• We reaffirm our BUY rating on CapitaMall Malaysia Trust (CMMT)
and raised our fair value from RM1.26/unit to RM1.54/unit based on a 10%
discount to its DCF value of RM1.71/unit.
• We have raised our earnings estimates by 17.3% and 17.1% for
FY12F & FY13F, respectively. These account for higher rental rates, and the
newly acquired East Coast Mall as well as the asset-enhancement initiatives at
Gurney Plaza.
• Accordingly, we have lifted our DPU estimates to 7.9 sen
and 8.3 sen, for FY12F and FY13F, respectively. We forecast DPU growth of
between 5% - 6% pa for FY12F to FY14F.
• Carpark lots on the 6th and 7th floor of Gurney Plaza have
been converted into an additional retail area of 20,161sf (+2.4%). Reconfiguration
of the former mini-anchor space in Basement 1 increased the NLA by 2,800sf
(+0.3%). Phase 1 of interior refurbishment was completed in FY11. CMMT expects
to generate an ROI of 11% on a capital outlay of RM21.9mil.
• CMMT is also looking at converting the huge car park space
in front of the East Coast Mall (NLA: 100,000sf or +23%) into retail space,
pending a feasibility study. CMMT is looking at optimising tenant mix by
bringing in more F&B outlets and at least a pharmacy. The occupancy rate of
99%, with a long waiting-list signals strong demand.
• For the Mines, CMMT has taken back a portion of the lease from
Giant (general merchandising). This space has
been replaced by a fitness centre and Wah Gallery.
• For the overall portfolio in the upcoming market review,
rental rates are expected to increase – potentially involving 23% of leases
that are up for renewal in FY12F. CMMT
achieved a positive rental reversion of 5.6% in FY11. For FY12F, we are projecting
an increase of 5%-6% of blended rental. Balance sheet remains strong with a net
gearing of 28%, implying further room for acquisition. Management intends to upgrade
the ambience of all CMMT’s mall. This would in turn increase footfall, as such
basic upgrading would contribute significantly to the appearance and
attractiveness of the malls. CMMT
expects to spend RM50mil in capex for FY12F.
• At a projected dividend yield of 5.6% for FY12F, valuation
is not cheap. Nevertheless, we believe CMMT has a solid strategy to grow DPU.
It has consistently outperformed market expectations, given its quality retail
portfolio, strong parentage and more importantly, ready access to a large pool of
established retailers. We believe CMMT offers a low risk exposure to the retail
REIT sector.
Source: AmeSecurities
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