The Motley Fool

3 Reasons CapitaLand Mall Trust Can Continue to Grow Its DPU

CapitaLand Mall Trust (SGX: C38U) reported a solid set of results for the first quarter of 2019. Distributable income was up by 7.4%, while DPU increased by 3.6% to 2.88 Singapore cents.

On top of the strong headline numbers, there were also telling signs that the trust’s growth looks likely to continue.

Positive rental reversion

The rental reversion rate is a key metric followed by REIT investors. A positive rental reversion means the REIT was able to sign leases at higher rates than the expiring rents.

In the first quarter of 2019, CapitaLand Mall Trust signed a total of 190 leases at a positive rental reversion rate of 1.2%. The retention rate of tenants was also high, at 88.9%, signaling the strong relationship CapitaLand Mall Trust has with its tenants.

The positive rental reversion rate should boost organic rental income growth down the road.

Bringing more shoppers to its malls

Despite the proliferation of e-commerce, CapitaLand Mall Trust has still managed to continuously increase the shopper traffic at its malls. On a comparable basis, total shopper traffic increased by 2.0% in the first quarter of 2019 compared to a year ago.

There are a number of strategies the trust has undertaken in an attempt to attract shoppers to its malls.

For one, the trust has continuously looked for new tenants that can engage shoppers. Two, CapitaLand Mall Trust has done a good job of organising events in its malls to attract and engage shoppers. In the first quarter of 2019, the trust held the Nickelodeon Fiesta at Clarke Quay and the Warner Bros “Get Animated” Invasion Tour at Raffles City, which helped draw significant crowds to those two malls.

Source: CapitaLand Mall Trust 2019 Q1 Earnings Presentation

Contribution of Funan and Westgate

In addition to organic growth in its existing malls, the reopening of Funan after three years of redevelopment and the full-year contribution from the acquisition of the balance 70.0% interest in Westgate can boost rental income.

Westgate was acquired in November last year and will boost second- and third-quarter sales on a year-on-year basis.

Management has also said that Funan is on track to open in mid-2019, with 90% of the mall already leased.

The Foolish bottom line

The future certainly looks bright for CapitaLand Mall Trust. However, investors should note that the trust’s propensity for growth has not gone unnoticed. At its current price of S$2.43 per unit, the trust has a rich valuation of 1.19 times its book value and an annualised distribution yield of 4.7%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore recommends Capitaland Mall Trust.