- Site visit reaffirms our view that yields within the China portfolio are experiencing gradual uplift in yields
- Completed assets are trading at 2-3x their initial returns while gestation period is needed for the new properties
- Maintain Buy, TP $2.51
Site visit to Guangzhou, Changsha, Wuhan and Shanghai. CMA currently has 7 developments in Shanghai, 1 each in Foshan, Changsha and Wuhan. We visited the completed Guicheng and Yuhuating malls in Foshan and Changsha, which have been in operations for the past 5-6 years, and saw Zhongshan Mall in Wuhan, currently under development and scheduled to complete in 2012. In Shanghai, we visited 4 of the 7 properties – Hongkou Plaza, Raffles City Changning and Luwan site as well as Raffles City Shanghai.
Completed assets are yielding 2-3x their initial NPI returns, new malls are well-located customized products but will need gestation period. Existing completed properties such as Guicheng and Yuhuating malls, which are anchored by Wal-Mart, are generating between c5%-7% NPI yield currently and planned AEI works are expected to boost this further. While a gestation period is needed for malls currently under development, we note that these properties are well-located, particularly those in Shanghai, and will be more customized products and therefore expected to generate higher returns on completion.
Maintain Buy, TP $2.51. We continue to like CMA for its niche pan Asian retail real estate niche. We maintain our Buy call and target price of $2.51, based on a 10% premium to RNAV of $2.28.
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