CapitaLand 1QFY23 results met expectations, post-results and factoring in contributions from QueensBay Mall, the house is raising its FY23 earnings projection by 21% and lifting the target price on the stock by 4% to RM0.53 (from RM0.51).
1QFY23 net profit of RM20.0m (-3% YoY) made up 24% of Kenanga’s previous full-year estimate (and at 15% of consensus, which might be skewed by timing assumptions of Queensbay Mall. A DPU of 0.87 sen has been declared. YoY, on the back of a 16% rise in gross revenue to RM78.5m, core net profit dipped 3% to RM20.0m in 1QFY23 because of higher property operating expenses and other nonoperating expenses. By property asset, the major earnings contributors were Gurney Plaza and East Coast Mall. Overall portfolio occupancy rate was at 89.2% as of end-March 2023 while gearing stood at 44.3% end-1QFY23 following the QBM acquisition.
As business environment has normalised, in 1QFY23, shopper traffic stood at 95% versus 1Q19’s level while tenant sales psf was at 113% of 1Q19’s threshold. In terms of portfolio lease expiry profile, as a percentage of gross rental income, 30.5% is due for expiry this year (of which 26.5% of these leases have been renewed and/or under advanced negotiations).
Following the completion on 21 Mar 2023 of its acquisition of QBM for RM990.5m – funded by debt and new equity– CLMT has started booking in contributions from QBM. Based on a circular to unitholders dated 8 Feb 2023, QBM is forecasted to post NPI of RM72.3m in FY23 (vs. RM69m in the 11-month period ended Nov 2022). The house is projecting NPI contributions from QBM of RM52.0m this year and RM73.9m next year.
In view of the latest development, Kenanga is updating its core net profit forecasts to RM100.1m (+21%) for FY23 and RM105.7m for FY24 to capture contributions from QBM and post-results fine-tuning.
Attaching a target yield of 7.5% on FY24F GDPU as the house sees a rollover valuation window, is to reflect CLMT’s challenging prospects, given its less prime asset profile amid the uncertain economic outlook and elevated inflationary environment.
