Watch for capex needs
CMA has been aggressive in acquisitions, committing to over S$2.5bn of purchases in 2011. While its NPI gestation is well known, we believe the market will increasingly focus on its capex needs and rising leverage. Some of its large-scale China investments have yet to go through formally, with debt obligations yet to show up on its books. While CMA maintains that access to Rmb debt funding is not a problem, funding costs have increased substantially, with the group understood to be paying PBoC rates + 20%.

A closer look at gearing
Assuming its projects are debt funded, progressive drawdown couldlift CMA’s net gearing from 6% to 40-55% in FY11-13, with look-through gearing (incl. net debt of associate REITs and private funds) rising further to 67-84%. CMA has guided for optimum gearing of 60-70%, which provides little margin for comfort, in our view.

NPI growth to remain tepid; risks of cash call in 2012
We estimate that its operating cash flows will be unable to cover its development capex needs in the near future. 3Q11 results suggest that NPI growth could remain tepid for 2012 on start-up costs and rental gestation. A pick-up could come only by 2013, by our estimates. Its China portfolio yields on costs are still sub-optimal at 6%, and lower for new malls at 5%. A potential divestment of ION to CMT could prop up financials but this would come at the expense of recurring earnings (35%) and likely cash calls from its associate. Share price has crept up to 0.9x P/BV. With its recent dual listing in HK, we believe equity-raising in 2012 is possible.