Results

• Reported 9MFY16 gross revenue of RM220m (+10.2% yoy) which translated to normalised net profit of RM123m (+8.7% yoy), accounting for 74.3% and 71.4% of our and consensus full-year estimates, respectively.

Deviations

• None.

Dividends

• None as dividend is usually payable semi-annually.

Highlights

• Yoy, excluding the one-off fair value gain in FY15, growth in both gross revenue (+2.8%) and net income (+3.3%) was contributed by the newly acquired Tropicana City Property (TCP) and better performance from Gurney Plaza and East Coast Mall on the back of higher rental reversion (+5.3% on portfolio basis excluding Sungei Wang Plaza).

• Qoq, Sungei Wang Plaza continued to be affected by the ongoing MRT works and closure of BB plaza with NPI contracted by 9% due to negative rental reversion (-37.9%).

• YTD, same store sales grew by 6% across all portfolio showing encouraging improvement after GST effect. Besides, both gross revenue and net income increased in tandem with higher management fee (+8.8%) due to the corresponding increase in NPI and asset base after the acquisition of TCP.

• Notably, rental reversion (-6.7%) and occupancy rate declined for TCP due to amalgamation space to cater for mini anchor.

• Finance cost rose by +21.6% due to new term loan being drawn for the acquisition of (TCP) and capital expenditure for AEIs at average cost of debt of 4.5%.

• Gearing was steady at 32% while portfolio occupancy rate remained healthy at 96.3%.

Risks

• Lower than expected contribution from SWP.

• Prolonged erosion in consumer sentiment.

Forecasts

• Unchanged.

Rating

HOLD, TP: RM1.60,

• We foresee no near-term re-rating catalyst and are concerned on the performance of Sungei Wang Plaza (SWP) and to a lesser extend Tropicana City Property (TCP).

Valuation

• Maintain HOLD recommendation with unchanged TP of RM1.60 based on FY17 DPU.
• Targeted yield remains unchanged at 5.76% based on historical average yield spread of CMMT and 10-year MG

Source: Hong Leong Investment Bank Research - 21 Oct 2016