Saturday, February 22, 2014

Analysis of CapitaMalls Malaysia Trust

Please read the disclaimer here: Enjoy the article, bitches!

Today I will be taking a look at CapitaMalls Malaysia Trust (CMMT). CMMT is a Malaysian shopping mall real estate investment trust (REIT). CMMT’s portfolio consists of 4 malls: Gurney Plaza, Sungei Wang Plaza, The Mines and East Coast Mall. CMMT trades on the Bursa Malaysia with the stock code 5180. The stock closed at Ringgit Malaysia (RM) 1.35 on Friday. RM 1 is approximately USD 0.30. I’m currently looking to increase my exposure to good quality real estate as they can become solid cash cows if bought at a reasonable price. Another reason I want to increase my exposure to real estate is of course for the ladies. I hear that some girls get absolutely wet for guys who are involved in real estate. Maybe they will think that I’m a jerk off when I tell them that my real estate holdings consist of units in REITs instead of luxury condominiums and units in trendy shopping malls. Then again, maybe some girls will think that I’m hot stuff as I managed to use my limited capital to get exposure to high quality, established real estate and a professional management team.

Of the 4 shopping malls that CMMT owns, Gurney Plaza and Sungei Wang Plaza are good quality properties while The Mines and East Coast Mall are pretty decent. The following tables break down the revenue psf for CMMT’s properties and the revenue psf for other popular shopping malls in Malaysia:        

Annual revenue psf for CMMT’s properties

Gurney Plaza
RM 137.03
Sungei Wang Plaza
RM 161.02
The Mines
RM 100.02
East Coast Mall
RM 89.95

Annual revenue psf for other popular malls in Malaysia

Sunway Pyramid
RM 139.58
RM 255.40
Mid Valley Megamall & The Gardens
RM 167.68

Notes to the table:

Annual revenue psf = gross revenue/net lettable area

There are timing differences between the annual revenue psf figures for the properties in the tables. This is the case as the easiest way to obtain net lettable area data and gross revenue data is from the annual reports, and not all of the REITs 2013 annual reports are out yet. CMMT’s properties annual revenue psf are calculated using data from its 2013 annual report. Pavilion mall annual revenue psf is calculated using data from Pavilion REIT’s 2012 annual report. As Mid Valley Megamall & The Gardens 2012 annual report included only a few months of results, just the net lettable area data was taken from the 2012 annual report; gross revenue data was taken from the 2013 4th quarter report. Sunway Pyramid’s annual revenue psf is calculated using data from Sunway REIT’s 2013 annual report (the REIT’s financial year ends on June 30).         

All of CMMT’s properties have high occupancy rates which is obviously a good thing as it could indicate that there’s strong demand for space in CMMT’s malls. The stronger the demand to rent space in a mall, the more likely it is that the mall will be able to maintain or increase the rent that it charges. As at 31 December, 2013, Gurney Plaza, Sungei Wang Plaza, The Mines and East Coast Mall have occupancy rates between 98.00%-100%. In 2013, CMMT managed to increase the gross revenue from its properties by 5.5%.

Both Gurney Plaza and Sungei Wang Plaza are freehold properties. The Mines is a 99 years leasehold property expiring on 20 March 2091. East Coast Mall is a 99 years leasehold property expiring on 18 December 2106.

Excluding fair value gain of investment properties, CMMT had earnings per unit of RM 0.0837 in 2013. Based on CMMT’s units closing price on Friday, the REIT will have a price/earnings ratio of approximately 16.12 or earnings yield of 6.20%. I think that CMMT is trading at a reasonable price. If I had to choose between investing in CMMT and investing in a new development, I will definitely choose CMMT as I think it has a better risk/reward profile. While I think that CMMT should be a decent long-term investment, I won’t invest in CMMT right now as I’m looking to be a greedy mofo and chase the big bucks. But if I were asked by a family member to put together a passive income retirement portfolio, then I will definitely consider including CMMT in that portfolio. Based on the dividends declared over the past 12 months, CMMT would have a dividend yield of 6.55%.

Well, I will have to wait a little longer to increase my real estate exposure. While I’ve never known my grandparents, I think it’s safe to say that they would be a little annoyed with me for not investing more in real estate. After all, those old school Chinese people love their real estate (a lot of them love gambling and smoking too, but that’s a story for another time). Anyway, thank you for reading. Take care and stay rational.


  1. I agree with you that Chinese people like to talk about physical real estate investing, which I have no wish to have such expose in that area.

    1. I too have no wish to invest in physical real estate, especially new developments right now as I think they're overvalued. But if the price is right, I won't mind investing. I wish I was around during my grandparents time as there really was money to be made from real estate then.

  2. Owning Sungei Wang and Gurney Plaza and getting almost double of fixed deposit's interest rate year in year out, is full of awesomeness.

    Relative to its historical valuation, CMMT is definitely trading at an attractive level. That is, very attractive for passive income investors. On absolute basis, I think it is still not attractive enough for me to put my money into it, at least 7% dividend yield would prompt my consideration. Sorry for the kiasu-ness XD

    My bet is that many intelligent retired investors are quietly stocking the REITs like CMMT. Once the Ringgit currency rate is stablised (presumably upon the completion of QE), many yield-seekers from around the world would come back to hunt these 6%-7% M-REITs.

    1. I agree right now the stock is pretty good for those seeking passive income. But not really the best for someone young and ambitious like me (who understand finance). Of course I wouldn't mind holding it, but right now I can find better opportunities out there.

      Well, long-term if you want the ringgit to be strong, you would want QE to continue. The more money the US prints the weaker their currency should get. I think the U.S. should end QE though as I believe in free markets, not funny money. Besides I have investments in US so I hope the get rid of QE soon, contrary to what a lot people believe QE is making their economy worse long-term

  3. QE wont go on forever that's for sure. The cup will eventually get full and spill. What I was trying to say is that Ringgit will, upon the ending of QE, revert back to the mean or pre-QE currency rate. Right now, many yield-sekking global investors are dumping Ringgit -- so the M-REITs -- because the weakening Ringgit will offset their dividend yields. The days will come when everyone chasing the no-brainer 7%-8% REITs yield again, that is when the emerging markets found their way back to not relying on QE funds anymore (which I really dunno when).

  4. This comment has been removed by a blog administrator.