KUALA LUMPUR: CapitaLand Malaysia Mall Trust’s (CMMT) FY18 results were below expectations due to weaker rental revenue, lower interest income, and higher property operating expenses.
CIMB Equities Research said on Wednesday positive rental reversions for non-Klang Valley malls partially offset the impact of rental downtime at Sungei Wang Plaza (SWP) and the -16.9% reversion at The Mines.
“Hold retained with a lower TP. FY19-21F 7.2-7.4% dividend yield is the stock’s key appeal,” it said.
CMMT’s FY18 core net profit made up 87% of the research house’s forecast and 90% of Bloomberg consensus's.
The research house said overall results were dampened by sustained negative reversions at selected malls and prolonged rental downtime.
Overall core net profit contracted 15% yoy on account of the 12% drop in interest income and the 2% increase in operating cost. FY18 dividend per unit (DPU) was at 7.9 sen (-3.6% yoy), in line with its forecast.
“2018 was a relatively good year for CMMT’s Gurney Plaza and East Coast Mall (ECM), which recorded positive rental reversions of 4.2% and 2.8%, respectively.
“However, Sungei Wang Plaza continued to be dragged down by negative rental reversion (-13.3%) due to the rental downtime caused by its asset enhancement initiative (AEI), despite higher occupancy rate of 75% in 4Q18 (9M18: 70%).
“CMMT targets to complete the AEI in Apr; this should lead to a gradual recovery in Sungei Wang Plaza’s numbers in 2H19F.
“Other Klang Valley (KV) malls continued to book negative rental reversions in 4Q18 -- The Mines: -16.9% (3Q18: -12.8%), 3 Damansara: -7.5% (3Q18: -3%), and Tropicana City Office Tower: -5.1%,” it said.
CIMB Research said during CMMT's conference call, management highlighted that for 2019, it would focus on boosting footfall at The Mines through space reconfiguration and new marketing strategies which would leverage on the mall’s canal features.
That said, CMMT’s management also noted the retail competition from nearby malls, particularly IOI City Putrajaya.
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