- We re-affirm our HOLD recommendation on CapitalMalls
Malaysia Trust (CMMT), with an unchanged fair value of RM2.00/unit, based on
our DCF valuation.
- It was announced on Bursa Malaysia yesterday that CMMT has
awarded a contract via a project management agreement to CapitaLand Retail
Malaysia Sdn Bhd as the manager for the asset enhancement initiative (AEI)
works at the East Coast Mall (ECM) in Kuantan.
- This is for a fee of 3% of the final contract sum for the
AEI works. The estimated cost of the AEI works is RM43.3mil.
- To recap, the AEI is to create additional retail space for
ECM via the conversion of car park bays at Level 3. In addition, the AEI works
will include reconfiguration of space to improve the trade mix and extension of
the alfresco area on the Ground Floor.
- Therefore, an additional NLA of c.23% will be added to the
mall. The AEI is envisaged to commence in mid-March FY13 and to be completed by
the fourth quarter of 2014.
- Given the untapped potential of ECM and high demand for
floor space, we believe there is potential rental upside. This is further
underpinned by the low average rental of c.RM6psf, compared to other CMMT’s
portfolio.
- Further to that, the bulk (32% of NLA) of ECM’s leases is
up for renewals this year. As such, we are expecting a potential rental upside
to kick-in.
- All in, we are keeping our estimates at this juncture,
without the inclusion of the potential rental upside from the additional NLA at
ECM.
- We continue to remain positive on CMMT’s for its
well-diversified retail malls in Penang, Kuala Lumpur and Kuantan, which
focuses on necessity shopping.
- This is further backed by Malaysia’s rising consumer
affluence. Notably, it also has the strongest sponsor, CapitaMalls Asia.
Source: AmeSecurities
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