0.1) nm nm
Net Interest (Exp)/Inc (5.4) (4.7) (4.9) 9.6 (3.7)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Net Income 31.3 29.7 32.0 2.2 7.9
Tax (14.0) (10.2) (15.5) 10.5 52.2
Minority Interest 0.98 0.00 0.44 (55.6) nm
Net Income after Tax 18.3 19.5 17.0 (7.2) (13.0)
Total Return 31.3 19.5 40.6 29.6 108.1
Non-tax deductible Items (8.0) 4.18 (16.5) 105.6 nm
Net Inc available for Dist. 23.3 26.7 25.7 10.0 (3.9)
Ratio (%)
Net Prop Inc Margin 67.8 67.2 66.9
Dist. Payout Ratio 100.0 100.0 100.0
Source of all data: Company, DBS Bank
Page 64
Company Guide
CapitaLand Retail China Trust
CRITICAL DATA POINTS TO WATCH
Critical Factors
Beijing retail market a key driver to revenues. Given its
operations in China, CRCT’s share price is sensitive to changes
in property-related policies in China. These policies differ from
city to city – close attention should be paid to Beijing as c.75%
of the portfolio’s NPI is derived from properties in Beijing. For
example, during 2H2016, the sell-off in CRCT was caused by
the change in property tax in Beijing but the stock recovered
thereafter as operating metrics continue to improve post the tax
changes.
Well located assets (Wangjing, Xizhimen, Rock Square and
Xinnan) that are dominant malls in their respective submarkets
enabled CRCT to achieve positive rental reversions of more than
10% over time. With steady tenant sales and a regular tenant
remixing strategy to constantly refresh its tenant mix, the
manager has been able to maintain reversions at a high of at
c.11 % in1H18, implying that CRCT organic growth profile will
likely continue to remain steady overtime.
China retail sales could point to potential upside risk to rental
reversions. We note that the REIT has shown a close correlation
coefficient of 0.69 (Chart 2) with China retail sales, in view that
rental growth prospects are supported somewhat by retailers
achieving healthy retail sales momentum. While near term forex
fluctuations (CRCT pays distributions in SGD while reports in
RMB) overshadow the consistently steady China’s retail data in
recent times, we believe that once the currency stabilises,
investors will focus back on China retail sales as a proxy to the
potential forward performance for CRCT.
Visible pipeline and a lowly geared balance sheet infuses the
REIT with ample firepower to acquire. CRCT benefits from a
visible acquisition pipeline from Sponsor, CapitaMalls Asia, one
of Asia’s largest mall operator, manager and owner of shopping
malls. While the availability of the pipeline from the Sponsor
offers significant inorganic growth potential for the REIT, the
ability to acquire from the Sponsor has been limited, given the
tight cap rates that the market is transacting compared to the
high implied yields that CRCT trades at.
That said, CRCT has been able to source deals from external
parties, expanding the group’s real estate exposure in China,
driving inorganic growth to distributions while keeping its
gearing low at < 32% to maintain its flexibility to acquire
opportunistically. The high take-up rates in the REIT’s dividend
reinvestment program also infuses the REIT with much needed
equity to part-fund any future growth opportunities. We have
priced in a S$100m (c. RMB 500m) acquisition in our forecasts
@ 4.5% yield, partly funded by debt and cash on the balance
sheet from the recent sale of Anzhen.
Net Property Income and Margins (%)
Net Property Income and Margins (%)
Distribution Paid / Net Operating CF
Interest Cover (x)
Source: Company, DBS Bank
Page 65
Company Guide
CapitaLand Retail China Trust
;
Appendix 1: A look at Company's listed history – what drives its share price?
