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Company Initiation

CapitaLand Mall Trust

12 June 17, 8.15am/11.15am Morning Call/Webinar



2

Disclaimer

The information contained in this presentation has been obtained from public sources which Phillip Securities Research Pte Ltd (“PSR”) has no reason to believe are unreliable and

any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such information and are expressions of belief

only. PSR has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or

should be relied upon as such. Any such information or Research contained in this presentation is subject to change, and PSR shall not have any responsibility to maintain the

information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSR be liable for any special, indirect, incidental or

consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages.

This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular

person.

You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or

particular needs, before making a commitment to invest in such products.



Company Initiation

CapitaLand Mall Trust

Strong operator in a challenging environment

12 June 17, 8.15am/11.15am Morning Call/Webinar

Tan Dehong, Peter Ng

Phillip Securities Research Pte Ltd

12 June 2017



4

Investment Thesis

1.Expect retail sales to bottom in 2H17 as the economy continues to recover. Sentiment could

receive further boost with improving home prices.

2.Largest mall owner in Singapore with a focus on suburban malls that are well integrated into

major transport hubs and with near monopolistic locations.

Structural Challenges

1.Increasing number of ecommerce sites, more aggressive promotions and increasing ease of

shopping online.

2.Declining population growth and aging population in Singapore.

CMT (Neutral, TP: S$2.01, Last: S$1.93)



5

14% market share in Singapore (16 malls). Close to 75% of malls directly integrated with MRT stations

Average occupancy of 98.8% since listing in 2002 (GFC 2008: 99.7%, 2009: 99.8%)

Largest mall owner in SG with well integrated malls

Source: Company/PSR

Revenue segmental breakdown

CMT’s well located malls at important transport nodes



6

Retail sales dropped 2.6% in 2016

1Q17 similar trend, March numbers stronger than Jan-Feb

GDP inflexion point in 3Q16, driven by electronics, precision engineering clusters

Expect retail sales to bottom in 2H17 as economy continues to recover.

2016 was worst year for retail since 2009.

-6

-4

-2

0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% YoY Retail Sales Index (Ex Motor Vehicles)

-10

-5

0

5

10

15

20

25

30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Nominal GDP T4Q YoY % Change: USD mn: sa

GFC Starts RecoveryPickup in

global economies

EU Debt

Crisis

Source: CEIC, PSR

GDP growth picked up since 3Q16 after Singapore narrowly missed a technical recession

MTI forecasts Singapore’s economic growth to come in above 2% in 2017 on the back of an improving global outlook.



7

Expect strength in these sectors to continue on the back of recovery of global demand in these

sectors

Driven by manufacturing and exports, particularly in electronics and

precision engineering sectors

GDP growth picked up since 3Q16 after Singapore narrowly missed a technical recession

1Q16 2Q16 3Q16 4Q16 1Q17

Manufacturing -0.4% 1.5% 1.8% 11.5% 8.0%

Services -4.2% -0.7% 1.1% 8.4% -2.1%

Exports (non-oil) -9.6% 1.2% -5.2% 2.7% 15.2%

Source: MTI, PSR

YoY Growth



8

Household balance sheets improving with total gearing dropping over last two years

Residential property make up 44% of total household assets

14 consecutive quarters of home price decline since 4Q13. Expect bottom in 2H17

Consumer sentiment could receive further boost with improving home

prices

Residential Property make up 44% of total household assets

46% 49% 47% 49% 50% 50% 48% 46% 46% 45% 44%

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Financial Assets Residential Property Assets Total Debt to Assets (RHS)

Source: Singstats



9

Our rationale for expecting a bottoming and improvement in home prices stems from:

1. 14 consecutive quarters of home price fall increasing affordability. Buying sentiment likely improved

after government’s first easing of cooling measures in 1Q17.

2. Dwindling unsold inventory as a result of tapering government land sales since 2011. Demand

supported by improving sentiment.

3. Transaction volumes in 1Q17 have increased 70% YoY. Our talks and channel checks with

developers seem to point to a greater hunger for land. They have demonstrated this with four en-

bloc sales in the last month. Developers seem to share the same optimism on home prices.

