CapitaMalls hit by start-up costs again

Pre-opening losses could be stretched to 1Q.

Pre-opening losses hit CMA’s result again and this could stretch to 1Q13, says CIMB. But operating metrics wise, CIMB notes that growth in same-mall NPI and China tenant sales stayed firm.

"4Q12 core earnings were below expectations, at 14% of our full-year forecast (16% of consensus), taking FY12 core EPS to 83% of our forecast. We lower our FY13-14 core EPS as we factor in the expensing of some start-up costs. We lift our target price (10% RNAV discount) for higher same-mall NPI in China. Maintain Neutral on valuation grounds," it said in a research note.

Here's more:

Stronger operating metrics CMA’s property income in China was dented by pre-opening losses (S$5m) for newly opened malls in 4Q12 (S$12m for FY12). Management indicated that more start-up costs could be expensed in 1Q13 but the quantum is likely to be smaller.

Excluding this, operating metrics continued to improve, with same-mall NPI and tenant sales in China up 16.9%and 9.8%, respectively.

FY12 core earnings rose 25% and are expected to be sustain this growth in FY13 as new malls acquired in China and Japan begin to contribute fully.

Rising China book values
Revaluation gains of S$138m for its China malls were booked in FY12 on stronger NPIs and tenant sales but with cap rates are unchanged. With
75% of its China malls now operational and more malls opening in 2013-15, book values should continue to rise.

Potential compression of cap rates should also facilitate accretive recycling moves. For now, we believe that divestments could come from its Singapore
portfolio, which appears to have peaked in terms of rents (+2.7% yoy) and tenant sales growth (+2% yoy).

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