CMMT’s recorded a MYR35.9m net profit in 1QFY13, up 4.1% y-o-y. This is in line with our and consensus expectations. The net profit growth was mostly attributed to the kick-in of positive rental reversions during the quarter. A DPU of 2.18 sen was declared, in line to meet our full-year DPU forecast. We are maintaining our NEUTRAL call on CMMT, with an unchanged target price of MYR1.85.

- Within expectation; dividend of 2.18 sen declared. CMMT’s 1QFY13 net profit of MYR35.9m (+4.1% y-o-y; +6.5% q-o-q) came in within our and consensus expectations. CMMT also declared a dividend of 2.18 sen for the quarter, in line with our full-year DPU estimate. This translates into an annualised net yield of about 4.2% as at yesterday’s closing price.

- Rental reversions kicking in. Although contribution from The Mines increased 18.1% y-o-y at the net property income (NPI) level, this was offset by Sg. Wang Plaza’s flattish contribution due to the limited upside to its high rental base (about MYR12 psf currently). Nonetheless, CMMT’s total portfolio still managed to record a 5.7% increase y-o-y at the NPI level. CMMT’s occupancy rate remained stable at 98.7% in 1Q13, with an average rental reversion of 8.0% recorded for the leases renewed. CMMT’s gearing is at a comfortable level of 28.8%.

- Business updates. CMMT announced back in March that it will be embarking on a major asset enhancement initiative (AEI) exercise for the East Coast Mall (ECM). This includes: 1) reconfiguration and extension of retail space to improve its tenancy mix; and 2) conversion of some car park bays into retail space. Total capex for the AEI is estimated at MYR60m. As the AEI is expected to be completed by end-2014, the positive impact from the AEI will only be seen from FY15 onwards. CMMT’s unitholders have also recently approved on CMMT’s proposed authority to allot and issue up to 353.6m new units (20% of its current fund size), which we believe could be utilised for future AEI plans and/or acquisition purposes.

- Investment case. No changes to our earnings forecasts. We are maintaining our NEUTRAL call on CMMT, with an unchanged target price of MYR1.85. We think that the upside potential for the MREIT sector is limited as investors could potentially shift their portfolios and gear towards high-beta stocks post general election.

Source: RHB