Govt’s first “easing” of property cooling measures in 1Q17 to improve

sentiment



10

9 years of Retail Sales decline since 1985

Most occurred in periods of home price weakness – Home prices are important for sentiment and

consumption

Consumer sentiment could receive further boost with improving home

prices

Most retail sales weakness occur in periods where home prices are weakening

-1%

-12%

-2%

2%

-4% -4%

-3%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1986 1991 1998 2001 2003 2009 2014 2015 2016

YoY % Private Property Price Index YoY %, RSI (Ex Motor Vehicles) (RHS)

Source: CEIC, Singstat, PSR



11

Proactive approach in improving shopper experience and strategically located malls have led to it

consistently maintain a near full portfolio occupancy

Embracing technology and innovative solutions for improved shopper experience and better

operational efficiency. Measures include:

i. Harnessing visible light communication (VLC) technology in the malls’ Philips lighting fixtures which

are able to detect shoppers’ indoor positioning, This allows for more targeted and personalised

marketing messages to be broadcast to shoppers.

ii. Introduction of a fully automated artificial intelligence chatbot in the CapitaStar App which is able to

dish out a slew of concierge services such as restaurant booking and ride hailing.

iii. Streamlining goods delivery process by harnessing technology through the In-Mall distribution pilot

which shrank delivery time by more than 70%.

Well integrated suburban malls; Proactive innovative operator



12

Quality of malls reflected in near full occupancy throughout

Proactive strategies and strategically located malls enabling CMT to consistently maintain a

near full portfolio occupancy

95.1% 95.0%95.5% 94.2%

92.8%

92.5%

92.3%

100.0%

98.2%98.5%

99.2%

97.6%

98.5%

97.7%

88%

90%

92%

94%

96%

98%

100%

102%

2011 2012 2013 2014 2015 2016 2017Q1

Occupancy Rate of Private & Public Sector Retail Space (Whole Island)

Occupancy Rate of CMT Portfolio (excl Malls on AEI)

Source: Company, URA, CEIC



13

CMT shares and its portfolio malls’ valuations outperformed comparable asset classes since 2002

IPO

Difficult to replicate past performance due to structural challenges

CAGR rates comparison since CMT’s IPO in 2002. CMT shares and its portfolio malls’ valuations outperformed comparable asset classes

6.1% 6.0%6.2%

4.8%

3.7%

1.7%2.1%

0%

1%

2%

3%

4%

5%

6%

7%

CMT Shares TampinesMall

Junction 8 Funan Private ResiProperty

Price Index(URA)

Central AreaShop Space(URA Price

Index)

Fringe AreaShop Space(URA Price

Index)Source: Company, URA, CEIC

Outperformed since IPO, but difficult to replicate past performance



14

2015 Visa statistics – retail expenditure channelled to online sources

Temasek/Google study: E-ecommerce market in SG to be worth US$5.4bn by 2025 (2015: US$1bn)

CAGR of 18.4% over next 10y. 10y historical CAGR for overall retail spending 2.7%

2015 YoY % growth - Visa online spending trumped brick-and-mortar and island wide sales in the fashion category

Structural Challenges – E-commerce

35%

5.50%

-2.70%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Visa fashion-relatedonline spend

CMT Malls - Fashion,Shoes and Bags Category

average

Singapore islandwide:Wearing apparel and

footwear categorySource: Company, Visa, Singstat, PSR



15

Online shopping currently 2.1% of total retail sales

Mature countries like UK/US >10%

Amazon’s entry into Singapore 2H17. More aggressive promotions by e-commerce players to

attract shoppers

More room for online shopping to grow

Aggressive marketing by e-commerce players as they vie for market share will make online shopping even more attractive to consumers

Source: Lazada, Redmart



16

Variety of collection points/SingPost POPStations

Mckinsey Study 2016: Future of e-commerce dominated by autonomous vehicles

delivering 80% of parcels, this could happen within next 10y

Improvements in Logistics and last mile deliveries

Spending to qualify for free shipping Express Standard

ASOS £9.28 2 7Zalora S$40 1 1 to 14Amazon $125 3 to 5 9 to 12Lazada Economy shipping is free for any purchase 0 to 1 1 to 3Redmart S$49

Source: PSR

Average Shipping Time (days)

1 to 2

Shipping time for e-commerce deliveries set to shrink with i) increasing number of start-ups disrupting the logistics space improving efficiency ii) autonomous vehicles taking over deliveries in future

Expect online sales to continue momentum and account for bigger portion

of total retail. Brick and mortar malls will remain under pressure.



