Dissecting CapitaMall Trust (CMT) Latest Financial Results – And What This Mean For You!

CapitalMall Trust (CMT) release 1H2020 results and it gives some indication to how retail industry will fare past this circuit breaker.

As we know, retail industry was destroyed by circuit breaker measures.

Tenants were given about 2months of rental rebates mainly for April and May 2020 to help them survive. Moving forward, they have to be on their own. In this article, I'd be sharing some thoughts on it.

How long will it take for shopper traffic trend to fully recover?

For the period 19 June to 5 July 2020, CMT has mentioned that most tenants have resumed operations.

Average shopper traffic has recovered to only 53% of the level a year ago.

Shopping traffic is absolutely vital to business in the malls. That is the whole idea for paying a premium in rental rates vs a HDB shop unit.

Restaurants for example CANNOT rely solely on takeaway for all of it's revenue. The best margins are always the drinks and alcohol.

Suburban malls (blue) continue to outperform downtown malls (green) which include raffles city, bugis, plaza Singapura. Both are trending similarly in the slight recovery.

We do expect Phase 3 to come in at some point in future, the question remains how long will take for traffic to recover to 2019 levels?

And what if there is a second wave of covid-19 infections, will that cause another evaporation of traffic?

Portfolio occupancy concerns for CapitaMall Trust (CMT)

As of 31mar2020, 11.9% were expiring in 2020 which is problematic.

As seen in 30June2020, only 320 leases remain to be expiring.

Total occupancy has dropped from 98.5% to 97.7% even though 2023 lease expiry numbers have increased from 520 leases from 432 leases previously. 

Hence, it is possible that some leases in 2020 were not renewed and some new incoming tenants signed for 3years.

Gross rental income per month in 2021 is lower now even though there are more leases.

This signals a fall in PSF rental rates which may impact near future performance.

Weightage average portfolio lease expiry has dropped to 2.0years from 2.2years.

Quick touch on merger of CMT and CapitaComm Trust (CCT)

Before investing into CMT, do be comfortable with the impending merger of CMT and CCT.

The objective is to diversify for both sets of shareholders to own different kind of assets. 

Below is how the merger will be carried out. This merger will take place by end sept2020.

CCT shareholders will be offered 0.72x CMT shares + $0.259.

Conclusion

CMT will become out of the biggest Reits in Asia and the financial standing is strong.

But before investing into a company, it is important to be comfortable with the business risk of the company.

If you're keen to hear more, click on the Video below for more!