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Broker's take: UOB Kay Hian upgrades CapitaLand Mall Trust to 'buy' with S$2.65 target price

UOB Kay Hian has upgraded its call on CapitaLand Mall Trust (CMT) to "buy" with a target price of S$2.65 as the real estate investment trust (Reit) is poised to gain from rental contributions from the revamped Funan, and benefit from the development of the Jurong Lake District.

In a report, the brokerage's analysts Jonathan Koh and Loke Peihao said that Funan, with about 90 per cent of pre-leasing commitment for retail spaces and 98 per cent of pre-leasing commitment for office spaces, is estimated to "contribute rental income of S$16.5 million in Q3, representing 8 per cent of total gross revenue".

As a result, the brokerage has increased its revised distribution per unit forecast for fiscal 2019 by 12 per cent to factor in the contributions from Funan when it opens in June.

With the Urban Redevelopment Authority's draft Master Plan 2019 calling for the development of Jurong Lake District (JLD) as Singapore’s second central business district, CMT malls in the area may benefit from future development in the area. 

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JLD comprises of commercial hub Jurong Gateway and leisure precinct Lakeside.

CMT, which owns three retail malls in Jurong Gateway - IMM Building, JCube and Westgate - is a "prime beneficiary of growth from JLD", UOB Kay Hian said. The trio of malls accounts for about 20 per cent of CMT’s portfolio valuation.

Unit price catalysts for CMT include positive newsflow on retail rentals and mall occupancy and the positive effects of asset enhancement initiatives at the Reit's malls.

As at 2.48pm, CMT units were trading at S$2.45, one Singapore cent or 0.4 per cent higher.