Malaysia REIT

CMMT makes debut, looks to long-term resilience

Reit’s IPO proceeds will be channelled into new assets, says CapitaMalls Asia chief

CAPITAMALLS Malaysia Trust (CMMT) made its debut on the Malaysian stock exchange yesterday, stressing its long-term resilience despite a tepid launch.

CapitaMalls Asia (CMA) chief executive Lim Beng Chee said the Reit’s portfolio of RM2.1 billion (S$897 million) will be expanded gradually, with the proceeds of some RM800 million raised from the initial public offer to be injected into a RM1 billion fund that will serve as a pipeline for new assets.

CMA is the controlling shareholder of CMMT’s manager, CapitaMalls Malaysia Reit Management (CMRM), and its sponsor.

CMMT opened at 98.5 sen – half a sen above its retail price but slightly below its institutional price of RM1 a unit, echoing a similar debut by Malaysia’s largest trust, Sunway Reit.

Mr Lim attributed CMMT’s sluggish start to local investors’ lack of Reit exposure, noting that CapitaMall Trust (CMT)’s listing experience in 2002 was also not well received initially by Singapore investors.

Nonetheless, investors have become more knowledgeable, and over the past seven to eight years CMT has proved its resilience, expanding its portfolio almost 10 times to $7.5 billion from $800 million, he pointed out.

Malaysia’s largest pure-play retail Reit, with a market capitalisation of RM1.3 billion, CMMT is also one of the most liquid, with a free-float of 67 per cent. CMA holds almost 42 per cent of CMMT, in which cornerstone investors the Employees Provident Fund and Great Eastern Life Assurance Malaysia own an aggregate 11.4 per cent.

Mr Lim said the RM1 billion fund will be set up within a year, and assured the Reit will grow – ‘otherwise there is no point to listing CMMT in Malaysia’.

Its three current assets – Gurney Plaza in Penang, Sungei Wang Plaza in Kuala Lumpur and The Mines in Selangor – have an average 97 per cent occupancy rate and form part of CMA’s portfolio of 87 properties in five countries.

On Malaysia, Mr Lim said it is attractive because ‘you can buy income-producing assets from day one’. But he indicated that building from the ground up is also something CMA is prepared to do – ‘if we find something interesting.’

CMRM chief executive Sharon Lim said potential income-producing assets will be acquired by the Reit, while CMA will manage the non-income producing ones or those in the development stage, with a view to injecting them into CMMT later.

In the meantime, she said, CMRM will maximise its real estate to drive sales and ultimately yields, having managed to improve the yield from its existing assets by about one per cent to 7.2 per cent.

It has budgeted RM100 million over 2010 and 2011 for asset enhancement and capital expenditure. ‘Every year there will be things to do as retail trends change,’ Ms Lim said.

At 98 sen a unit, retail investors are expected to receive a yield of 7.3 per cent for 2010 and 7.6 per cent the year after – returns Mr Lim said are very attractive compared with government bonds at 4 per cent and fixed deposits at 3 per cent.

‘From my perspective it’s not below the IPO price as the retail price was 98 sen. Institutional investors aren’t selling – they can see there’s more value to the Reit that can be delivered over time.’

CMMT touched an intra-day low of 97.5 sen before finishing at 98 sen.

CMA prices M’sia trust at bottom of range

CapitaMalls M’sia Trust is scheduled to list on July16

CapitaMalls Asia Ltd (CMA), owner of shopping malls in the region, said it priced shares of its Malaysian unit at the low end of its projected range, raising investor concerns that gains may be capped when trading begins.

CapitaMalls Malaysia Trust’s units were offered to institutions at RM1 apiece, while shares were sold to individual investors at 98 sen each, it said.

The RM852 million initial public offering (IPO), the second-biggest in Malaysia this year, was earlier priced at between RM1 and RM1.10 a share for large investors.

‘The upside on the capital appreciation potential can be quite limited,’ said Scott Lim, chief executive officer of MIDF Amanah Asset Management Bhd in Kuala Lumpur, which manages the equivalent of US$670 million. ‘Most of the properties inside the Reit are priced at market, they’re already at present market value and they’re not undervalued assets.’

The IPO follows the RM1.5 billion raised by Sunway Real Estate Investment Trust in its initial sale last month and underscores rising investor appetite for equities in Malaysia amid an economic rebound from last year’s recession. CapitaMalls Malaysia’s IPO may be surpassed by share sales of two units of state oil and gas company Petroliam Nasional Bhd.

Sunway Reit fell on its trading debut yesterday, closing at 88.5 sen at the midday break, from its institutional offer price of 90 sen.

‘It’s ok. These things happen,’ Jeffrey Cheah, chairman of its parent company Sunway City Bhd, told reporters in Kuala Lumpur today. ‘It’s a very difficult market. I don’t look at just today. I look at longer term.’

CapitaMalls Malaysia Trust is scheduled to list on July 16 when JPMorgan Chase & Co will act as stabilising manager, the company said in a separate exchange filing yesterday.

JPMorgan, CIMB Investment Bank Bhd, and Maybank Investment Bank Bhd are jointly managing the sale.

‘It is a good proxy to the Malaysian Reit sector that we believe is due for another round of re-rating,’ Joshua Ng, an analyst at RHB Research Institute Sdn, said in a report yesterday. ‘Its growth prospects are good, underpinned by growing rentals and acquisitions.’

Singapore-based CMA, part of South-east Asia’s biggest developer CapitaLand Ltd, owns shopping malls in China, India and Singapore. CapitaMalls Malaysia is the owner of the Sungei Wang Mall in Kuala Lumpur, The Mines mall, which is south of the city centre, and Gurney Plaza in Penang, according to the company’s prospectus.

‘We are heartened by the success of the offering,’ CMA chief executive officer Lim Beng Chee said in the statement. ‘Despite the challenging market conditions, it is priced at one of the tightest yields for a Malaysian Reit initial public offering.’ – Bloomberg