Saturday, December 14, 2013

CapitaMalls Malaysia Trust : In need of catalysts (CIMB)

CapitaMalls Malaysia Trust
Current RM1.39
Target RM1.47
In need of catalysts

We believe that CMMT's net property income (NPI) will be impacted by the weak performance of its Sg. Wang mall due to the ongoing MRT construction works. However, we anticipate that the AEI for the East Coast Mall will provide a buffer to its NPI.

Our DDM target price drops to RM1.47 from RM1.74 previously, due to the rise in cost of equity to 9.2% (from 9% previously). Due to the change in our rating structure, our call changes from Neutral to Hold. We believe that the lack of acquisitions to strengthen its NPI and the risk of rising interest rates in 2014 could weigh on CMMT's share price performance. For exposure to Malaysian property, we suggest investors switch to the property developers.

Sg. Wang outlook dim
Due to the current ongoing MRT construction works around the Sg. Wang shopping mall, YTD shopper traffic and rental reversions were impacted. For 9M13, Sg. Wang's rental reversion led to a 3% decline in rental rates. Thus, we expect Sg. Wang's NPI to be flattish in FY14 and shopper traffic in the mall to remain weak as long as the MRT construction works are ongoing. Sg. Wang accounts for 20-22% of CMMT's total revenues.

East Coast Mall potential
CMMT will continue its AEI for the East Coast Mall, which is expected to incur a total cost of RM60m. The AEI is expected to be completed by end-FY14 and CMMT expects a return on investment (ROI) of 8-10%. The mall is currently enjoying a high occupancy rate of 99.8%, while its current rental rates are low at RM5-6psf. This leaves room for further increases in rental rates post the AEI, especially since the mall does not face any major competition for shopper traffic and tenants in the area.

43.6% of rental income up for reversion
Some 43.6% of CMMT's gross rental income will be up for reversion in 2014. We believe that this is likely to present an opportunity to increase revenues, given the lack of new acquisitions in 2013. Sg. Wang aside, we believe that the rental reversions for The Mines and East Coast Mall will continue to drive the NPI of CMMT's portfolio

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 10/12/13

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