Analysts neutral on CMMT’s prospects
KUCHING: Capitaland Malaysia Mall Trust’s (CMMT) prospects garnered neutral views from analysts as contributions from Gurney Plaza and East Coast Mall could be cushioned by declining earnings from Sungei Wang Plaza.
In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said it maintained its financial year 2017 (FY17) and FY18 earnings forecast for CMMT.
“We continue to see neutral earnings outlook for CMMT in FY17, as growing contribution from Gurney Plaza and East Coast Mall would cushion declining earnings from Sungei Wang Plaza.
“Nevertheless, we see limited earnings downside risk from Sungei Wang Plaza to CMMT as the mall is the smallest earnings contributor to CMMT, contributing eight per cent to total net property income in the first half of FY17,” it opined.
In another note, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) said It would continue to monitor the demand of Sungei Wang Plaza’s retail space as it believed it could see an improvement in the near to mid-term future.
“We continue to monitor the demand for Sungei Wang Plaza’s retail space which could improve in the near to mid-term premised on the recent opening of KVMRT 1 line (July 17).
“This could enhance shopper traffic due to the close proximity of the MRT station to several city centre malls,” it said.
Similarly, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) believed that the new MRT station could increase accessibility to Sungei Wang Plaza.
“The group recorded the first quarter of fair value losses (RM11.8 million), dragged down mostly by Sungei Wang Plaza as well as Tropicana Property due to negative reversions and lower occupancy.
“We are not overly alarmed by this for now as it makes up a negligible portion of the group’s total assets (0.3 per cent).
“We will continue to monitor the situation going forward, but we believe that most negatives have been priced in and the negative impact on the portfolio’s fair value will be short-lived as the MRT has started operations which bode well for Sungei Wang Plaza due to increased accessibility, while Tropicana Properties should see better reversions once reconfiguration works are completed in 4Q17,” it commented.
Meanwhile, on CMMT’s first half of 2017 (1H17) results, the group’s 1H17 realised distributable income (RDI) of RM84.2 million came in within expectations.
“1H17 gross rental income (GRI) declined slightly by 0.8 per cent mainly due to lower GRI at Sungei Wang Plaza on negative reversions, but better than 1Q17 negative reversions, lower GRI at The Mines due to negative reversions and lower occupancy, and lower GRI at Tropicana City Mall due to negative reversions, but this was mitigated by contributions from Gurney Plaza and East Coast Mall.
“All in, RDI declined marginally by 1.1 per cent as earnings before interest and tax (EBIT) margin was flattish at 59.5 per cent,” Kenanga Research said.
On a quarter-on-quarter (q-oq) basis, it noted that CMMT’s GRI declined by 0.7 per cent due to similar reasons mentioned above, which mostly translated to bottom-line decline of 1.0 per cent as margins were fairly stable.
“Note that the group recorded its first ever quarter of fair value losses ( RM11.8 million) since listing, dragged down mostly by SWP and Tropicana Property due to negative reversions and lower occupancy ( refer overleaf),” it added.
Looking ahead, the research team said, CMMT would see 43 per cent of leases up for expiry in FY17, mostly from Gurney Plaza and East Coast Mall, of which it expected modest single-digit reversions.