CLMT to see stronger 4Q with reopening of the economy
KUCHING: Capitaland Malaysia Trust’s (CLMT) fourth quarter of 2021 (4Q21) financial performance is expected to be much stronger, driven by the reopening of the economy, analysts observed.
Kenanga Investment Bank Bhd’s research team (Kenanga Research) in a report, commented: “We do expect a recovery in 4Q21 with the recent opening up of the economy and malls operating at 90 per cent of net lettable area (NLA).
“FY21 will see a 18 per cent of NLA up for expiry, but the bulk of these expiries are in its nonKlang Valley based malls (Gurney Plaza and East Coast Mall which are less affected by Covid-19 at this juncture) while FY22 will see 40 per cent of leases expiring.”
It added, “The group will be looking to diversify its asset class beyond retail possibly targeting industrial, and office assets.”
On the REIT’s third quarter of 2021 (3Q21) performance, Kenanga Research noted that CLMT’s first nine months of FY21 (9MFY21) realised distributable income (RDI) of RM21.3 million was in line with expectations as it anticipated a weaker 3Q21 due to the MCO.
On a year-on-year (y-o-y) basis, year to date, its top-line was down by 19 per cent due to the ongoing rental relief to aid struggling tenants and negative rental reversions (down 10.3 per cent) as the group tried to optimise occupancy and rental.
“As a result, RDI was down by 51 per cent despite lower financing cost (down 19 per cent),” it said.
Quarter-on-quarter (q-o-q), top-line was down by eight per cent on rental relief and negative reversions, while operating cost was up by 15 per cent on higher operating expenses.
“This caused RDI to decline by 70 per cent,” it said.
Despite its weak 3Q, CLMT’s gearing remained stable at 0.36folds (compared with 0.35-folds in 2Q21) which is well below MREITs’ statutory gearing limit of 0.60-folds.
Kenanga Research maintained its ‘market perform’ rating on the stock as well as its core net profit (CNP) forecast of RM40 million to RM98 million for FY21 to FY22E.
“We expect the weak rental reversion environment to persist for now as occupancy will take priority over reversions and given CLMT’s challenging asset profile as it does not own prime malls.
“As such we expect reversions oft down nine per cent and down five per cent in FY21 and FY22. However, we do believe that FY22 will be a better year than FY21 given the rise shopper traffic in recent weeks which should persist well into FY22,” it said.