PETALING JAYA: Capitaland Malaysia Trust
’s (CLMT) plan to acquire five industrial facilities located within Iskandar Puteri, Johor, is not cheap on entry but still strengthens CLMT’s medium-term industrial exposure and income diversification, with returns driven mainly by leasing execution, analysts say.
TA Research said it was maintaining its “buy” recommendation on CLMT with an unchanged target price of 80 sen, based on a target yield of 6.75% and a 3% environmental, social and governance premium.
The research house said in a report to clients that while it acknowledged the strategic merits of the forward purchase, it takes a more measured view of the transaction.
At an implied acquisition cost of about RM421 per sq ft, the entry valuation is meaningfully higher than CLMT’s earlier Johor industrial acquisitions, including Nusajaya Tech Park at around RM364 per sq ft and Senai Airport City at around RM392 per sq ft.
“We believe the premium reflects higher land prices, elevated construction costs and the assets’ proximity to the Tuas Checkpoint.
“While this supports stronger pricing, it also raises the execution bar should leasing or rental assumptions fall short,” the research house noted.
With an estimated development time frame of 15 to 25 months, management has time to secure tenants during the construction period, ahead of the staggered completions between the first half of 2027 and 2028.
Upon full leasing, the assets are expected to generate a gross yield of about 7.3%, equivalent to an annual gross rental income of RM16.1mil, it said.
“This falls within the typical 6% to 8% yield range for industrial properties. That said, the yield assumption implies a monthly rental of around RM2.60 per sq ft,” it said. Based on market checks, industrial rents in southern Johor typically range between RM1.60 and RM2.70 per sq ft per month, TA Research said.
Premium new-build facilities generally command RM2.40 to RM2.70 per sq ft, while standard detached factories transact closer to RM2 to RM2.20 per sq ft.
Against this backdrop, the implied RM2.60 per sq ft per month appears achievable, but it sits at the upper end of prevailing market levels, the research house said.
As such, leasing execution, tenant mix and competitive positioning will be key, especially given the assets’ completion between 2027 and 2028, when supply conditions may be more competitive, the research house added.
It noted that while the properties’ modern specifications and prime location support rental prospects, the absence of pre-committed tenants leaves limited margin for error.
It said CLMT will bear full leasing risk and this risk is further heightened by the long lead time to completion, which could coincide with increased industrial supply.
“That said, we take comfort from the assets’ institutional-grade specifications, move-in-ready delivery and location within a master-planned industrial estate, which should support leasing competitiveness relative to secondary stock,” TA Research said.
