CapitaLand Malaysia Trust’s 3Q22 results was within the expectation of Maybank Investment Bank as earnings were encouraged by improved portfolio occupancy rate. It invests in income-producing real estate primarily used for retail purposes. For the first nine months (9M2022), the core net profit was at 72%/77% of the Street’s full year estimates. Maybank Investment Bank makes no changes to its forecasts on this REIT and its target price (TP) of MYR0.55 (Ke: 9.9%). As such, the research house maintains HOLD rating on this REIT; risk-reward remains approximately balanced, with FY22-24E net DPU yields of c.6.6-7.2%.
Improved portfolio occupancy rate
3Q22 core net profit was MYR21.4m (+660% YoY, -0.2% QoQ), bringing 9M22 core net profit to MYR63.5m (+188% YoY). 3Q22’s YoY earnings was encouraged by (i) positive rental reversions at East Coast Mall (9M22: +3% YoY), (ii) improved portfolio occupancy rate to 83.1% (+1.5ppts YoY) – from newly secured supermarket anchor tenant for 3 Damansara, and (iii) in the absence of rental relief. Rental reversion for overall portfolio declined by -3.6% for 9M22, compared to -4.2% in 1H22, driven by improvements at Gurney Plaza, 3 Damansara and The Mines.
This however was partly offset by (i) higher operating expenses, namely maintenance (+11% YoY) and utilities expenses (+77% YoY). Meanwhile, 3Q22’s QoQ earnings marginally declined due to higher interest expenses (+9.7%), as average cost of debt increased slightly to 3.35% (2Q22: 3.08%).
Maybank IB maintains its FY22-24E earnings forecasts. Its earnings growth forecasts are mainly backed by sustained occupancies (96%-98%) at its outstation malls i.e. Gurney Plaza and East Coast Mall and single-digit positive rental reversions at these key malls.
The research house has stated that it “remains cautious on oversupply issues at Klang Valley shopping malls which will exert pressure on the malls’ occupancy and/or rental rates. CLMT expects to complete the acquisition of its 1st logistics asset in 4Q22”.
On ESG matters, CLMT management targets to complete its first sustainability-link loan by end-FY22 and to achieve 100% green-rated portfolio by 2026, except for Sungei Wang Plaza (stratified and not 100%-owned).
Temasek Holdings Pte. Ltd. – 35.0%
Permodalan Nasional Bhd. -17.9%
Employees Provident Fund- 13.5%