Better Yield Elsewhere: Maintaining our Equal-weightrating on CapitaMall Trust, we have a new lower pricetarget of S$1.52 (from S$2.05). The lower price targetreflects our lower rental assumptions for CMT as well asattempts to capture the risk of our bear case panning outas the macro environment remains fragile. Assigning a20% probability that our bear case may pan out, wehave a new price target of S$1.52 for CMT versus theS$1.66 suggested by our base case DCF-driven NAV.

While we like CMT’s relatively defensive suburban retailasset portfolio, we find CapitaCommercial Trust, our new sector top pick’s riskreward more compelling, offering a higher DPU yield of14.5% and 13.6% for FY09-2010F versus CMT’s8.7-8.3% DPU yields.

Suburban retail relatively safer but not immune:Suburban malls constitute 46-49% of CMT’s total assetvalue and net property income, which are relatively moredefensive, as suburban malls are less dependent ontourism and consumer discretionary spending, whichhas been on a downtrend. Given that management willbe putting on hold its asset enhancement plans forFunan Digital Mall, Tampines Mall, JurongEntertainment Centre and Raffles City’s Phase 3 worksdue to the current market uncertainties, as managementis in cash preservation mode, a number of its assetsremain undervalued.

Sector dependent on macro recovery: The market islikely to remain skeptical on the viability of the S-REITbusiness model given its heavy reliance on credit andwill be keeping a watch on the ability and cost of theS-REIT debt refinancing in 2009. For now, we believeS-REITs are likely to trade in line with the STI Index.