This article first appeared in The Edge Financial Daily on December 13, 2019

CapitaLand Malaysia Mall Trust
(Dec 12, RM1.03)
Maintain hold with an unchanged target price of RM1.03: We were among 20 to 25 sell-side analysts joining CapitaLand Malaysia Mall Trust’s (CMMT) site tour of Sungei Wang Plaza’s newly refurbished and enhanced Jumpa, a 112,000 sq ft retail space. With a total capital expenditure of RM54.5 million and asset enhancement works of over 16 months, Jumpa is now operating at a physical occupancy of about 70%, and a committed occupancy of 95%. During the visit, we sensed that Jumpa’s differentiated retail concept will relate more to a younger age group while still appealing to tourists in general and families.

Jumpa has been operating since Sept 25, with new offerings of food and beverage — local and Asian delights, chic and trendy as well as athleisure (athletic and leisure) fashion collections, and essential services such as the Giant hypermarket, Caring pharmacy and Pet Lovers Centre, among others. Jumpa’s tenant occupancy is well spread out, with the anchor tenant Giant hypermarket occupying a vast space on the concourse level. The layout of each floor is clearly themed, with the upper floors dominated by entertainment, family and educational offerings.

We are quite impressed with the climbing gym amassing the top floor: Beast Park. Beast Park is at the tail end of preparations, with a targeted opening likely before end-December. We believe it could be a crowd-puller during festive periods and year-end school holidays, especially since no similar offerings are available at surrounding malls. Overall, we had observed a decent shopper traffic, which could pick up over some time when all tenants are operating, including three mini anchor tenants by mid-2020. Take note that Emperor Cinema had yet to open at Jumpa.

Our forecasts for CMMT have not factored in Jumpa. On an assumed average rental rate of RM4 to RM5 per sq ft, we estimate Jumpa would contribute RM5.3 million to RM6.7 million in rental revenue per annum (pa) and RM3.8 million to RM4.8 million in net property income (NPI) pa — an 80% NPI margin and a 90% occupancy rate or equivalent to 2% to 3% of financial year 2020 (FY20) and FY21 earnings per share forecasts.

We reiterate our “hold” call on CMMT, supported by attractive FY19 to FY21 forecast dividend yields of 5.9% to 6.5%. The upside risk is a turnaround in rental reversions. Downside risks are prolonged negative reversions, a rental downtime at The Mines and delays in Sungei Wang Plaza’s turnaround after Jumpa’s opening. — CGS-CIMB Research, Dec 12