CapitaMalls Asia (CMA)/ CapitaMalls Trust (CMT)/ CapitaLand/ Low Keng Huat

CapitaMalls Asia (CMA)/ CapitaMalls Trust (CMT)/ CapitaLand/ Low Keng Huat: The joint venture consisting of CMA, CMT and CapitaLand has collectively granted an option to a consortium to purchase Westgate (office component) for a total consideration of $579.4m, translating into $1,900psf on net saleable area. Assuming a gross rent of $7.50 psf/mth for office, CLSA estimate the deal is done at ~3.6% NPI yield which seems aggressive. CLSA estimate that the retail component valuations of $986m upon completion is currently implying a valuation of $2,404 psf, comparable to CMT’s suburban malls, Tampines Mall ($2,422 psf) and Junction 8 ($2,477 psf), but lower than SPH Reit’s Clementi mall ($2,970 psf). Given that management has reiterated the initial target of $16-17 psf passing rents have been met, CLSA estimate retail is achieving a decent 5.77% NPI yield. The consortium is led by Sun Venture Homes Pte Ltd (60%) and Low Keng Huat (Singapore) Limited (40%). Sun Venture is a very active Singapore-based developer in the commercial space. In 2010, it acquired The Adelphi from CapitaLand for $218m and in Jul 2013 divested Robinson Point to Tuan Sing for $348.9m netting a decent 23% gain on its original purchase price of $284m barely less than a year in Jul 2012. CLSA view the deal as a positive for CMA as it allays some of the earlier concerns of a slow pre-commitment progress in Westgate Tower post the reversal decision by CapitaLand to consolidate its operations in Westgate Tower. Furthermore, pricing of the deal is favourable to CMA and eases balance sheet stress over the next few years. CLSA retains its conviction BUY with $2.62 TP for CMA.