How CapitaMalls Asia could milk gains from Project Jewel

It may have to wait until 2018.

According to Barclays, on 20 Dec 2013, CMA and Changi Airport Group entered into a joint venture (49%, 51%) to develop an integrated mixed-use development at Changi Airport (Project Jewel) at a total estimated cost of S$1.47bn.

The project has a total GFA of 1,443,000 sqft (retail c969,000 sqft, airport operation c185,000 sqft, indoor gardens and attractions c238,000 sqft and hotel c51,000 sqft) and construction is expected to begin in 2H14 and complete by 2H18.

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Land tenure is 60 years and the retail NLA is c576,000 sqft. Cost/NLA is works out to be S$2,600 psf, which is way below ION Orchard (now S$4,842psf) and close to Tampines Mall (cS$ 2,500psf). Expected target NPI yield on cost is around 5-6% p.a.

We do not assume any contribution from Project Jewel until 2018. However, this would have an impact on CMA’s cashflows and opportunity costs.

Factoring in all commitments, which are mainly in China and Singapore, and without assuming asset revaluation gains, we expect net gearing to rise to 37% from the current 22%. Management does not expect look-through gearing to exceed 40% from the current 36% even with these commitments coming through as it expects valuation to increase in tandem.