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Stocks In Focus MY (CapitaMalls M’sia Trust, Felda Global Ventures, KLCC Properties) – 27/01/15
Malaysia Daily Bulletin | 27 January 2015

CapitaMalls To Buy Tropicana Assets

  • CapitaMalls Malaysia Trust (CMMT) is revisiting the acquisition of Tropicana City Mall and Tropicana City Office Tower, after a previous attempt to acquire the two properties in 2013 miscarried due to disagreement on the terms of sale and purchase between the company and the vendor, Tropicana Corporation.
  • The deal which is expected to be completed by 3Q15 is estimated to cost RM565 million, including the acquisition fee and expenses, which the group intends to fund through debt and/or equity fund raising in such combination to be determined later. According to C H Williams Talhar & Wong’s appraisal dated 26 January, the two freehold commercial buildings are worth RM532 million.
  • Tropicana is projected to register a disposal gain of RM13.5 million in FY15 from the proposed sale and would see its borrowings narrow to RM2 billion from RM2.4 billion and net gearing improve to 0.5 times from 0.7 times upon the disposal.

Significance: The proposed acquisition is seen to expand CMMT’s income and geographical portfolio, thus allowing it to continue delivering stable returns for its unit holders. On the other hand, the disposal represents another key milestone in the Tropicana’s de-gearing initiative aimed at monetising the significant value of its sizable asset base.

Felda Risks Losing Position In FBM KLCI

  • CIMB Equities Research warned that Felda Global Ventures Holdings may lose its position in the 30-stock FBM KLCI due to its lower market capitalisation. The company’s share price had plummeted by roughly 42 percent since it announced its RM628 million acquisition of Asian Plantations and reported its first quarterly loss since listing in 3Q14 which resulted in a RM6 billion reduction of market capitalisation after investors cut their losses.
  • The research house feels that there is limited downside for the stock from current levels as it is of the opinion that the drop in share price had already adequately recognized concerns that the market was valuing the firm’s plantation estates at RM8,304 per hectare, which was below the replacement cost of new planting.
  • It adds that the organization’s move to sell non-core assets might brighten things up but it notes that even if that was the case, its stock is unlikely to rerate substantially as its 4Q14 earnings are expected to stay weak and could come in below consensus.

Significance: The research house has upgraded its rating for the company from ‘Reduce’ to ‘Hold’, lowered its target price from RM2.93 to RM2.33 and cut its FY14-16 earnings by 4 to 7 percent to reflect losses from the floods and Asian Plantations.

KLCCP’S Core Net Profit Hits RM711m

  • KLCC Properties’ FY14 core net profit has reached RM711.2 million after the inclusion of its 4Q14 core net profit of RM205.1 million, according to CIMB Equities Research. The research house noted that the results were in line with its estimates as it accounted for 102 percent of its and 98 percent of consensus full-year forecasts.
  • The company’s core net profit rose by 24.6 percent year-on-year as a result of a growth in revenue from its retail and management services, which increased by 5.4 percent and 21.2 percent year-on-year, respectively. However, the research house did not amend its FY15 to FY16 earnings forecasts as it believes that it is improbable that the firm will be acquiring any assets besides its own developments like Menara Dayabumi in the short to medium term.
  • CIMB Research also noted that the firm’s balance sheet continues to be healthy with its gross and net gearing at 0.17 times and 0.1 times respectively, which means it should not have much issues with funding. It believes that the lack of acquisition was likely due to the lack of appropriate and available assets similar to those already in its portfolio like Suria KLCC.

Significance: Due to the fact the company is unlikely to make any acquisitions in the near to medium term, CIMB Research has a dry outlook towards it so it maintains its ‘Hold’ recommendation and leaves its target price unchanged at RM6.90.

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