Share price history
Source: Company, DBS Bank
30
50
70
90
110
130
150
170
190
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Index
(Rebase
d t
o e
nd
-2016)
x
CRCT P/NAV (LHS) S-REIT Index (Rebased, RHS) Shanghai Composite (Rebased, RHS)
1. Eurozone crisis: - CRCT P/NAV fell from 1.06x to 0.87x and bounced back to 1.26x
- Both S-REIT Index and Shanghai Composite sold off and the latter corrected more- Retreat of CRCT was closer to
China, but recovery closer to S-REITs
2. Taper tantrum- CRCT P/NAV fell from 1.06x to 0.81x and
bounced back to 1.05x- Taper tantrum did not have much impact on the Chinese market
3. China slowdown- CRCT P/NAV fell from 0.98x to 0.77x
- Sharp plunge in Shanghai Composite and moderate correction in S-REITs Index due to indirect impact- Degree of sell-off for CRCT was in
between the two indices
4. Weaker RMB, unfavourable change in Beijing tax regime
- CRCT P/NAV fell from 0.99x to 0.83x- The tax event was specific to CRCT hence it
did not impact the two indices
Sell-off
(Shanghai Composite)
Recovery
(S-REIT Index)
Both indices
sold off, recovered at
different pace
Page 66
Company Guide
CapitaLand Retail China Trust
Balance Sheet:
Aggregate leverage is at a comfortable level. Aggregate
leverage after drawing on debt funding for Rock Square will be
around 32% - a very comfortable level below MAS' 45%
gearing limit. This provides CRCT with debt headroom of over
S$550m for acquisitions.
Share Price Drivers:
Acquisitions. With adequate debt headroom and signal of a
shift in focus to more actively managed assets – from the
divestment of CapitaLand Anzhen to the acquisition of Rock
Square – we believe more acquisitions are on the Manager’s
radar in the near term.
Positive rental revisions. Despite the concerns over China’s
economic outlook weighing on CRCT, we believe delivery of
positive rental reversions and DPU growth should allay such
concerns. Furthermore, high positive rental reversions from Rock
Square should reassure the market of CRCT’s strategy in
investing in growth-oriented assets.
Key Risks:
Currency risk. As 100% of CRCT's income is derived in RMB
and it does not hedge its income, depreciation of the RMB
against the SGD would result in a lower DPU to unitholders.
Threat from e-commerce. This threat is partially mitigated by
the fact that c.48% of CRCT’s Gross Rental Income (GRI) is
sourced from tenants who are more resilient to competition
from e-commerce, i.e. F&B (28% of GRI), supermarkets (5%),
leisure & entertainment (3%), education (4%), and beauty &
healthcare (8%).
New mall supply in Beijing and Shanghai. This risk is partially
mitigated by the fact that c.80% of the new supply in Beijing is
located outside core retail areas where CRCT’s malls are
situated. CapitaMall Qibao in Shanghai remains on the watch-
out as it combats competition from nearby new supplies.
Company Background
CapitaLand Retail China Trust (CRCT) is a real estate
investment trust which invests in income-producing retail
properties located mainly in China, Hong Kong, and Macau.
Aggregate Leverage (%)
ROE (%)
Distribution Yield (%)
PB Band (x)
Source: Company, DBS Bank
Page 67
Company Guide
CapitaLand Retail China Trust
Income Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Gross revenue 214 229 228 243 256
Property expenses (74.5) (80.0) (82.1) (84.9) (87.2)
Net Property Income 140 149 146 159 169
Other Operating expenses (13.8) (14.5) (14.2) (15.0) (15.5)
Other Non Opg (Exp)/Inc (2.0) (0.1) 0.0 0.0 0.0
Net Interest (Exp)/Inc (19.4) (21.0) (19.5) (23.9) (25.9)
Exceptional Gain/(Loss) 0.0 52.2 0.0 0.0 0.0
Net Income 104 166 118 127 135
Tax (41.6) (64.2) (24.7) (26.3) (28.6)
Minority Interest 2.61 1.65 (0.5) (0.6) (0.6)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Income After Tax 65.5 103 92.4 99.8 106
Total Return 107 145 92.4 99.8 106
Non-tax deductible Items (19.9) (57.3) 6.85 7.34 7.75
Net Inc available for Dist. 86.7 91.1 105 107 113
Growth & Ratio
Revenue Gth (%) (2.8) 7.0 (0.4) 6.7 5.1
N Property Inc Gth (%) (1.0) 6.8 (2.1) 8.5 6.4
Net Inc Gth (%) (5.4) 57.7 (10.5) 8.0 5.8
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Net Prop Inc Margins (%) 65.2 65.1 64.0 65.1 65.9
