June 6, 2019

CapitaLand Mall Trust (CMT) announced early this week that Funan will be opening its doors on 28 June, following its redevelopment for three years. The opening date comes in two months ahead of its original schedule. Funan is poised to excite shoppers in Singapore’s Civic District, with more than 180 brands clustered around six passion themes: Tech, Craft, Play, Fit, Chic, and Taste. Approximately 30% of its tenants are new-to market brands and new concept stores or flagships. These include Afuri Ramen, Brompton Junction and Dyson. Meanwhile, more than 60% of the brands originate from Singapore, and these include Drumstruck and Tiong Bahru Bakery. Other anchor tenants include Golden Village (latest seven-screen multiplex), FairPrice Finest and KOPItech (Kopitiam’s latest concept).

According to CMT, Funan has achieved precommitted occupancy of ~92% for its retail component and ~98% for its twin office blocks. Management expects more retail leases to be signed in the coming months. We believe this firm commitment level is a testament to Funan’s unique positioning and CMT’s strong marketing efforts, notwithstanding the soft macroeconomic backdrop. More than 30% of Funan’s brands are new to CapitaLand’s portfolio.

We raise our FY19 and FY20 DPU forecasts by 0.5% and 2.0%, respectively, on faster-thanexpected ramp up at Funan. Based on our projections, Funan’s retail and office component is expected to contribute in aggregate 3.2% and 7.6% of our FY19 and FY20 NPI forecasts, respectively.. Whilst we see CMT as a defensive shelter amid the ongoing trade tensions given its resilient portfolio and strong track record, we believe these positives have already been priced in. Our fair value estimate inches up from S$2.32 to S$2.33. Maintain HOLD. – OCBC Investment Research

CapitaLand Mall Trust closed at: S$2.57