The major asset enhancement initiatives will be in Sg Wang Plaza, which will undergo a major refurbishment of its retail space.
KUALA LUMPUR: CIMB Equities Research is retaining its Hold call and dividend discount model based target price of RM1.51 for CapitaLand Malaysia Mall Trust (CMMT) due to the lack of near term catalysts.
It said on Thursday is focusing its efforts on arresting the rental reversion decline for Sg Wang Plaza in the Golden Triangle and aims to identify additional asset enhancement initiatives to improve its malls.
“We remain cautious on the outlook for The Mines; any further deterioration in its earnings will be a downside risk to our forecasts while upside risk is better-than-expected rental reversions for its properties,” it said.
CMMT’s 4Q17 top- and bottom-lines declined to RM92.0m (-1.6% on-year) and RM40.8m (-4.5% on-year), respectively.
This brought its cumulative FY17 core net profit to RM157.9m (-3.6% on-year), making up 99% of the research house’s full-year forecast but only 95% of Bloomberg consensus.
Core net profit strips off a net fair value gain of RM4.2m on investment properties in FY17.
“The 4Q17 dividend per unit (DPU) of 4.1 sen was declared, bringing FY17 DPU to 8.2 sen (-2.5% on-year), which met our expectation,” it said.
The 4Q/FY17 revenue declined by 1.6%/1.0% on-year, marred by negative rental reversions at Sg Wang Plaza (-17% on-year) and The Mines (-7% on-year), lower occupancy rates at The Mines and Tropicana Office Tower, together with softer demand for promotional space at Tropicana City Mall.
This was exacerbated by higher portfolio property operating expenses of 4.2%/1.3% on-year in 4Q/FY17, leading to lower portfolio net property income.
The 4Q/FY17 earnings were further hampered by higher finance cost incurred to fund capex.
CIMB Research said CMMT’s FY17 portfolio rental reversion improved to -1.3% (9M17: -1.8%) as it managed to narrow rental reversion at Sg Wang Plaza to -16.9% (9M17: - 23.4%).
“A total of 46% of CMMT’s net lettable area will expire in FY18, with the bulk coming from The Mines, Gurney Plaza and Sg Wang Plaza.
“We expect Gurney Plaza to garner positive rental reversions and The Mines to record flattish reversion (FY17: -7%) post completion of the DigitaMart reconfiguration exercise.
“We think Sg Wang Plaza’s rental reversions, though improving, may remain in the red,” it said.
CIMB Research said CMMT will have about c.40% of its retail net lettable area undergo asset enhancement initiatives this year, for which the group plans to spend c.RM80m in total.
“We understand that the major asset enhancement initiatives will be in Sg Wang Plaza, which will undergo a major refurbishment of its retail space, resulting in a better tenant mix and allowing it to complement the malls within its vicinity.
“CMMT plans to spend RM55mil on Sg Wang Plaza’s asset enhancement initiatives and expects it to be completed by 2H19,” it said.
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