CapitaLand Mall Trust owns a portfolio of high-quality malls around Singapore and boasts the city-state's greatest market share in retail space. Its malls are well managed, situated in densely populated areas, and close to mass transport hubs with high foot traffic. These attributes are attractive for its diverse tenant base, resulting in high retention rates and near-full occupancy across its properties through business cycles. Non-discretionary products and services such as food and beverage drive repeat customer visits and account for 30% of gross income. This high occupancy and staggered lease expiry profile helps reduce rental cyclicality and is conducive to stable distributions to unitholders.

While the Singaporean economy has slowed, economic conditions remain stable to support retail sales and rental income for retail landlords. Unemployment rate in the city-state is lower than historical averages, and income growth is steady. We consider downtown malls of Plaza Singapura on Orchard Road, a prominent shopping district, and Raffles City in the central business district to be well positioned to benefit from tourism exposure.

The trust has a record of generating value for investors from redeveloping existing properties. This is achieved through better utilisation of floor space, increasing Net Leasable area by expanding existing properties and improving tenant and trade mix. A face-lift and conversion of the rooftop at Tampines Mall into retail space will increase net leasable area by 10%. Return on the SGD 36 million investment was 8%. In our view, these projects are low-risk growth strategies in delivering higher rent and increasing property value. We expect redevelopment activities to continue to feature as part of CMT's operations over the long term. Current asset-enhancement initiatives include the expansion at Bukit Panjang Plaza and the redevelopment of Funan Digital Life Mall.

Analyst: Michael Wu, CAIA

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