Results

4Q13 core PAT rose 14.6% yoy to RM38.6m, with YTD net profit of RM148.5m making up 101% and 94% of HLIB and consensus estimates respectively.

Deviations

None.

DPU

2.24 sen DPU was declared in 4Q13, bringing YTD DPU to 8.85 sen, or 107% of our 8.29 sen FY13E DPU forecast.

Highlights

Organic growth. 12M gross revenue rose 5.6% yoy to RM246.5m, mainly due to higher gross rental income on the back of higher rental rates achieved from new and renewed leases

East Coast Mall enhancements. Phase 1 of the refurbishment works for ECM have been completed. These entail the reconfiguration of 26k sft of existing area, and the conversion of 82 car park lots into 24k sft of new NLA. These have resulted in a refurbished food court and a new IT cluster. In addition, 8k sft of new retail space has been created via the rear extension from Ground Floor to Level 3. The benefits can be seen in 21.2% rental reversion in FY13, leading to a 3.6% revaluation of ECM to RM373m as of Dec 2013. Overall portfolio rental reversion was 7.5% in FY13.

Lower financing cost in 4Q. In May 2013, CMMT tightened the credit margin of floating rate credit facilities at a more competitive rate, leading to CMMT’s financing costs declining by 35bps yoy to 4.29% p.a.

Risks

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

Forecast

Rolling over our numbers, our forecasts remain unchanged.

Rating

HOLD ()

Positives: Imports best practices from the CapitaLand Group; beneficiary of positive macroeconomic conditions.

Negatives: Highly specialised portfolio makes CMMT the most sensitive M-REIT to adverse changes in the retail segment.

Valuations

In light of the sector headwinds, we retain our HOLD call. Rolling over to FY15 numbers, our TP is raised from RM1.26 to RM1.36 (target DY remains unchanged at 7.0%).

Source: Hong Leong Investment Bank Research - 24 Jan 2014