- We re-affirm our BUY recommendation on CapitaMalls Malaysia Trust (CMMT), with an unchanged fair value of RM2.15/unit, based on our DCF valuation.
- Gurney Paragon Mall – an upcoming retail mall in Penang, located just next to the Gurney Plaza, is earmarked for opening on July 23. It is strategically located on 10 acres of prime land along Penang’s renowned promenade Gurney Drive, with an additional frontage on Jalan Kelawai.
- Gurney Paragon Mall comprises of eight floors of retail space with GDV of c.RM450mil and 700,000sf of NLA. Lease commitments of c.80% had been secured to-date, while the balance of retail space are currently in negotiations, with a target to achieve 95% by end-year.
- As we have anticipated and after Uniqlo’s foray into Penang in March, international retailers such as H&M, Michael Kors and Godiva are following suit with upcoming maiden entries in Gurney Paragon Mall. Some other mini anchor tenants are Bentley Music, Celebrity Fitness and TGV Cinemas.
- Although mini anchor tenants could potentially draw footfall away from Gurney Plaza at the initial stage given the close proximity, footfall are envisaged to normalise thereafter, as both malls are likely to house different retailers with some overlaps. Underpinned by Gurney Plaza’s long waiting list of retailers wanting presence at Gurney Drive, we are not surprise if these retailers had in fact leased space at Gurney Paragon Mall.
- Our channel checks with retailers had revealed competitive rentals between Gurney Paragon Mall and Gurney Plaza. Nevertheless, given Gurney Plaza’s strong competitive advantage coupled with constant asset enhancement initiatives (AEI) and tenant remixing, we believe that CMMT is able to sustain its position as the preferred shopping destination in Penang, underpinned by sound management hands. AEI on the 4th floor is expected to complete by 1Q14.
- Meanwhile, the restoration of St Joseph Novitiate (now known as St Jo’s) is ongoing and serves as the centrepiece of Gurney Paragon development. St Jo’s, dedicated for F&B, is partially opened. Big F&B names such as Ben’s by BIG, Friday’s, Brussels Beer Café, The Coffee Bean and Tea Leaf, Petite Millie, Morganfield’s and Moo Cow have started operations.
- That said, we view any impact from Gurney Paragon mixed development would rather be on Gurney Plaza’s F&B segment, given St Jo’s strong F&B foothold.
- We are nonetheless still positive on CMMT and with dividends yields of >5%, it is our top BUY within the REITs theme.
Source: AmeSecurities
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