Results

• 1QFY16 gross revenue of RM93.6m (+15.63% yoy) was translated into normalised net profit of RM41.05m (+7.33% yoy), accounting for 24.2% and 23.8% of our and consensus full-year estimates respectively. DPU stands at 2.12 sen, representing annualized yield of 5.8%.

Deviations

• None.

Dividends

• None as dividend is usually payable semi-annually.

Highlights

• YoY basis, growth in both gross revenue and net income was contributed by the newly acquired property (Tropicana City) and better performance from Gurney Plaza and East Coast Mall on the back of higher rental reversion (+6.1% on portfolio basis excluding Sungei Wang Plaza).

• As expected, NPI for Sungei Wang Plaza dropped by 26% due to negative rental reversion ( -36%) and affected by the ongoing MRT works and closure of BB plaza.

• Portfolio occupancy rate remained healthy at 96% while finance cost for the year jumped by +13.4% due to new term loan being drawn for the acquisition of Tropicana City Property (TCP) and capital expenditure for AEIs with average cost of debt at 4.5%.

• Planned AEIs on network infrastructure works at both TCP and The Mines have commenced operation with RM5.2m of capex incurred in the current quarter.

• Despite the temporary sluggish performance of Sungei Wang Plaza, management is confident that the stable performance of other malls will help to cushion the effect and continue to provide stable returns.

Risks

• Limited port folio diversification (in terms of market segment as it is pure retail) and internal pipeline.
• Lower than expected contribution from SWP.
• Prolonged erosion in consumer sentiment.

Forecasts

• Unchanged.

Rating

HOLD , TP: RM1.40

• Positives: Best practices from the CapitaLand Group and geographically diversified.

Negatives

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

Valuation

Maintain HOLD recommendation with unchanged TP of RM1.40.

• Targeted yield remains unchanged at 6.3% based on historical average yield spread of CMMT and 10-year MGS.

Source: Hong Leong Investment Bank Research - 15 Apr 2016