This article first appeared in The Edge Financial Daily on July 20, 2017

KUALA LUMPUR: CapitaLand Malaysia Mall Trust (CMMT) expects its net profit income for 2017 to be little changed from 2016 due to poor consumer sentiment and a flattish rental reversion for leases up for review.

“In the second half of 2017, the prevailing cautious consumer sentiment will persist. Hopefully, it would pick up towards the end of the year (though) I don’t see any improvement in the cost of living at this juncture,” said Low Peck Chen, chief executive officer of CMMT’s manager, CapitaLand Malaysia Mall REIT Management Sdn Bhd (CMRM).

Low said the flattish net property income (NPI) growth projection excludes one of its Klang Valley properties, Sungei Wang Plaza, which recorded a rental reversion of -33.8% in the first half of 2017 (1H17). “We hope to reduce it to 20% to 30% in the second half. However, sales-wise, there has been an improvement and has stabilised year-on-year for the first five months this year,” she told reporters after the release of CMMT’s second-quarter results yesterday.

For the quarter, CMMT posted a 0.4% dip in NPI to RM59.8 million from RM60 million a year earlier due to lower contribution from its Klang Valley shopping malls which was mitigated by stronger performance from Gurney Plaza in Penang and East Coast Mall in Kuantan. Distribution per unit slipped 1% to 2.06 sen from 2.08 sen in the second quarter of 2016. Gross revenue fell 0.2% to RM91.8 million from RM92 million previously. For 1H17, NPI fell 0.9% to RM119.5 million from RM120.6 million a year earlier, while DPU dropped 1.4% to 4.14 sen from 4.2 sen. Gross revenue eased 0.8% to RM184.3 million from RM185.7 million.

Low said some of the lease renewals could face renewal pressure, but they would be dealt with on a case-by-case basis. In the first quarter, the rental reversion stood at -12.4%, she said. For the second half, CMMT has 480 leases (with a gross rental income of RM8.4 million) up for renewal. This is out of 728 leases (RM12.3 million) identified for renewal in 2017.

Besides Gurney Plaza and East Coast Mall, CMMT’s properties are in the Klang Valley, namely The Mines, Tropicana City Mall and City Office Tower, and 62% of Sungei Wang Plaza. It has a total net lettable area of 3.1 million sq ft. As at June 30, total asset size amounted to RM4.1 billion while total asset value stood at RM3.9 billion, with a property yield of 6.1%.

Low hoped to maintain CMMT’s occupancy level above 95% (it recorded a rate of 95.8% as at June 30) with stable shopper traffic.

“We will continue looking at reconfiguration opportunities of the properties but our focus is on improving our shopping mall offerings and rewarding shoppers and buyers, to improve footfall and not just improving NPI,” she said.