• NEUTRAL, higher MYR0.59 TP from MYR0.54, 8% upside and c.6% yield. FY22 results met expectations, with most of CLMT’s properties reporting higher revenue contribution as tenant sales remained above the pre-pandemic average despite lower shopper traffic. Its maiden logistics property began contributing income in Dec 2022, and the REIT’s acquisition of Queensbay Mall is on track to be completed in Mar 2023.

• Results in line. 4Q22 core profit of MYR23.2m (+4.4% QoQ, +31.2% YoY) brought FY22 core earnings to MYR87.5m (+124% YoY). This is broadly in line with expectations at 104% of our and consensus’ full-year estimates. FY22 revenue increased by 23.1% YoY, attributed to the improved retail outlook and absence of rental relief. Finance cost of MYR46.5m was 3.3% lower YoY despite the rapid OPR rate hikes in 2022 due to the interest rate re-fixing exercises carried out in 2021. A DPU of 1.05 sen was declared for the quarter, bringing the full-year DPU to 4.01 sen (FY21: 1.84 sen).

• Improving off a low base. On a portfolio basis, rental reversion in FY22 (excluding the gross turnover rent component) improved to -3% from FY21’s -12.7%, while portfolio occupancy rose to 87.8% from 83.7%. Management guided that the turnover rent portion in FY22 was c.8%. Gurney Plaza and East Coast Mall were the only two malls recording positive rental reversion, while Sungei Wang Plaza and 3 Damansara saw the biggest reductions in average rental, at -25.8% and -27.3% respectively. The Mines, which contributes 21.4% to the total rent, saw a slight decline in average rental by -1.8%. In 2023, 41% of gross rental income will be up for expiry, but with 29.6% coming from the better performing Gurney Plaza and East Coast Mall, we think there is an opportunity for better rental reversion in the upcoming year.

• Sustainability efforts. In addition to its target to achieve a 100% green- rated retail portfolio by 2026 – mainly through upgrading cooling towers to be more energy efficient – CLMT announced that it secured its first 5-year sustainability-linked loan. Recognising its sustainability efforts, we increase CLMT’s ESG score to 3.1, and input a 2% ESG premium to our TP based on our in-house methodology.

• Earnings forecasts maintained. We introduce our FY25F earnings forecast of MYR114m while keeping our FY23-FY24F earnings forecasts unchanged. Key risks include stronger or weaker-than-expected retail performance and rental reversions.

Source: RHB Research - 20 Jan 2023