INVESTMENT HIGHLIGHTS

• FY17 earnings largely within estimates

• Core net income slid 4% on revenue that dipped 1%

• FY18 will see asset enhancement initiatives for a few malls

• Maintain NEUTRAL with a lower TP of RM1.49 (previously RM1.65)

FY17 earnings largely within estimates. CapitaLand Malaysia Mall Trust’s (CMMT) FY17 core net income (CNI) of RM157.9m came in broadly within our expectation, making up 96% of our forecast. It, however, made up only 93% of consensus’ estimates. A final DPU of 4.08 was announced, bringing total DPU to 8.22, which is within expectation.

Core net income slid 4% on revenue that dipped 1%. Lower NPI from CMMT’s Klang Valley assets continues to be a drag for its full year CNI. Negative rental reversion was seen for The Mines (-7.2%) and Sungei Wang Plaza (SWP) (-16.9%). Excluding SWP, CMMT’s rental reversion for the retail segment registered a 0.6% improvement while there is no change to the rental rate for Tropicana City Office Tower.

4QFY17 CNI of RM37.6m was 8% lower yoy due to net property income, which fell by 4.7%yoy, and higher property and non-property expenses. Meanwhile, gross revenue slipped by 2% to RM92.0m. Compared to the previous quarter, rental reversion narrowed to -1.3% from -1.8% in 3QFY17.

FY18 will see asset enhancement initiatives for a few malls. Management has earmarked to embark AEI amounting to RM80m for SWP, The Mines and East Coast Mall. SWP will see the biggest facelift among the malls as a substantial area that was occupied by one of its anchor tenant will be utilised for the AEI. About a-third of SWP’s NLA is expected to be revamped in phases. The AEI carried out at SWP will last through until 1HFY19 while the AEI at The Mines and East Coast Mall is expected to be completed in FY18. There will also be a rebranding exercise for Tropicana City Mall to position itself as a preferred dining and shopping destination in FY18.

Source: MIDF Research - 25 Jan 2018