KEY INVESTMENT HIGHLIGHTS

• FY19 earnings deemed within expectations

• Unexciting earnings in FY19

• Stable portfolio occupancy rate

• Earnings forecast unchanged

• Maintain NEUTRAL with an unchanged TP of RM1.01

FY19 earnings deemed within expectations. CapitaLand Malaysia Mall Trust’s (CMMT) FY19 core net income of RM103.3m which accounts for 93% and 87% of our and consensus full year estimates. Nevertheless, we deemed FY19 earnings within expectations as earnings were distorted by deferred tax liabilities. A DPU of 1.52sen was announced, bringing cumulative DPU to 6.3sen in FY19 and translates into gross distribution yield of 6.2%.

Unexciting earnings in FY19. 4QFY19 core net income eased by 33%yoy to RM22.52m, bringing cumulative core net income to RM103.3m (-24%yoy) in FY19. The lower core net income was in line with lower revenue (-2%yoy) which could be mainly attributed to decline in rental income from Sungei Wang Plaza (SWP) (-10.6%), 3 Damansara (-4.9%) and The Mines (-15.5%). On the other hand, Gurney Plaza and East Coast Mall (ECM) recorded higher rental income of +2.9% and +5.7% respectively. Meanwhile, earnings in FY19 were further weighed by higher maintenance expenses (+8.4%yoy), higher utilities expenses (+2.9%yoy) and deferred tax liabilities.

Stable portfolio occupancy rate. CMMT’s portfolio occupancy rate showed sequential improvement from 92.4% in 3QFY19 to 93.8% in 4QFY19. Meanwhile, we expect overall occupancy rate at SWP to improve following the opening of Jumpa. Note that Jumpa’s soft launch was on September 25. On the other hand, CMMT recorded negative rental reversion of 5.7% in FY19 mainly owing to negative rental reversions of The Mines and SWP.

Maintain NEUTRAL with an unchanged TP of RM1.01. We make no changes to our earnings forecast. We also keep of TP of RM1.01. Our TP derived from DDM valuation and our perpetual growth rate of 1.2% is maintained. We maintain Neutral call on CMMT due to its unexciting earnings.

Source: MIDF Research - 23 Jan 2020