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CGS-CIMB: Worst over for CMMT share price but risks remain

KUALA LUMPUR (Jan 25): CGS-CIMB Securities Sdn Bhd said today the worst is likely over for the share price of retail-centric CapitaLand Malaysia Mall Trust (CMMT) in anticipation that the Covid-19 pandemic vaccine rollout in March 2021 will help turn around the country’s retail sector. 

CGS-CIMB analyst Sharizan Rosely wrote in a note today that in the research firm’s view, a further extension of the country’s Movement Control Order (MCO) beyond Feb 4, 2021 to curb the spread of the pandemic will be negative for CMMT’s earnings outlook for financial year ending Dec 31, 2021 (FY21).

"We upgrade (CMMT shares) from 'reduce' to 'hold' with a higher DDM (dividend-discount model)-based TP (target price) of RM0.60 as we incorporate FY23F DPU (dividend per unit) into our DDM assumptions.

"Prospects for CMMT could improve in 2Q21F while FY21-23F dividend yields of 6.8-7.9% provide support. Upside risk: overall recovery in retail malls. Downside risk: prolonged lockdown measures.

“We (however) cut FY21F revenue by 9.7% to reflect potential rental assistance/rebates, reduced occupancy rates and likely negative reversion on the renewal of expiring leases in FY21F,” Sharizan said.

At Bursa Malaysia’s 12:30pm break today, CMMT’s share or unit price fell two sen or 3.23% to 60 sen for a market value of about RM1.24 billion.

CMMT’s latest-reported number of issued shares stood at 2.06 billion units.

CGS-CIMB’s note today followed CMMT’s announcement on Friday (Jan 22) on its 4QFY20 and full-year FY20 results.

CMMT’s FY20 results were above expectations, according to CGS-CIMB.

"CMMT booked in a FY20-reported net loss of RM84.5 million. Stripping out the RM158 million in asset fair value loss, FY20 core net profit of RM59.4 million was above expectations at 114% of our full-year forecast and 107% of consensus estimate,” Sharizan said.

Meanwhile, Kenanga Investment Bank Bhd analyst Marie Vaz wrote in a note today Kenanga maintained its "market perform" call for CMMT units with an unchanged TP of 56.5 sen given CMMT's challenging asset profile.

"Due to the uncertainty of the Covid-19 situation, the group will be prioritising cash preservation and has accelerated digital adoption among tenants.

"Outlook remains challenging,” Vaz said.

According to CMMT’s website, the property trust was established with the objective of investing in a portfolio of income-producing real estate primarily used for retail purposes and located primarily in Malaysia. 

CMMT is managed by CapitaLand Malaysia Mall REIT Management Sdn Bhd — a joint venture between CapitaLand Ltd and Malaysian Industrial Development Finance Bhd, according to CMMT’s website.

“Its (CMMT’s) portfolio of assets comprises five shopping malls and a complementary office block which are strategically located in five urban centres across Malaysia. The five assets are Gurney Plaza in Penang; three in Klang Valley — a majority interest in Sungei Wang in Kuala Lumpur, 3 Damansara and 3 Damansara Office Tower in Petaling Jaya; and The Mines in Seri Kembangan; and East Coast Mall in Kuantan.

"The portfolio has a total net lettable area of over three million square feet and is valued at about RM4 billion.

"CMMT's interest in Sungei Wang comprises 205 strata parcels within the mall which represents approximately 61.9% of the aggregate retail floor area of Sungei Wang and 100% of the car park bays in Sungei Wang,” CMMT said.

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