CMMT’s full-year  core  profit  came  in  within  expectations.  Maintain NEUTRAL  with  a  lower  DDM-based  TP  of  MYR1.35  (6.5%  downside). Management has guided for a conservative DPU growth  for 2015, as it expects  the  macroeconomic  environment  to  remain  challenging.  We also expect Sg. Wang Plaza to continue underperforming over the short term, further dampening DPU growth.

Within expectations.  CapitaMalls Malaysia Trust’s (CMMT) 4Q14 core profit of MYR39.2m (+1.6% YoY, +9.7% QoQ) brought FY14 core  profit to  MYR149.7m  (+0.9%  YoY),  in  line  with  our/consensus  estimates.  A final dividend of 2.26 sen was declared this quarter, bringing total FY14 DPU  to  8.91  sen,  up  0.6%  YoY.  Overall  earnings  for  the  year  were impacted by higher operating expenses as well as Sg. Wang’s persistent rental  contractions.  That  said,  overall  rental  reversions  for  2014 remained stable at 2.9%, with a portfolio occupancy rate of 97.7%.  

2015  outlook.  Unsurprisingly,  CMMT  expects  2015  retail  sales  to  be affected by the volatile macroeconomic environment and the goods and services tax (GST). Nonetheless, given that its malls are mainly targeted towards the mass market, it believes that the impact will be manageable. East  Coast  Mall’s  (ECM)  Phase  2  refurbishment  has  now  been completed,  with  the  introduction  of  new  brands  such  as  Uniqlo  and Birkenstock to the mall. We expect contributions  from ECM  to increase by about 8% in 2015. That said, the incremental revenue from ECM will likely be offset by Sg. Wang’s underperformance, although management is  currently  exploring  ways  to  boost  Sg.  Wang’s  rental.  Overall, management  is  guiding  for  a  conservative  DPU  growth  in  2015.  Given 
that no tariff hikes are expected in 2015, CMMT is unlikely to increase its service  charges  to  its  tenants.  Estimated  capex  for  2015  will  be MYR30m-40m, which will include the refurbishment of some assets.

Earnings  forecasts.  We  trim  our  FY15/FY16  earnings  forecasts  by about  5/6%  as  we  believe  our  previous  forecasts  were  too  aggressive. We also introduce our FY17 forecasts.

Maintain NEUTRAL. We lower our DDM-based TP slightly to MYR1.35 (from  MYR1.41)  after  revising  our  earnings  estimates  and  some  key valuation  assumptions.  We  believe  that  it  could  be  challenging  for  the REIT to maintain its annual DPU growth of about 4-5% going forward.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

CapitaMalls  Malaysia  Trust  (CMMT)  specialises  in  retail  assets  that  include  Sg.  Wang  Plaza  and  Gurney  Plaza.  It  is  part  of  the renowned Singapore-based CapitaLand Group through its sponsor, CapitaMalls Asia.

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Source: RHB