CMMT’s 9MFY13 net profit of MYR109.9m was  in line with expectations. It  declared a dividend of 2.26 sen for 3Q13.  We note that the potential acquisition  of  Tropicana  City  Mall  is  still  on  the  cards  as  the  due diligence  process  is  still  ongoing.  Nonetheless,  given  the  uncertainty surrounding  the  timing  of  the  US  Fed’s  QE  tapering,  we  maintain  our SELL call and MYR1.35 FV for now.

• Earnings still intact. CapitaMalls Malaysia Trust (CMMT)’s 3QFY13 net profit  of  MYR37.7m  (+9.0%  y-o-y;  +3.4%  q-o-q)  brought  9MFY13  net profit to MYR109.9m (+6.3% y-o-y). The trust declared a dividend of 2.26 sen  for  the  quarter,  bringing  total  YTD  DPU  to  6.61  sen.  9M  revenue growth was driven by positive rental reversion  as well as revenue from the on-selling of electricity to tenants at The Mines.  
   
• Sungei  Wang  Plaza  (SWP)  still  at  risk.  CMMT  achieved  a  decent average rental reversion of 6.5% for its portfolio leases renewed to date. However, SWP has started seeing some negative rental reversion, which is not unexpected given its high rental base of about MYR12 psf, as well as the ongoing MRT construction works which disrupts  retail businesses and affect shopper traffic. Occupancy was stable at 98.8%.
   
• Updates on proposed acquisitions. To recall, CMMT received a Letter of Intent (LOI) from Tropicana Bhd (TRCB MK, BUY,  FV: MYR2.19)  on 23  Aug,  offering  CMMT  the  opportunity  to  acquire  Tropicana  City  Mall and  Tropicana  City  Office  Tower.  CMMT  was  initially  granted  an exclusive period of four weeks to perform due diligence on the assets. CMMT  announced  that  the  due  diligence  process  is  still  ongoing.  We believe that  the  mall is worth  around  MYR550-650m.  As  CMMT still has about MYR703m of debt  headroom, we believe it will not have funding issues.  Furthermore,  it  has  also  received  approval  from  the  Securities Commission (SC) for the issuance of up to 353.6m of new units.
   
• Maintain SELL. We retain our forecasts, SELL call and MYR1.35 FV. At the current valuations,  its  yield spread of 200 bps  is  unattractive, in our opinion.  However, we note that  the acquisition of  the Tropicana assets could potentially lead to a future re-rating of CMMT.

Source: RHB