CapitaMalls Malaysia Trust (CMMT) was among the first real estate investment trusts (REIT) to report 3Q11 earnings. The trust continues to fare well, with distributable income for the year to date slightly ahead of the forecast made in its prospectus for listing back in July 2010.
Gross revenue totalled RM57.8 million in the latest 3Q11, including contributions from the extension of Gurney Plaza. Acquisition of the latter was completed at end-March this year. Income available for distribution for the quarter stood at RM29.8 million, bringing the total for the year to date to RM85.6 million.
Contributions from all three shopping malls in CMMT’s portfolio were steady. Occupancy ranged from 98.4% for Sungei Wang Plaza to 98.6% for Gurney Plaza and 99% for The Mines. The average occupancy in 3Q11 stood at 98.7%, not varying much from the 98.7% to 99.1% recorded in 1Q11 to 2Q11 respectively. The trust also maintained positive rental reversion of about 6.7% for leases renewed so far this year.
Gross yield for CMMT estimated at 6%
At the current pace, CMMT is on track for our estimated income distribution totalling roughly 7.85 sen per unit for the year, of which 3.9 sen per unit has already been paid earlier. CMMT will trade ex-entitlement for another distribution of 2.83 sen per unit on Nov 8. The total distribution translates into a gross yield of about 6% at the prevailing unit price of RM1.31 — a fairly attractive return compared with prevailing bank deposit rates.
Earnings for REITs are fairly defensive, although they are still exposed to economic cycles to varying degrees depending in part on the type of properties (and their locations) in the portfolio. For instance, well-managed shopping malls carry relatively lower risks, compared with say, the commercial office market, which may suffer on forecasts of excess supply. Consumer spending, on the other hand, is expected to stay quite resilient.
CMMT is managed by a joint-venture company between CapitaMalls Asia, which is listed on the Singapore Stock Exchange and one of Asia’s largest shopping mall developers, owners and managers, and Malaysian Industrial Development Finance Bhd.
Premium for size and liquidity
The trust’s three investment properties — with net lettable area of more than two million square feet — are valued at RM2.43 billion. Its book value stood at RM1.06 per unit (after taking into account the as yet unpaid income distribution for 3Q11). Thus, at the current price, CMMT is trading at more than 1.2 times book value.
We believe this premium is attributable in part to its relative size and liquidity. It is the largest listed retail-focused REIT on the local bourse with assets and market capitalisation that are second only to Sunway REIT.
CMMT is in the midst of acquiring the East Coast Mall in Kuantan for RM330 million. The acquisition is slated for completion by end-2011. The four-storey mall with net lettable area of about 440,000 sq ft was completed in 2008 and currently has occupancy of about 97%. The acquisition will be funded by the issuance of 262 million new units priced at RM1.26 each.
We forecast that CMMT will be able to maintain income distribution at roughly 7.9 sen per unit in 2012, assuming a 100% payout based on our forecast earnings and enlarged units in circulation.
Axis continues to expand portfolio
Axis REIT, on the other hand, has a slightly more diversified portfolio of assets with properties in the office, logistics and retail warehouses as well as office/light industrial segments.
Axis has been among the most active REITs in terms of expanding its portfolio. From the initial five properties (on its listing back in August 2005), its portfolio now consists of 27 properties valued at a combined RM1.26 billion with an average occupancy of 96.8% in 3Q11.
A total of five properties were acquired in 2010, including two logistics warehouses in Seberang Prai, Tesco Hypermarket in Johor, Axis PDI Centre and Axis Technology Centre.
For the current year, Axis completed the acquisitions of a logistics warehouse in Johor and an office building in Cyberjaya for RM81.3 million and disposed of the Axis North Port Logistics Centre for RM14.5 million.
It is currently in the midst of finalising the purchase of another logistics warehouse in Seberang Prai valued at RM59 million as well as a sale and leaseback of a three-storey office block and logistics warehouse from DHL Properties for RM48.5 million. With several other properties under assessment, we expect the trust will stick to its strategy of expanding portfolio in the foreseeable future.
Following the recent acquisitions, gearing has risen to 38.2% as at end-September, up from about 31.3% since its last placement exercise in 3Q10. To bolster its balance sheet and fund future purchases, Axis is planning to issue up to 75.2 million new units.
Gross yield estimated at 6.5%
We estimate income distribution to total roughly 17.2 sen per unit for the current year based on 100% payout, of which 13 sen has already been paid in the last three quarters. That translates into a gross yield of roughly 6.5% at the prevailing unit price of RM2.63. Axis is currently trading at about 1.34 times its book value of RM1.96 as at end-September.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
This article appeared in The Edge Financial Daily, November 4, 2011.
