PETALING JAYA: The proposed acquisition of a freehold logistics warehouse situated in Shah Alam for RM39.7mil by Capitaland Malaysia Trust (CLMT) is in line with the property investment trust’s growth strategy and diversification initiatives, although it will slightly raise its gearing level.
TA Research said the acquisition reflected the company’s commitment to capture value in the rapidly expanding new economy sector and meet the growing demand for high-quality logistics infrastructure in prime locations.
“However, due to the relatively small size of the asset and its limited impact on earnings, we are ‘neutral’ on this acquisition,” it noted.
CLMT is a property investment trust that focuses on retail properties in the country.
The acquisition price of RM468 per sq ft (psf) for the warehouse space in Hicom Glenmarie Industrial Park is considered fair, it said.
This is given the market range of about RM320 to RM500 psf for similar-sized warehouses, according to various property websites.
Additionally, the research house said the purchase price of RM39.7mil aligns with independent valuations.
The acquisition would slightly increase CLMT’s gearing ratio to 44.8% from 44.3% (as at end-March 2023).
“Based on a 90% net property income margin and a lease starting in January 2024, the proposed acquisition is projected to increase our earnings forecast by 2% in financial year 2024 (FY24) and 1.8% in FY25.
“However, we maintain our current earnings forecasts, pending the completion of the acquisition.
“We maintain our ‘buy’ recommendation on CLMT with an unchanged target price of RM0.78, based on a targeted yield of 7.5% to our 2024 distribution per unit projection of 5.8 sen per unit,” it added.
For its first quarter ended March 31, 2023, CLMT reported a net profit of RM12.04mil, compared with RM20.54mil in the previous corresponding period, while revenue grew to RM78.49mil versus RM67.59mil a year earlier.
In a statement on its first-quarter earnings performance, CLMT said the increase in revenue was due to improvements across its various streams of income, as tenants’ businesses continued to improve as compared to a year ago.
The company added that revenue was also bolstered by contributions from Valdor Logistics Hub and Queensbay Mall, upon completion of the acquisitions.
For the retail segment, CLMT said shopper footfall and retail sales in the first quarter were bolstered by festive spending.
“Growing tourist arrivals from China is expected to provide a further boost in 2023. However, businesses and consumers continue to remain cautious amidst global geopolitical uncertainties, a high inflationary environment and continued rising interest rates.”
CLMT said it was maintaining a disciplined approach in managing cost efficiencies to mitigate the impact of rising costs and will adopt a proactive stance in portfolio and asset management.
It added that this would include identifying growth opportunities to enhance income diversification.
“With the completion of the acquisition of Queensbay Mall on March 21, 2023, the enlarged CLMT portfolio is now more resilient with additional income stability.”
