Accretive Bedok Mall acquisition is a new feather in CMT’s cap: analysts

Despite its hefty price tag.

CapitaLand Mall Trust’s proposed $783.1m acquisition of Bedok Mall will be accretive to its portfolio, according to analysts.

CIMB analyst Tan Xuan said that the deal will increase the trust’s exposure to the lucrative necessity spending segment.

“The new purchase will complement CMT’s portfolio as it will expand AUM by 8% to S$11bn and boost the trust’s exposure to the necessity spending segment to 76.2% of portfolio, from 74.5%,” Tan noted.

“While the full property and financing details have not been revealed, we reckon the purchase should initially be mildly accretive as the FY14 property yield of 5.1% is close to the trust’s implied yield of 5+%, with more uplift in the medium term based on the growing tenant sales seen in 1H15 as well as from possible reversion upside from its first rental renewal cycle from FY17 onwards,” she added.

Although the mall’s price tag is rather hefty, Barclays analyst Tricia Song believes that Bedok Mall will be well worth its price.

“ The acquisition price and valuation of S$3,506psf at 5.1% is significantly higher than the highest in CMT’s core portfolio – Junction 8’s S$2,620psf at 5.35% cap rate. We believe the difference could be attributed to the age difference, tenure (Bedok is newer with a longer remaining lease) and the tenant mix (Bedok Mall has fewer large anchor tenants and hence higher rents in the “high teens”),” she noted.

“Located in one of the largest estates in Singapore in terms of population, Bedok Mall serves the shopping demand for the residential population catchment in the area as it is the largest shopping mall in its immediate vicinity, enjoys excellent transport connectivity, with direct connection to the Bedok MRT station and the Bedok bus interchange,” Song said.