Results

• 6MFY15 gross revenue of RM127.9m (+2.2% yoy) was translated into normalised net profit of RM74.8m (-0.1% yoy), accounting for 43.5% and 46.0% of our and consensus full-year estimates respectively.
• We deemed this in-line as we expect maiden contribution from Tropicana City Mall and Office to kick-in next quarter.

Deviations

• None.

Dividends

• Declared 1st interim dividend of 4.61 sen (2QFY14: 4.53 sen), of which 4.43 sen is taxable while 0.18 sen is nontaxable.

Highlights

• 6M15 gross revenue grew on the back of contribution from East Coast Mall after completion of its 2-year asset enhancement initiative. Additionally, revenue also grew as a result of higher rental rates from new and renewed lease from overall properties, save for Sg Wang Plaza (SWP). NPI margin remains unperturbed at 66% (Figure #6)
• Although occupancy remains healthy at SWP (Figure #5), gross revenue and net property income remains on contraction mode as sequential contributions have dropped - 17.2% and -21.5% respectively. We reiterate our views that SWP will remain a laggard for CMMT until KVMRT works completes in 2017.
• Acquisition of Tropicana City Mall and Office Tower has been completed on 10th July 2015. Post acquisition, CMMT enlarged portfolio now comprises of 5 shopping malls and 1 complementary office block with total asset under management of ~RM3.9bn and total NLA of ~3.1m sq ft.

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.
• Disruption in visitors to SWP due to KVMRT construction works.

Forecasts

• We made changes in our FY15 DPU assumption from 8.3 sen to 8.5 sen post adjustment. This is largely to reflect completion of acquisition exercise earlier than expected.

Rating

HOLD , TP: RM1.49

• Positives: 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 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 - 20 Jul 2015