As you might know, CapitaLand Mall Trust (SGX:C38U) recently reported its yearly numbers. It looks like a credible result overall – although revenues of S$787m were what analysts expected, CapitaLand Mall Trust surprised by delivering a (statutory) profit of S$0.19 per share, an impressive 50% above what analysts had forecast. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Following the latest results, CapitaLand Mall Trust’s 14 analysts are now forecasting revenues of S$824.7m in 2020. This would be a reasonable 4.8% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 30% to S$0.13 in the same period. Before this earnings report, analysts had been forecasting revenues of S$834.3m and earnings per share (EPS) of S$0.14 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at S$2.71, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values CapitaLand Mall Trust at S$3.16 per share, while the most bearish prices it at S$2.38. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to CapitaLand Mall Trust’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It’s clear from the latest estimates that CapitaLand Mall Trust’s rate of growth is expected to accelerate meaningfully, with forecast 4.8% revenue growth noticeably faster than its historical growth of 2.5%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.2% per year. So it’s clear that despite the acceleration in growth, CapitaLand Mall Trust is expected to grow meaningfully slower than the market average.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CapitaLand Mall Trust. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that CapitaLand Mall Trust’s revenues are expected to perform worse than the wider market. The consensus price target held steady at S$2.71, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that in mind, we wouldn’t be too quick to come to a conclusion on CapitaLand Mall Trust. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for CapitaLand Mall Trust going out to 2022, and you can see them free on our platform here..
You can also see whether CapitaLand Mall Trust is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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