- We-reaffirm our HOLD recommendation on CapitaMalls Malaysia Trust (CMMT), with an unchanged fair value of RM2.00/unit, based on our DCF valuation.

- At CMMT’s AGM yesterday, shareholders who account for 84.4% of the shares voted in favour of the resolution in relation to the new issue of units of up to 353.6mil, representing 20% of CMMT’s existing paid-up capital.

- As such, CMMT appears to be paving the way for more acquisitions to expand its portfolio. We understand that the CMMT has been on a constant look-out for yield accretive acquisitions in Malaysia. Potential acquisitions will continue to be centred on day-to-day necessity shopping malls. This is in-line with its current portfolio mix to be a “pure-play” shopping mall REIT.

- CMMT had in December 2012 issued a 4-year unrated and secured Medium Term Notes of RM300mil. Gearing is manageable at 25% as at end-FY12, well below the 50% threshold, suggesting room for additional debt for acquisitions.

- With the pre-emptive mandate to issue more shares, this hints of a potential acquisition of Queensbay Mall. If so, CMMT will acquire Queensbay Mall via a mix of debt and equity funding.

- Capitamalls Asia (CMA) acquired Queensbay Mall (NLA: 892,361sf) in April 2011 for RM652mil, comprising 90.7% of retail floor area and 100% of car park bays. Initial property yield was at c.5% with an average rental of c.RM5psf. Thanks to active tenant remixing and asset enhancement initiatives, Queensbay Mall has achieved an over 20% rental reversion. This translates into c.RM6psf with occupancy standing at c.95% presently.

- Taking all in, we believe Queensbay Mall is ready for an injection as rentals appear to have stabilised. Furthermore, the mall complements well with Gurney Plaza, given no cannibalisation. Both are located in strategic locations, serving different affluent geographies in Bayan Lepas and Georgetown, respectively, for Queensbay Mall and Gurney Plaza.

- No change to our FY13F-FY15F estimates for now. We continue to like CMMT for its welldiversified portfolio mix and resilient income stream as well as strong sponsor backing.

Source: AmeSecurities