Results

• 4QFY14 net profit of RM39.2m (+9.7% qoq, +1.6% yoy) which brought FY14 net profit to RM149.7m (+0.9% yoy) was in line with our expectations, accounting for 97.3% and 95.7% of our and consensus full-year estimates respectively.

Deviations

• None

Dividends

• Distribution per unit of 2.26 sen (+0.9% yoy) was declared during fourth quarter.

• YTD dividend amounted to 8.91 sen per unit (FY13: 8.85 sen) accounting for 104.2% of our full year DPU assumptions.

Highlights

• Phase 2 of asset enhancement works at East Coast Mall has been completed and contributes positively to gross revenue (+9.4% yoy from the mall). In addition, improvement in portfolio’s full year gross revenue is also attributed to higher onselling of electricity to tenants and higher rental rates for new and renewed lease (save for Sungei Wang Plaza).

• Sungei Wang Plaza continuously being affected by KVMRT works, evident by decrease in contribution to gross revenue (-6.9%) as it experienced 9.3% reduction in rental reversion. In our opinion, Sungei Wang Plaza will remain a laggard to CMMT until KVMRT works complete in 2017.

• In 2015, 29.5% of the portfolio is due for expiry; largely from The Mines (12.2%, 187 number of leases). We are of the view that CMMT will face no major issue in retaining tenants given the stable performance of the mall as earnings improved +11.2% yoy in FY14 and experienced +10.4% improvements in rental reversion over preceding rental.

• Occupancy rate for the portfolio remain stable at 98% and management guided that they are expecting occupancy rate for Sungei Wang Plaza to be at least 95% going forward (currently 95.4%).

• Capex incurred in 2014 was RM67.4m which includes refurbishment of building façade at The Mines, Gurney Plaza reconfiguration works, East Coast Mall’s Phase 2 and chillers installation at The Mines and Gurney Plaza.

Risks

• Limited portfolio diversification (in terms of market segment as it is pure retail) and internal pipeline
• Intensifying competition in super-prime Bukit Bintang area
• Exposure to rising inflation
• Disruption in visitors due to KVMRT construction works

Forecasts

• Unchanged.

Rating

HOLD , TP: RM1.50

Positives

• Imports best practices from the CapitaLandGroup and beneficiary of sustained (albeit slower) consumption growth.

Negatives

• Highly specialised portfolio makes CMMT themost sensitive to adverse changes in the retail segment.

Valuation

• Maintain HOLD with a higher TP of RM1.50 (previously RM1.46) as we roll forward our valuation to FY15.
• Targeted yield remains unchanged at 6.4% based on historical average yield spread of CapitaMalls Malaysia Trust’s and 7-year MGS.

Source: Hong Leong Investment Bank Research - 21 Jan 2015