Highlights

• CMMT hosted conference call session post result announced on 16 July 2015 and we left the briefing feeling neutral. Questions raised during the conference call were mainly centred on recently-acquired Tropicana City Mall and Office Tower.

• Management guided that they are targeting occupancy rate at the mall to be around 95% by end of this year, versus 90% as at January 2015. Since completion of the acquisition, few initiatives are already in placed such as addition of F&B outlets as well as other retail outlets will be opened on progressive basis.

• In addition, management has also identi fied circa 6,000 sq ft of new potential net lettable area to be added at the mall.

• By and large, retail sales have dropped in April due to GST implementation. However, it is not a gloom and doom situation as they also seen retail sales actually starts to pick up month-on-month basis, though at slow pace.

• In view of KVMRT works, Sg Wang Plaza is expected to post negative rental reversion at least until end of 2015.

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

• Unchanged.

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 - 23 Jul 2015