CMMT’s MYR38.2m1Q15 net profit came in line with our and consensus estimates.  Maintain  NEUTRAL  and DDM-based  MYR1.48  TP  (4% downside).  The  Tropicana  City  Mall  acquisition  is  still  on  track  for completion  in  3Q15,  which  should  offset  Sungei  Wang  Plaza’s persistent  non-performance.  With  overall rental reversions  still  stable, we maintain our 2-3% DPU growth forecast for FY15-17.

• Within  expectations.  CapitaMalls  Malaysia  Trust’s  (CMMT)  1Q15  net profit  of  MYR38.2.m  (-33.6%  QoQ,  +0.1%  YoY)  came  in  line  with our/consensus  estimates  at  24%/23%  respectively.  A  dividend  of  2.25 sen was declared for the quarter. However, this  will be paid out together with its 2Q15 dividend,  given its semi-annual  distribution  policy.   Despite the persistent non-performance of Sungei  Wang  Plaza, earnings for the quarter were  cushioned by the stable rental reversions from  the  Gurney Plaza and The Mines  malls.  Overall rental reversions for 1Q15  stand  at3.6% while portfolio occupancy rate remains stable at 97.5%.
• Recent  developments.  According  to  management,  the  acquisition  of Tropicana  City  Mall  is  on track for  completion  in  3Q15.  Occupancy  for the asset is currently at 91%. Post completion,  CMMT  plans  to look at improving  on  the  trade  mix  of  the  mall  in  the  near  future.  For  Sungei Wang  Plaza,  the  outlook  is  expected  to  remain  challenging  and management  expects  rental  reversions  to  remain  in  the  double-digit negative  territory.  That  said,  the  incremental  revenue  from  Tropicana City  Mall  should  mitigate  the  income  loss  from  Sungei  Wang  Plaza. CMMT has also shared that 1Q15 retail sales noted an improvement due to  the  pre-goods  and  services  tax  (GST)  spending,  especially  for  bigticket items such as jewellery and electrical goods. Management expects sales to be slow for the next two quarters,  although sales could see a pickup in 4Q15 as consumers adjust to the  new tax.
• Earnings forecasts. Unchanged.
• Maintain NEUTRAL.  We maintain our NEUTRAL  call and DDM-based TP  of  MYR1.48.  We  continue  to  believe that  the outlook  remains challenging for  CMMT, especially  with  the persistent  rental contraction coming  from Sungei  Wang  Plaza.  While DPU  growth  is flattish at 2-3% for FY15-17F, the dividend yield is decent, at about 6%.