Gross revenue totalled RM57.8 million in the latest 3Q11, including contributions from the extension of Gurney Plaza. Acquisition of the latter was completed at end-March this year. Income available for distribution for the quarter stood at RM29.8 million, bringing the total for the year to date to RM85.6 million.
Contributions from all three shopping malls in CMMT’s portfolio were steady. Occupancy ranged from 98.4% for Sungei Wang Plaza to 98.6% for Gurney Plaza and 99% for The Mines. The average occupancy in 3Q11 stood at 98.7%, not varying much from the 98.7% to 99.1% recorded in 1Q11 to 2Q11 respectively. The trust also maintained positive rental reversion of about 6.7% for leases renewed so far this year.
Gross yield for CMMT estimated at 6%
At the current pace, CMMT is on track for our estimated income distribution totalling roughly 7.85 sen per unit for the year, of which 3.9 sen per unit has already been paid earlier. CMMT will trade ex-entitlement for another distribution of 2.83 sen per unit on Nov 8. The total distribution translates into a gross yield of about 6% at the prevailing unit price of RM1.31 — a fairly attractive return compared with prevailing bank deposit rates.
Earnings for REITs are fairly defensive, although they are still exposed to economic cycles to varying degrees depending in part on the type of properties (and their locations) in the portfolio. For instance, well-managed shopping malls carry relatively lower risks, compared with say, the commercial office market, which may suffer on forecasts of excess supply. Consumer spending, on the other hand, is expected to stay quite resilient.
CMMT is managed by a joint-venture company between CapitaMalls Asia, which is listed on the Singapore Stock Exchange and one of Asia’s largest shopping mall developers, owners and managers, and Malaysian Industrial Development Finance Bhd.
Premium for size and liquidity
The trust’s three investment properties — with net lettable area of more than two million square feet — are valued at RM2.43 billion. Its book value stood at RM1.06 per unit (after taking into account the as yet unpaid income distribution for 3Q11). Thus, at the current price, CMMT is trading at more than 1.2 times book value.
We believe this premium is attributable in part to its relative size and liquidity. It is the largest listed retail-focused REIT on the local bourse with assets and market capitalisation that are second only to Sunway REIT.
CMMT is in the midst of acquiring the East Coast Mall in Kuantan for RM330 million. The acquisition is slated for completion by end-2011. The four-storey mall with net lettable area of about 440,000 sq ft was completed in 2008 and currently has occupancy of about 97%. The acquisition will be funded by the issuance of 262 million new units priced at RM1.26 each.
We forecast that CMMT will be able to maintain income distribution at roughly 7.9 sen per unit in 2012, assuming a 100% payout based on our forecast earnings and enlarged units in circulation.
Axis continues to expand portfolio
Axis REIT, on the other hand, has a slightly more diversified portfolio of assets with properties in the office, logistics and retail warehouses as well as office/light industrial segments.
Axis has been among the most active REITs in terms of expanding its portfolio. From the initial five properties (on its listing back in August 2005), its portfolio now consists of 27 properties valued at a combined RM1.26 billion with an average occupancy of 96.8% in 3Q11.
A total of five properties were acquired in 2010, including two logistics warehouses in Seberang Prai, Tesco Hypermarket in Johor, Axis PDI Centre and Axis Technology Centre.
For the current year, Axis completed the acquisitions of a logistics warehouse in Johor and an office building in Cyberjaya for RM81.3 million and disposed of the Axis North Port Logistics Centre for RM14.5 million.
It is currently in the midst of finalising the purchase of another logistics warehouse in Seberang Prai valued at RM59 million as well as a sale and leaseback of a three-storey office block and logistics warehouse from DHL Properties for RM48.5 million. With several other properties under assessment, we expect the trust will stick to its strategy of expanding portfolio in the foreseeable future.
Following the recent acquisitions, gearing has risen to 38.2% as at end-September, up from about 31.3% since its last placement exercise in 3Q10. To bolster its balance sheet and fund future purchases, Axis is planning to issue up to 75.2 million new units.
Gross yield estimated at 6.5%
We estimate income distribution to total roughly 17.2 sen per unit for the current year based on 100% payout, of which 13 sen has already been paid in the last three quarters. That translates into a gross yield of roughly 6.5% at the prevailing unit price of RM2.63. Axis is currently trading at about 1.34 times its book value of RM1.96 as at end-September.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
This article appeared in The Edge Financial Daily, November 4, 2011.
