' We reaffirm our BUY rating on CapitaMall Malaysia Trust (CMMT)and raised our fair value from RM1.26/unit to RM1.54/unit based on a 10%discount to its DCF value of RM1.71/unit. 

' We have raised our earnings estimates by 17.3% and 17.1% forFY12F & FY13F, respectively. These account for higher rental rates, and thenewly acquired East Coast Mall as well as the asset-enhancement initiatives atGurney Plaza.

' Accordingly, we have lifted our DPU estimates to 7.9 senand 8.3 sen, for FY12F and FY13F, respectively. We forecast DPU growth ofbetween 5% - 6% pa for FY12F to FY14F. 

' Carpark lots on the 6th and 7th floor of Gurney Plaza havebeen converted into an additional retail area of 20,161sf (+2.4%). Reconfigurationof the former mini-anchor space in Basement 1 increased the NLA by 2,800sf(+0.3%). Phase 1 of interior refurbishment was completed in FY11. CMMT expectsto generate an ROI of 11% on a capital outlay of RM21.9mil.

' CMMT is also looking at converting the huge car park spacein front of the East Coast Mall (NLA: 100,000sf or +23%) into retail space,pending a feasibility study. CMMT is looking at optimising tenant mix bybringing in more F&B outlets and at least a pharmacy. The occupancy rate of99%, with a long waiting-list signals strong demand.  

' For the Mines, CMMT has taken back a portion of the lease fromGiant (general merchandising). This space has been replaced by a fitness centre and Wah Gallery.  

' For the overall portfolio in the upcoming market review,rental rates are expected to increase ' potentially involving 23% of leasesthat are up for renewal in FY12F.  CMMTachieved a positive rental reversion of 5.6% in FY11. For FY12F, we are projectingan increase of 5%-6% of blended rental. Balance sheet remains strong with a netgearing of 28%, implying further room for acquisition. Management intends to upgradethe ambience of all CMMT's mall. This would in turn increase footfall, as suchbasic upgrading would contribute significantly to the appearance andattractiveness  of the malls. CMMTexpects to spend RM50mil in capex for FY12F.

' At a projected dividend yield of 5.6% for FY12F, valuationis not cheap. Nevertheless, we believe CMMT has a solid strategy to grow DPU.It has consistently outperformed market expectations, given its quality retailportfolio, strong parentage and more importantly, ready access to a large pool ofestablished retailers. We believe CMMT offers a low risk exposure to the retailREIT sector. 

Source: AmeSecurities