Sungei Wang Plaza to remain a laggard for CMMT

CapitaLand Malaysia Mall Trust (Oct 19, RM1.40)

Maintain hold with a lower target price of RM1.41: CapitaLand Malaysia Mall Trust’s (CMMT) nine months of financial year 2015 (9MFY15) gross revenue of RM251.5 million was translated into a normalised net profit of RM114.5 million, accounting for 64.4% and 70.5% of our and consensus full-year estimates respectively.

The gross revenue improved mainly due to the completion of the acquisition exercise of Tropicana City Mall and Office Tower, as well as higher rental at East Coast Mall following an asset enhancement exercise.

Additionally, revenue also grew as a result of higher rental rates from new and renewed leases of overall properties, save for Sungei Wang Plaza (SWP). Net property income margin remains at 66%.

Finance cost during the quarter jumped by 29% due to a new-term loan being drawn to partly finance the acquisition of Tropicana City Property, additional revolving credit facilities draw down for the East Coast Mall asset enhancement, higher interest rate post overnight policy rate hike in July 2014 and interest rate refixing exercise.

We reiterate our views that SWP will remain a laggard for CMMT until the Klang Valley Mass Rapid Transit (KVMRT) works are completed in 2017. 

Year-to-date contributions to gross revenue and net property income have dropped by 18.3% and 24.1% respectively. 

The risks include limited portfolio diversification and internal pipeline, intensifying competition in super-prime Bukit Bintang area and disruption in visitors to SWP due to KVMRT construction works.

We made changes in our FY15 distribution per unit assumption from 8.5 sen to eight sen post adjustment.

This is largely to reflect higher than expected costs in relation to acquisition.
 

This article first appeared in The Edge Financial Daily, Oct 20, 2015. Subscribe to The Edge Financial Daily here.