Results

• 1QFY15 gross revenue of RM81m (+0.9% qoq, +2.6% yoy) was translated into net profit of RM38m (+0.1% yoy), accounting for 22.2% and 23.4% of our and consensus fullyear estimates respectively.

• We deemed this in line as we expect stronger earnings from fourth quarter and also maiden contribution from Tropicana Office and City Mall in third quarter.

Deviations

• None.

Dividends

• None. (1QFY14: None)

• Dividends normally declared twice a year – during second and fourth quarter.

Highlights

• Gross revenue grew by +2.6% yoy, thanks to completion of asset enhancement works at East Coast Mall.

• During the quarter, management has been proactive in reorganizing its capital management by: (1) tightening credit margin (percentage floating rate at 1Q15:29% vs. 4Q14:31%); (2) re-fixed interest rate for part of the term loan for 3 years; (3) extend average term to maturity to 3 years; and (4) additional term loan facility of RM50m.

• Overall occupancy rate has been fai rly stable at 97.5% in comparison with 97.7% at the preceding quarter.

• Management also shared that there was a strong increase in retail sales pre-GST implementation. However moving forward, retail sales are expected to stabilize throughout the year, albeit seasonally slow in second quarter.

• Sg Wang Plaza continues to deliver sluggish performance in view of KVMRT works, with gross revenue and NPI contribution decrease by -15.0% and -18.4%, respectively. Shopper traffic has also come down by 9.9% yoy during the quarter, largely attributable to closure of ent rance as a result of BB Plaza reconfiguration works.

• Acquisition of Tropicana City Mall and Office Tower is on track for completion in 3Q15. Upon completion, focus will be on enhancing trade mix at the mall.

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.
• Failure on acquisition of Tropicana Office & City Mall.

Forecasts

• Unchanged.

Rating

HOLD , TP: RM1.49

• Posi tives: Imports best practices from the CapitaLand Group and beneficiary of sustained (albeit slower) consumption growth.

Negatives

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

Valuation

• Maintain HOLD recommendation and TP remain at RM1.49.
• Targeted yield remains unchanged at 6.4% based on historical average yield spread of CMMT and 7-year MGS.

Source: Hong Leong Investment Bank Research - 16 Apr 2015