Net Income Margins (%) 30.6 45.0 40.5 41.0 41.3
Dist to revenue (%) 40.5 39.8 46.1 44.0 44.3
Managers & Trustee’s fees to sales %)
6.5 6.3 6.2 6.2 6.0
ROAE (%) 4.5 6.9 6.0 6.4 6.7
ROA (%) 2.4 3.8 3.3 3.4 3.5
ROCE (%) 3.5 3.7 4.5 4.5 4.7
Int. Cover (x) 6.5 6.4 6.8 6.0 5.9 Source: Company, DBS Bank
Driven by acquisitions
Page 68
Company Guide
CapitaLand Retail China Trust
Quarterly / Interim Income Statement (S$m)
FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018
Gross revenue 59.0 56.0 54.1 55.4 56.3
Property expenses (19.0) (20.0) (21.1) (18.2) (18.6)
Net Property Income 40.0 36.0 33.0 37.2 37.6
Other Operating expenses (3.2) (3.2) (4.0) (4.1) (4.3)
Other Non Opg (Exp)/Inc 0.0 1.24 (1.4) 0.82 (0.1)
Net Interest (Exp)/Inc (5.4) (5.2) (4.5) (4.7) (4.9)
Exceptional Gain/(Loss) 0.0 52.2 0.0 0.0 0.0
Net Income 31.3 81.1 23.1 29.7 32.0
Tax (14.0) (24.9) (15.9) (10.2) (15.5)
Minority Interest 0.98 0.0 0.48 0.00 0.44
Net Income after Tax 18.3 56.2 7.70 19.5 17.0
Total Return 31.3 56.2 36.1 19.5 40.6
Non-tax deductible Items (8.0) (34.8) (17.8) 4.18 (16.5)
Net Inc available for Dist. 23.3 21.4 18.3 26.7 25.7
Growth & Ratio
Revenue Gth (%) (2) (5) (3) 2 2
N Property Inc Gth (%) (1) (10) (8) 13 1
Net Inc Gth (%) (13) 207 (86) 153 (13)
Net Prop Inc Margin (%) 67.8 64.2 61.0 67.2 66.9
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Balance Sheet (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Investment Properties 2,628 2,441 2,422 2,530 2,537
Other LT Assets 4.03 2.99 365 372 379
Cash & ST Invts 136 187 85.8 66.2 95.7
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 12.8 37.1 12.7 13.6 14.3
Other Current Assets 2.11 0.44 0.44 0.44 0.44
Total Assets 2,783 2,668 2,886 2,982 3,027
ST Debt 0.0 0.0 0.0 0.0 0.0
Creditor 64.5 59.6 57.4 61.2 64.4
Other Current Liab 241 242 242 242 242
LT Debt 978 748 973 1,040 1,058
Other LT Liabilities 48.8 50.8 50.8 50.8 50.8
Unit holders’ funds 1,432 1,549 1,543 1,567 1,591
Minority Interests 19.9 19.3 19.8 20.3 21.0
Total Funds & Liabilities 2,783 2,668 2,886 2,982 3,027
Non-Cash Wkg. Capital (290) (264) (286) (289) (292)
Net Cash/(Debt) (842) (561) (887) (974) (962)
Ratio
Current Ratio (x) 0.5 0.7 0.3 0.3 0.4
Quick Ratio (x) 0.5 0.7 0.3 0.3 0.4
Aggregate Leverage (%) 35.1 28.0 33.7 34.9 35.0
Z-Score (X) 0.9 1.2 0.9 0.9 0.9
Source: Company, DBS Bank
Gearing remains comfortable
Page 69
Company Guide
CapitaLand Retail China Trust
Cash Flow Statement (S$m)
FY Dec 2016A 2017A 2018F 2019F 2020F
Pre-Tax Income 104 166 118 127 135
Dep. & Amort. 2.40 1.73 1.73 1.73 1.73
Tax Paid (41.6) (64.2) (24.7) (26.3) (28.6)
Associates &JV Inc/(Loss) 0.0 0.0 (5.1) (7.1) (7.6)
Chg in Wkg.Cap. 12.7 (17.5) 22.2 2.97 2.43
Other Operating CF 42.0 30.5 5.12 5.61 6.02
Net Operating CF 120 116 117 104 109
Net Invt in Properties (313) 199 (6.8) (107) (7.7)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 (25.5) (331) 0.0 0.0
Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0
Other Investing CF 0.0 1.42 0.0 0.0 0.0
Net Investing CF (313) 175 (338) (107) (7.7)
Distribution Paid (52.5) (82.6) (105) (107) (113)
Chg in Gross Debt 277 (228) 226 67.3 17.7
New units issued 0.0 102 0.0 24.0 24.0
Other Financing CF (13.5) (30.4) 0.0 0.0 0.0
Net Financing CF 211 (239) 120 (15.8) (71.7)
Currency Adjustments (8.1) (2.1) 0.0 0.0 0.0
Chg in Cash 9.78 50.4 (101) (19.6) 29.5
Operating CFPS (S cts) 12.5 14.6 9.69 10.1 10.5
Free CFPS (S cts) (22.5) 34.4 11.3 (0.4) 9.98
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank
Analyst: Derek TAN
Mervin SONG, CFA
Carmen Tay
Page 70
Company Guide
CapitaLand Retail China Trust
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 31 Jul 2018 08:18:44 (SGT) Dissemination Date: 31 Jul 2018 08:21:11 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
Page 71
Company Guide
CapitaLand Retail China Trust
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary
position in CapitaLand Retail China Trust recommended in this report as of 29 Jun 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
Compensation for investment banking services:
3. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months
for investment banking services from CapitaLand Retail China Trust as of 29 Jun 2018.