17

Slowing population growth rates, aging Singaporeans

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 2021 2025 2029

Total Population Y-o-Y Growth Rate (RHS)

Source: Company, Phillip Securities Research (Singapore)

Target of 6.9m by

2030 implies a CAGR of 1.5% until 2030

Slowing population growth to negatively impact retail spending

Singapore population growth rate

10y average 2.50%

30y average 2.40%CAGR to hit 6.9mn by 2030 1.50%



18

Slowing population growth rates, aging Singaporeans

0

2

4

6

8

10

12

14

16

18

0

5

10

15

20

25

30

35

40

45

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

SG: Age Dependency Ratio: % of Working-Age Population

SG: Age Dependency Ratio: % of Working-Age Population: Young

SG: Age Dependency Ratio: % of Working-Age Population: Old (RHS)

Source: CEIC, PSR

Singapore’s old age dependency ratio expected to rise further



19

Upcoming Supply – Heavy supply in Eastern Region, expect Tampines

Mall and Bedok Mall to come under pressure

Project Location Estimated NLA (sq ft) Estimated completion

Marina One (The Heart) Marina Bay 140,000 2017

Singapore Post Centre Paya Lebar 177,000 2017

Paya Lebar Quarter Paya Lebar 340,000 2018

Northpoint City Yishun 330,000 2018

TripleOne Somerset Podium AEI Somerset 70,000 2018

Jewel Changi Airport Changi Airport 576,000 2019

Funan North Bridge Road 324,000 2019

City Gate Beach Road 76,000 2019

Total 2,033,000

Source: URA, PSR

Major retail projects completing 2017-2020

90

95

100

105

110

115

120

125

2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1

Rental Index (Fringe Area) Rental Index (Central Area)

Source: URA, PSR

Rental index, especially in fringe area, to

continue to be under pressure in 2017 as majority of supply over next few years

are concentrated in suburban areas.

Rental Index expected to be under pressure for 2017, especially for Eastern Area



20

High base of shoppers’ traffic from good locations of malls

80% of sales coming from necessity spending which is less susceptible to economic environment

Tenant sales is a fuel for rental income

Higher shoppers’ traffic = Higher sales conversion

Tenant sales is facing pressure and is expected to continue facing pressure due to structural change in the retail

landscape

Growth rates comparison between CMT’s tenant sales and Singapore retail sales

Tenant sales continue to outperform Singapore retail sales;

Expect pressures moving forward

Source: Company, SingStat, PSR

-4%

-2%

0%

2%

4%

6%

FY13 FY14 FY15 FY16

YoY Change

Tenant Sales Retail Sales



21

Occupancy cost continuously expanded in the past four years to 19% in FY16 from declining tenant sales

Trend is unlikely to bucker; Potential pressures in rental reversions for CMT moving forward

Historical occupancy cost has been higher than FCT (NEUTRAL, TP S$2.04)

Translates to lesser room for the trust to negotiate for higher rentals upon lease renewals

Declining rental reversions in CMT vs more resilient rental reversions in FCT

Higher occupancy costs puts pressure on growth in rental reversions

10%

12%

14%

16%

18%

20%

FY13 FY14 FY15 FY16

CMT Frasers Centrepoint Trust (FCT)

0%

3%

6%

9%

12%

FY13 FY14 FY15 FY16

CMT FCT

CMT may be stretching occupancy cost too much FCT rental reversions outpacing CMT



22

Current debt headroom of S$840 million (redevelopment costs for Funan) is sufficient to acquire

another shopping mall asset in Singapore under sponsor’s (CapitaMalls Asia) portfolio

Valuations of retail assets that could potentially be acquired by CMT as at FY16

Sufficient debt headroom to potentially acquire another asset

Asset Name Status Effective

Stake (%)

GFA (sqm) Valuation

(S$'mn)

Jewel Changi Airport Under Construction 49 134,059 746

Star Vista Completed 100 24,000 276

ION Orchard Completed 50 87,715 3,244

ION Orchard Link Completed 50 450 32

Source: Company, PSR



23

Actively pursuing AEI with two or three works completed in the past three years

Commenced redevelopment works for Funan and AEI works at Raffles City Singapore which are expected to be

completed in 4Q19 and 1Q18 respectively

Historical AEIs that were completed in CMT's portfolio

AEI and redevelopment of existing retail assets to pursue growth

Year Asset Name

FY14 Bukit Panjang Plaza, Jcube, Bugis Junction, IMM Building (Phase 1)

FY15 Sembwang Plaza, IMM Building (Phase 2), Clarke Quay

FY16 Plaza Singapura, Tampines Mall

Source: Company, PSR



24

Funan’s redevelopment will result in a new integrated development with retail, office and service residence components

Improved connectivity via an underground passage connecting the development to City Hall MRT

Funan’s NLA will double to 0.6 million sqft from 0.3 million sqft

Estimated redevelopment cost is S$560 million with a 6.5% projected ROI

Asset could bring in an additional S$36.6 million in NPI per annum (8% of FY16’s NPI)

