CLMT's FY24 core net profit came within expectation as the group continued to be underpinned by strong growth from all its key ex- Klang Valley assets, namely Gurney Plaza and Queensbay Mall (QBM) and East Coast Mall. We remain positive on the group's strategy in diversifying into the industrial segment, which albeit will remain a small contributor in the medium term. Maintain OUTPERFORM with a higher TP of RM0.75 (from RM0.70) as we roll over our valuation base year to FY25F.

Within expectations. CLMT's FY24 core net profit achieved 102% and 100% of our full-year forecast and consensus estimates, respectively.

Meanwhile, it declared an estimated after-tax income distribution of 1.1 sen, bringing YTD net distribution to 4.2 sen, which is in line with our full-year forecast of 4.3 sen net.

YoY, its FY24 revenue grew 15% mainly due to: (i) full income recognition from QBM during the period (of which acquisition was completed in Mar 2023), (ii) positive rental reversions up to 12% on a portfolio basis. Its core net profit surged 24% as its operating expenses (including those of QBM) increased at a slower pace of 7% which also translated to a higher NPI margin of 58.0% (+3.0 ppts).

QoQ, its 4QFY24 revenue rose by 11%, likely attributable to year-end festive seasons and the recognition of RM5.6m unbilled lease income receivable. Net profit was increased by 9% as partially offset by deferred tax in the quarter.

Outlook. Given the promising developments in Penang, we foresee the positive trajectory to continue into FY25 and FY26. The group reaffirms its direction to acquiring and expanding its industrial segment, with a focus on logistics assets as part of its strategy to diversify its portfolio income streams. Currently, industrial assets make up less than 3% of the group's NPI which is predominantly made up by income from Gurney Plaza (42%) and QBM (33%).

As what we had gathered in the previous quarter, its Glenmarie distribution centre has secured a tenant which will contribute NPIs of up to RM3m/year from FY25 while its Logistic Hub in Valdor also saw a high rental reversion in previous quarter. Besides that, we are pleased with the yield-accretive industrial asset recently acquired by the group, i.e. Elmina Business Park land, which will commence rental income from FY26.

Forecasts. We fine-tune our earnings forecast by 4% for FY25 as we incorporate FY24 numbers, mainly accounting for slightly higher rentals from QBM. We also introduce our FY26F numbers.

Valuations. We raise our TP to RM0.75 from RM0.70 as we roll over our valuation base year to FY26F, with FY26F NDPU forecast of 5.0 sen. This is against an unchanged target yield of 6.75% (derived from a 3.0% yield spread above our 10-year MGS assumption of 3.75%). The yield spread is on the higher range applied within our sector peers (average 1.75%) owing to the group's higher risk assets in the Klang Valley. There is no adjustment to our TP based on ESG which is given a 3-star rating as appraised by us (see Page 4).

Investment case. CLMT's performance will continue to be underpinned by its retail assets in Penang which are poised to benefit from positive consumer sentiment underpinned by robust developments in the industrial space. Maintain OUTPERFORM.

Risks to our call include: (i) elevated risk-free rate, weighing on REIT valuation, (ii) over-supply of retail malls especially, resulting in depressed rentals and occupancy rates; and (iii) further deterioration in consumer spending.

Source: Kenanga Research - 23 Jan 2025