The fifth part of my investment portfolio in which objective is to create wealth to retire.
Stock : CapitaMall Trust
CapitaMall Trust is the first REIT that was listed in Singapore in July 2002 ( IPO price $0.96 ) and at present it is also the largest REIT listed by market capitalization. It asset is the retail malls in Singapore with famous one like Raffles City, Plaza Singapura, IMM Building, Tampines Mall, Junction 8, Bugis Junction, JCube, Funan Digitalife Mall and etc. Currrently, it has 16 assets in Singapore spreading across the island. As a REIT it is termed as defensive as it passes at least 90% of its rental earning back to unitholder in the form of distribution ( dividend ) and with its focus on the retail sector it further enhances its defensiveness mainly due to the demand ( as a result of changing life style in Singapore ) of the retailers. CMT is considered an "income stock" in my portfolio in which according to its latest Oct 2011 earning it is giving an annual distribution of 9.45 cents and with reference to my current holding price of $1.155 ( as vested in 2009 ), that translates to a distribution yield of 8.18%. CMT is never renounced for its high dividend yield and I managed to get it at a price of $1.155 was mainly in 2009, market just started to recover from the 2008 financial crisis and CMT just finished doing rights issue then. Hence, at that price, it is considered a steal as it has a NAV of $1.57.
Potential Upside :
Without any doubt, further quality acquisition is the way to have any good potential upside to CMT. Furthermore, CMT also constantly enhanced its aged assets through the Asset Enhancement Initiatives (AEI ) scheme to make its rental income in those assets sustainable and be able to growth. Another plus point of CMT is its assets are spread across the island including those suburban area. Days are gone with Singaporean going to wet markets for groceries and sight of those traditional provision shops are gone either. With life style changes, suburban malls are replacing those and Singapore practically do their basic necessities in those suburban malls. Established supermarkets like NTUC Fairprice and Cold Storage can be found in those suburban malls and these are where Singaporean shop for their everyday need. As such, CMT with its suburban assets provides the defensiveness despite bad economic day.
Potential Downside :
The downside for CMT like any other REIT is lacking of quality acquisition which are yield-accretive and its gearing. At the moment, CMT has a gearing ratio of 38.4% ( from its latest Oct 2011 earning report ) which probably more towards the higher side. Singapore is a small island, the lacking of land space also defer lot of properties development and hence the lacking of quality assets due to land space limitation is also a potential barrier for CMT to growth its assets. We have seen for the past few years, older retail properties in Orchard have been demolished and redeveloped and for CMT to do that in order to growth its asset portfolio, the cost of it might increase its gearing and this is one disadvantage.
Personal Expectation :
As an "income stock" the minimum personal expectation is CMT ability to maintain at least 8 cents of distribution per annual and further expectation is for CMT management to do more yield-accretive assets acquisition to growth the company and bring value to unit holders. CMT is also another stock that personally I will continue to add more to my existing portfolio should be price dropped to a very attractive valuation
CapitaMall Trust
