WCT Holdings Bhd’s Paradigm Mall in Kelana Jaya saw 53 or 18% of its tenants close shop and move out about two months ago, leaving behind vacancies that have yet to be taken up in the mall’s first wave of tenancy renewals since it opened for business about three years ago. It could take up to five months to find replacements for these units, which make up about 8% of its net leasable area. (The Malaysian Insider).

Comments: We checked with management on the news. They are not concerned with the departure of the tenants as it has found replacements for some of the units and the average rental revision of 10% will offset the impact of the lower occupancy (93% currently compared to 99% in FY14) on earnings contribution from Paradigm Mall. All its anchor tenants remained and those that left were tenants that were not doing well. WCT is looking for new tenants to refresh the retail offerings at the mall. We gather that the mall contributed about 10% of group earnings in FY14. Maintain BUY with RM2.12 target price, based on FY16E PER of 14x.

Source: Affin Hwang Capital Research - 11 Aug 2015