FY21 realised distributable income (RDI) of RM39.0m is well within our estimate (at 97%) but slightly above consensus at 107% as 4QFY21 played catch-up from a weak 9MFY21. FY21 dividend of 1.84 sen came in at 97% of our FY21E dividend of 1.89 sen. Maintain FY22E CNP of RM98m and introduce FY23E CNP of RM126m. Maintain MARKET PERFORM but on a slightly lower TP of RM0.560 (from RM0.580) post increasing our 10-year MGS target to 3.90% (from 3.60%).

FY21 realised distributable income (RDI) of RM39.0m is well within our estimate at 97% but slightly above consensus’ at 107% as 4QFY21 did well to play catch-up from a weak 9MFY21. 2HFY21 GDPU of 0.98 sen (included a 0.72 sen non-taxable portion), which brought FY21 GDPU to 1.84 sen, is also within expectation at 97% of our estimate of 1.89 sen, implying 3.2% yield.

Results’ highlight. YoY-Ytd, top-line was down by 14% due to the ongoing rental relief to aid struggling tenants and negative rental reversions (-12.7%) for all assets except for East Coast Mall which recorded top-line growth (+1.3%). All in, RDI was dragged down 37% despite lower cost components. QoQ, top-line bounced back by 36% with the reopening of the economy and strong rebound in shopper traffic during the holiday shopping season. All in, RDI was up to RM17.8m (from RM7.6m). Gearing remained stable at 0.36x, well below MREITs’ statutory gearing limit of 0.60x

Outlook. FY22-23 will see 48.8%-31.4% of leases expiring which may prove to be challenging ahead given its negative reversion track record. The Group will be looking to diversify its asset class beyond retail possibly targeting industrial and office assets.

Maintain FY22E CNP of RM98m and introduce FY23E CNP of RM126m. Given the high number of leases up for expiry, we believe CLMT is not out of the woods just yet in terms of rental reversions. However, investors can expect YoY earnings improvements from the absence of rental holidays in coming years given that the pandemic is now more manageable and complete lockdowns are less likely. As such, we expect reversions of -7%/-5% in FY22/FY23. FY22E/FY23E GDPU/NDPU of 4.7 sen/6.0 sen / 4.2 sen/5.4 sen imply gross yield of 8.1%/10.4% and net yield of 7.3%/9.3%, respectively.

Maintain MARKET PERFORM but on a lower TP of RM0.560 (from RM0.580). Our TP is based on an unchanged FY22E GDPU of 4.7 sen and 4.5ppt spread (+1.0SD), but on a higher 10-year MGS target of 3.9% (from 3.6%), in line with our in-house estimates. Our applied spread is the highest among pure retail MREITs under our coverage (between 1.0ppt to 1.6ppt) due to the weakness of CLMT’s non-prime asset profile and constant negative rental reversions unlike its peers that mostly own prime malls. Notably, the pandemic has been particularly tough on CLMT, which is further exacerbated by the lingering concern of retail space oversupply in the Klang Valley.

Risks to our call include: (i) bond yield contraction/expansion, (ii) higher/lower-than-expected rental reversions, and (iii) higher/lower-than-expected occupancy rates.

Source: Kenanga Research - 28 Jan 2022