We came out of CMMT’s 2Q15 results briefing feeling reassured of its direction for 2H15. Maintain NEUTRAL, with a MYR1.47 DDM-derived TP (8.4% upside). While we believe Sungei Wang Plaza will continue to underperform until the MRT project is completed, this would be offset by incremental revenue from East Coast Mall and Tropicana City Mall. Its dividend yield remains decent, at 6.9% for FY16F.

Soft but stable retail sales expected. During the results briefing,CapitaMalls Malaysia Trust (CMMT) shared its expectation that the soft retail sales will continue to the end of 3Q15. Post the implementation of goods and services tax (GST), retail sales growth slowed down to -9% YoY in 2Q15 from +13-14% YoY in 1Q15. The slowdown is evident throughout all the malls, regardless of region. However, there was a notable improvement in retail sales MoM from May onwards. The REIT expects retail sales to be relatively stable and to improve from 4Q onwards, contributed by the festive season and school holidays.

More on TCM and SWP. Management also shared during the briefing that it will be adding an extra 6,000 sq ft of net lettable area (NLA) to its recently-acquired Tropicana City Mall (TCM). The REIT plans to develop an al fresco dining area on the new-NLA space which is located right in front of TCM. The area is expected to be the entry-statement and act as a crowd puller for the mall. Additionally, work on the trade mix of the mall has also started with new names being brought into TCM such as S.Wine Café by The BIG Group. It also targets to achieve an occupancy rate of 95% (c.91%) and the timeline to achieve this is roughly a year from now. As for Sungei Wang Plaza (SWP), management shared that it has reconfigured and repositioned Level 6 which was previously disconnected from the rest of the mall. It now has Snips College of Creative Arts, Storhub (to be opened) and an eclectic mix of lifestyle, hobbies and fashion stalls – and it hopes that this will help drive shopper traffic to the mall. However, we believe that the mall will continue to underperform until the MRT construction is completed in 2017.

Maintain NEUTRAL. We maintain our forecasts, NEUTRAL call andDDM-based TP of MYR1.47 (8.4% upside). Although the outlook remains challenging for CMMT due to the persistent non-performance of SWP, we believe this would be offset by the fruition of East Coast Mall’s 2-year asset enhancement works and revenue contribution from TCM. Additionally, its FY16F dividend yield is still fairly decent, at 6.8%.