CAPITALAND MALAYSIA MALL TRUST

Target price: RM1.35

CAPITALAND Malaysia Mall Trust (CMMT)’s share price has declined 30% year-to-date and is below the initial public offering (IPO) price of RM1.08 (in 2010).

Investors are concerned about the oversupply of retail spaces in the Klang Valley which resulted in the following – Sungei Wang Plaza’s (SWP) negative reversions of -16.9%, which has improved from -30% since FY15, and negative reversions at The Mines (TM) due to the consolidation of tenants at the Digital Mart.

Kenanga Research had previously accounted for this, expecting negative reversions at SWP (-20%) and TM (-5%), and mid-single digit reversions for CMMT’s other assets.

The research house’s meeting with the management indicates that they are actively addressing the currently challenging landscape by rejigging their tenant mix strategy.

“We note that its weaker assets (SWP, TM, and Tropicana City Mall) are seeing reconfiguration of tenant space from the ‘large anchor tenants’ into more themes and concepts, which create a variety of niche tenants.

“This helps to address the common saying nowadays (that) ‘all malls are the same’,” said Kenanga Research.

All in, the research house maintains its capex assumptions of RM70mil to RM50mil in FY18 to FY19 as it has accounted for this.

However, Kenanga Research believes the malls may see some rental downtime during this period.

The management expects most of the asset enhancement initiatives (AEIs) to be completed by the second half of 2019, and the research house conservatively assumes full effects of the AEIs will only be felt from FY20 onwards.