4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA, within the next 3 months, will receive or intend to seek
compensation for investment banking services from CapitaLand Retail China Trust as of 29 Jun 2018.
5. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of
securities for CapitaLand Retail China Trust in the past 12 months, as of 29 Jun 2018.
6. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
7. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Page 72
Industry Focus
CapitaLand Limited & REITs
Page 9
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 30 Aug 2018 08:39:57 (SGT) Dissemination Date: 30 Aug 2018 08:42:08 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
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Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary
position in Ascott Residence Trust, CapitaLand, CapitaLand Mall Trust, CapitaLand Retail China Trust, CapitaLand Commercial Trust
recommended in this report as of 31 Jul 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. 3. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share
capital in Ascott Residence Trust, CapitaLand Retail China Trust, CapitaLand Commercial Trust recommended in this report as of 31 Jul 2018. 4. DBS Bank Ltd, DBS HK, DBSVS, DBSVUSA or their subsidiaries and/or other affiliates beneficially own a total of 1% of any class of common
equity securities of Ascott Residence Trust, CapitaLand Commercial Trust as of 31 Jul 2018.
Compensation for investment banking services:
5. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for
investment banking services from CapitaLand, CapitaLand Mall Trust, CapitaLand Retail China Trust, CapitaLand Commercial Trust as of of 31
Jul 2018.
6. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of
securities for CapitaLand, CapitaLand Mall Trust, CapitaLand Retail China Trust, CapitaLand Commercial Trust in the past 12 months, as of of
31 Jul 2018.
7. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
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Directorship/trustee interests:
8. Euleen Goh Yiu Kiang, a member of DBS Group Holdings Board of Directors, is a Non-Exec Director of CapitaLand as of 30 Jun 2018.
Disclosure of previous investment recommendation produced:
9. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”). DBS holds Australian Financial Services Licence no. 475946.
DBSVS is exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. DBSVS is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws.
Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.
Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).
This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).
For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]
Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.
Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.
Wong Ming Tek, Executive Director, ADBSR
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Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.
United Kingdom
This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom. In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.
Dubai International Financial Centre
This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.
United Arab Emirates
This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.
United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.
Other jurisdictions
In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
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DBS Regional Research Offices
HONG KONG DBS Bank (Hong Kong) Ltd Contact: Carol Wu 18th Floor Man Yee Building 68 Des Voeux Road Central Central, Hong Kong Tel: 65 6878 8888 Fax: 65 65353 418 e-mail: [email protected] of the Stock Exchange of Hong Kong
MALAYSIA AllianceDBS Research Sdn Bhd Contact: Wong Ming Tek (128540 U) 19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia. Tel.: 603 2604 3333 Fax: 603 2604 3921 e-mail: [email protected]
SINGAPORE DBS Bank Ltd Contact: Janice Chua 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel: 65 6878 8888 Fax: 65 65353 418 e-mail: [email protected] Regn. No. 196800306E
INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: Maynard Priajaya Arif DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: [email protected]
THAILAND DBS Vickers Securities (Thailand) Co Ltd Contact: Chanpen Sirithanarattanakul 989 Siam Piwat Tower Building, 9th, 14th-15th Floor Rama 1 Road, Pathumwan, Bangkok Thailand 10330 Tel. 66 2 857 7831 Fax: 66 2 658 1269 e-mail: [email protected] Regn. No 0105539127012Securities and Exchange Commission, Thailand
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