Results

1Q FY13 PAT rose 4.1% yoy to RM35.8m, making up 23.8% of HLIB and consensus forecasts respectively (in line).

Deviations

None.

DPU

1Q FY13 DPU: 2.18 sen, in-line with our 8.62 sen forecast.

Highlights

Organic growth… in 1Q FY13. CMMT 5.7% yoy increase in NPI and 4.6% yoy increase in distributable income was underpinned by nearly-full occupancy rate of 98.7% across the four malls in Penang, Kuala Lumpur, Selangor and Kuantan.

Asset enhancement initiatives (AEI)… Recall that on 8th March, CMMT announced it would spend RM43.3m on the East Coast Mall (“ECM”), Kuantan. The AEI works entail improving the trade mix and increase retail space by converting some of the car park bays on the third floor and re-configuring some existing areas. The exercise is expected to be completed before the end of 2014.

Reaping the rewards… CMMT appears to have already reaped some of the benefits, with 1Q rental reversion for ECM average at 14.8% (over the next three years). We believe there could be more upside to come given that 7% of ECM’s NLA is up for renewal in 2013.

Risks

Limited portfolio diversification (in terms of market segment as it is pure retail) and internal pipeline; intensifying competition; exposure to rising inflation.

Forecasts

Maintained.

Rating

Maintain HOLD

• Positives: Imports best practices from the CapitaLand Group; beneficiary of positive macro economic conditions.
• Negatives: Highly specialised portfolio makes CMMT the most sensitive M-REIT to adverse changes in the retail segment.

Valuation

Maintained at RM1.77 (based on 4.8% DY). Given that we do not regard current yield compelling, we maintain our HOLD rating.

Source: Hong Leong Investment Bank Research - 17 Apr 2013