CLMT - Stepping Into the Industrial Segment

Date: 10/06/2022

Source  :  RHB-OSK
Stock  :  CLMT       Price Target  :  0.58      |      Price Call  :  HOLD
        Last Price  :  0.51      |      Upside/Downside  :  +0.07 (13.73%)

  • Maintain NEUTRAL and MYR0.58 TP, 2% downside. CLMT recently announced that it is acquiring two plots of freehold land and the industrial properties for a total lump sum cash consideration of MYR80m – the REIT’s first in the industrial segment following the expansion of its investment mandate to include assets outside of retail in its portfolio. We are mildly positive on the acquisition given the relatively small size and yield, which is slightly accretive.
  • The acquisition. Our checks indicate that the properties are tenanted for logistics and warehousing purposes, and they are located at Sungai Jawi, Penang, which is in close proximity to the Batu Kawan Industrial Park. The land and properties will be acquired from Ingenieur EPCM SB, a fully-owned subsidiary of Dynaciate Group (DYGB MK, NR) for a total cash consideration of MYR80m. The property has a total NLA of c.335,000 sqf and total net book value of MYR60m as at 30 Nov 2021. The proposed acquisition is expected to be completed in 2H22.
  • The building and its contributions. Of the three buildings, two are aged approximately 15 years, while the other is three years. The buildings are fully occupied by two tenants, MMP Logistics SB and Schenker Logistics (Malaysia) SB, with a month rental of MYR426,500. The demand for logistics warehousing should remain strong, benefiting from the growing industrial activity in the area. However, we are unclear of the tenancy terms due to poor disclosure from the REIT.
  • Acquisition to be fully funded via borrowings. The acquisition is expected to increase CLMT’s net gearing from 35.9% to 37.2%, which is still comfortably below the 50% gearing limit (60% gearing limit applicable until 31 Dec 2022).
  • Mildly positive on the acquisition given the relatively small acquisition size (2% of CLMT’s total asset value). Its accretive gross yield of c.6.4% is slightly higher than the REIT’s yield of c.5%, but below the yields of other industrial properties recently acquired by its peers. The incremental net earnings from the acquisition is MYR1.5-1.8m for a full-year contribution. Moving forward, we can expect the REIT to acquire more industrial assets as part of its new mandate to diversify its portfolio beyond retail, but we note that there is no indicative acquisition target value or guidance on funding provided by management.
  • Maintain NEUTRAL and TP. Our FY22F-24F earnings are adjusted slightly by 1-3%. Our TP includes a 0% ESG premium/discount based on our in- house proprietary methodology.

Source: RHB Research - 10 Jun 2022

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CLMT 0.51 -0.005 (0.97%) 217,200 

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