- We reaffirm our HOLD recommendation on Capitamalls Malaysia Trust (CMMT) with an unchanged fair value of RM1.50/unit, based on a DCF-derived valuation.

- CMMT registered distributable income of RM38mil for 3QFY14, bringing 9MFY14 distributable income to RM118mil. The results are largely within our and consensus full year estimates.

- An overall positive rental reversion of +3.3% was achieved for the 9MFY14 period – Gurney Plaza (+7.7%), The Mines (+7.4%), East Coast Mall (+13.5%) and Sungei Wang Plaza (-7.3%). Portfolio occupancy remained solid at 98.5%, with East Coast Mall hitting 100% occupancy.

- The stronger revenue was underpinned by higher gross rental rates from new and renewed leases, except Sungei Wang Plaza and contribution from newly reconfigured units under the asset enhancement initiative (Phase 1) of East Coast Mall. Property operating expenses rose by 11% YoY, in tandem with the adjustment to property assessment fee and hikes in electricity tariff and renewable energy surcharge.

- East Coast Mall is currently undergoing Phase 2 of AEIs, which involves extending the al-fresco area and reconfiguration of ground, first and second floors. The reconfiguration of the ground floor of Gurney Plaza is currently in progress.

- While Sungei Wang continues to suffer negative rental reversion, we believe that CMMT will be a prime beneficiary to the completion of the MRT station at Bukit Bintang in 2017, riding on an increased traffic footfall.

- Balance sheet remained strong, with gearing of 29% and average costs of debt of 4.4%. Of which, 70% of its debt are on a fixed rate.

- We make no changes to our EPS estimates and HOLD recommendation in light of the lack of a near-term acquisition.

- At the current levels, the stock is trading with a distribution yield of 6.4%.

Source: AmeSecurities