What's kickstarting a CapitaMalls Asia rally?
Better operating performances in its key Asian markets led to higher 1Q12 revenues with potential for even stronger results.
It also helped that shopper traffic and tenant sales for its Singapore, China and Malaysia malls grew at fairly brisk rates. What's in store for CMA in the next nine months?
Here's more from DBS:
Highlights. Results within expectations, makes up 19% of full-year forecast. CMA reported PATMI of S$66.8m, up 36% y-o-y on a 41% higher revenue of S$70.9m. Stripping out S$30m of fair value gains from the acquisition of the remaining stakes in three Japan assets, a bottom-line of S$36m makes up c19% of our full-year estimate. Contributing to earnings were also better operating performances in Singapore, China and Queensbay Mall in Malaysia; a small maiden S$2m contribution from the purchase of the remaining 50% stake in the Minhang and Hongkou malls ( acquired last month); and increased income from a higher stake in three Japan assets. Portfolio-wise, NPI yield continued to improve across its major markets (except for Japan and India) with Singapore rising from 5.5% as at December 2011 to 5.7% in Q1, China 5.6% to 6.4% and Malaysia 6.5% to 7.1%, as shopper traffic and tenant sales continued growing by 1-10% and 2-13% respectively.
Our View. Earnings on a growth path. Forward earnings will continue to be lifted by a full nine-months' income from the additional 50% stake in Minhang and Hongkou Plaza, and contributions from Star Vista in Singapore (scheduled to be completed in August 2012), as well as continued improvement in operations at existing malls. In addition, the group plans to open seven malls in China this year. Contributions from these properties should be felt from FY13 onwards. CMA has also announced that it has acquired a development site in Tiangongyuan, in the south of Beijing, for the development a 122,000sm GFA retail mall. This is its first investment into south Beijing and deepens the group's presence in Beijing to nine malls. The mall is expected to be completed in 2015 at a cost of Rmb2.34b (or Rmb19200psm). This will extend the group's development pipeline of directly-owned projects in China. Its balance sheet remains healthy with a gearing of 15% as at 1Q12 (c 23% post-acquisition of Minhang and Hongkou) and with a projected capex of S$600-800m annually over the next two years. Gearing is expected to continue rising but at a modest pace.
Recommendation. Maintain BUY. We are raising our FY12 PATMI from S$191m to S$205m to take into account fair value gains. We are leaving our FY13 numbers unchanged. Our RNAV of S$2.52 and TP of S$2.02 are maintained. We continue to like CMA for its leadership position in the Asian retail real estate market. With the gradual completion and commencement of operations of its properties as well as the ramping up of its ongoing operations, we believe earnings and NAV growth should be sustainable.
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