CapitaMall Trust is confident of achieving DPU of 8.4 cents in FY09

· Performance in 1Q09 was disappointing as consumers shy away from shopping malls despite the festive Chinese New Year season. However, shopper traffic and retail sales have bottomed since Feb 09 and has picked up in Apr and May 09. Negative growth has narrowed. In general, basic and necessity goods have fared much better than luxury items.

· CMT has put in a lot of efforts to assist tenants to cope with the difficult times. Measures include advertising & promotional campaigns and activities, free parking and providing extra discount with usage of CapitaCard (a tie-up with DBS). CMT has resisted efforts by some tenants to ask for rental rebates but such pressure has eased in recent days.

· CMT achieved occupancy of 99.5% in 1Q09, which is impressive as there is no visible impact from the economic turmoil. CMT benefitted from a flight to quality to well located malls. Renewal and new leases for 169,233sf of space signed in 1Q09 were 1.3% higher than preceding rental rates. CMT's core tenants are professional players with long-term plans for the Singapore market. Top tenants include BHG, Cold Storage and NTUC Fairprice.

· We visited Tampines Mall, Plaza Singapura, Bugis Junction, Raffles City, IMM Building and Sembawang Shopping Centre over the weekend. Shopper traffic is heavy. There were no visible vacant shops at any of the malls, thus giving us confidence that CMT has maintained occupancy in the high-90% going into 2Q09.

· We were particularly impressed by Plaza Singapura where there was a X-ploring Dino Trails exhibition organised by Agency for Science, Technology and Research (A*STAR). There were at least three moveable life-size dinosaurs at the central podium. Kids were excited and busy asking parents to take pictures for them (imagine the bonding between parent and child). There were four free workshops, namely Mini Fossil, Flapping Pterosaur, My Walking T-Rex and Dino Timeline. There is a full-size skeleton of Tyrannosaurus (T-Rex) outside the mall near The Atrium. At IMM Building, shoppers were given S$100 vouchers from a mix of retailers and a goodies bag (cost just S$1 each) for every purchase of S$150 and above. Thus, a long queue at the redemption counter.

· CMT relies on the CMBS market for the bulk of its funding (CMBS: 54.7%, floating and fixed rates notes: 13.7%, convertible bonds: 31.0% and bank loans: 0.6%). CMBS is well suited for CMT given CMT's size and the quantum of funding required. CMT has previously issued CMBS with tenure of up to seven years. Management is looking at tapping on the CMBS market in Asia. Potential investors include insurance companies, pension funds and fixed-income funds, including institutions in China.

· Banks are continuing to ask for wide credit spread. Credit spread remains unchanged at 250-350bp for loans with tenure of three years. Foreign banks have been quiet, especially for European banks. CMT does not have any requirement for refinancing in 2009. It has borrowings of S$440 due in 2010, with the bulk of S$315m due in Apr 2010. Gearing was reduced from 43.1% to 29.2% post 9-for-10 rights issue. Moody's Investors Service has reaffirmed corporate rating of A2.

· Management targets to commence enhancement works for Jurong Entertainment Centre (JEC) by end-09. The mall has been closed since Nov 08. CMT has secured permission to increase the plot ratio for JEC from 1.85 to 3.00, more than doubling NLA to 209,700sf. The reconstructed mall will have an Olympic-sized ice skating ring. CMT has secured pre-commitment from anchor tenants for 50% of NLA (cinema, food court and supermarket). Construction cost is estimated at S$150m and the AEI is scheduled for completion in 2H 2011.

· CMT is also in talks with the authorities on the integration plan for Plaza Singapura and The Atrium and targets to start work by end-10. The integration of the two malls will create 170m of prime retail frontage along Orchard Road and a combined NLA of over 850,000sf. Up to 150,000sf of retail NLA will be created by decanting (or converting) lower-yield office space into retail sapce. Traffic flows from Dhoby Ghaut MRT station will be improved with interconnections between Plaza Singapura and The Atrium.

· We expect management to focus on organic growth through asset enhancement initiatives in the foreseeable future. In terms of expansion plans, management will continue to focus on family-oriented malls in Singapore. We believe management will be selective when evaluating acquisitions, pursuing only yield accretive deals.

Management is confident of achieving DPU of 8.4 cents in FY09, a forecast given during the 9-for-10 rights issue.

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