Contributions from the redevelopment of Funan to begin in 4Q19

Artist Impression of Funan redevelopment, Source: Company



25

Works involve refreshing the main entrance, refurbishing certain mall facilities and revamping the Central

Atrium on Level 3

Works are primarily superficial, and will not provide a direct boost to the mall’s rental income

Objective is to refresh and keep the mall relevant to the evolving trends

AEI on RCS to refresh and enhance shopping experience

Artist impression of AEI at RCS, Source: Company



26

Upside

1.Stronger than expected economic growth and employment situation in Singapore leading to

stronger pickup in retail spending

2.Slower than expected Fed raising of interest rates leading to longer low interest rate

environment

Downside

1.Weaker than expected employment and housing market in Singapore affecting sentiment and

retail spending.

2.Faster Fed rate hikes than expected increasing costs of borrowing for CMT, and lowering the

appeal of yield instruments

Risks to our thesis



27

Valuation – Neutral, DDM-TP S$2.01

4

4.5

5

5.5

6

6.5

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Dividend Yield

DIVIDEND_YIELD Average +1S.D. -1S.D

Source: Bloomberg, Phillip Securities Research (Singapore)

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Price/NAV

PX_TO_BOOK_RATIO Average +1S.D. -1S.D

Historical Dividend Yield and Price/NAV



28

Valuation – Neutral, DDM-TP S$2.01

1.5

2

2.5

3

3.5

4

4.5

2010 2011 2012 2013 2014 2015 2016 2017

Spread over 10y govt bond Average +1S.D. -1S.D

Source: Bloomberg, PhillipSecurities Research (Singapore)

CMT’s spread over 10y SGS bond now at close to +1s.d. level

Name PSR CALL Mkt Cap (SGD mn) Last Close ($) Dvd Yld:D-1 P/B Latest Gearing (%) Average Cost of debt

CAPITALAND MALL TRUST NEUTRAL 6,860 1.94 5.75 1.03 35.3 3.20%

FRASERS CENTREPOINT REIT NEUTRAL 1,936 2.10 5.61 1.09 29.4 2.20%

CAPITALAND RETAIL CHINA TRUST NEUTRAL 1,395 1.57 6.42 1.00 35.1 2.49%

SPH REIT 2,568 1.01 5.48 1.07 25.5 2.79%

MAPLETREE COMMERCIAL TRUST 4,444 1.55 5.56 1.12 36.4 2.66%

STARHILL GLOBAL REIT 1,647 0.76 6.66 0.82 34.8 3.17%

SUNTEC REIT 4,856 1.84 5.48 0.85 36.4 2.42%

Source: Bloomberg (Updated 7 June 2017), Company 1QCY Results Sl ides , PSR



29

Investment Thesis

1.Expect retail sales to bottom in 2H17 as the economy continues to recover. Sentiment could

receive further boost with improving home prices.

2.Largest mall owner in Singapore with a focus on suburban malls that are well integrated into

major transport hubs and with near monopolistic locations.

Structural Challenges

1.Increasing number of ecommerce sites, more aggressive promotions and increasing ease of

shopping online

2.Declining population growth and aging population in Singapore.

Company Analysis

1.Rising occupancy costs – highest in CMT history at 19%. Expect pressures in rental reversions

SUMMARY (CMT: Neutral, TP: S$2.01, Last: S$1.93)



30

Disclaimer

The information contained in this presentation has been obtained from public sources which Phillip Securities Research Pte Ltd (“PSR”) has no

reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this

presentation are based on such information and are expressions of belief only. PSR has not verified this information and no representation or

warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any

such information or Research contained in this presentation is subject to change, and PSR shall not have any responsibility to maintain the

information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSR be liable for

any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even

if it has been advised of the possibility of such damages.

This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or

particular needs of any particular person.

You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment

objectives, financial situation or particular needs, before making a commitment to invest in such products.



31

Analysts Paul Chew, Head of Research

Pei Sai Teng, Macro

Jeremy Ng, Technical Analysis

Jeremy Teong, Banking & Finance

Soh Lin Sin, Consumer | Healthcare

Richard Leow, Transport | REITs (Industrial)

Dehong Tan, REITs (Commercial, Retail, Healthcare) | Property

Peter Ng, Property | Infrastructure

Ho Kang Wei, US Equity

Chen Guangzhi, Oil and Gas | Energy

By Phillip Securities Research Mohamed Amiruddin, Operations Exec

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Company Initiation - StocksBNB · PDF filePhillip Securities accepts no liability whatsoever with respect to the use of this document or its ... of the possibility of ... Harnessing