Capitaland Mall Trust have the largest ‘fleet’ of suburban malls. While we can talk about the trust as an investment, it can also give us a sensing of the consumer purchasing power of the average Singaporeans.
For all the negativity surrounding Singaporeans being cautious with their money in a low growth 2015, the shopping traffic actually went up well. Could this point to global warming and a hotter Singapore?
Perhaps Bedok Mall and Funan DigitaLife Mall balance each other out. Net net, the sales went up, which may indicate people are not just walking around but are purchasing stuff at a slightly higher rate.
The rental revisions for CMT shows the ability to raise rent and the willingness for tenants to stay in operation and afford the rent.
Since the tenor for rent are usually 3 years, and inflation in Singapore is 2%, a mediocre and average revision is a 6% up. Only Plaza Singapura is able to command that kind of revision. The rest did not hit this average revision and many have revise their lease negatively.
The bottom half of the list shows the less lucrative malls to CMT, and they also have poorer retention rates, with negative rent revision.
Probably only selected malls are still lucrative in the eyes of the retailers to gain meaningful foot traffic and sales.
The slide shows the past revision history. Notice majority of the revision is around 6%. Surprisingly in recession years 2007 and 2008 the rent revision is very high.
This year, the revision have been below average.
If the retail shops are still making good profits at good margins, then the future prospects are good for them to pay greater rent. However, while more malls are being developed, the supply is still quite controlled. The rents now could probably reach a threshold of the kind of hearsay we have heard on the ground that “the rents are crazy”
In the past half year, the analyst have been beating down the retail REITs especially Kim Eng. CMT have shown some resilient numbers, but the deeper numbers do show that a lot of the rent increases might be due to some recent facelift done to the popular malls.
The retail Malls have not come down much during this Singapore market correction and have reverted to their original prices (check out their latest dividend yields versus FCT, SPH REIT, CRCT, MCT here), showing great resilience.
This is what investors are happy about. However, do we agree with Kim Eng that this segment have problems and the valuation does not justify that resilience?