Capitamalls Malaysia


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Quarterly Report For The Financial Period Ended 30 September 2018

Financials Archive

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Condensed Consolidated Statement Of Comprehensive Income

Condensed Consolidated Statement Of Financial Position

Review of Performance

Quarter Results (3Q 2018 vs 3Q 2017)

The Group recorded gross revenue of RM86.1 million in 3Q 2018, a decrease of RM6.5 million or 7.0% against 3Q 2017. The decrease was mainly due to lower occupancy at Sungei Wang (SW), The Mines (TM) and 3 Damansara (3D), downtime from asset enhancement works at SW as well as lower rental rates at TM. The decrease was mitigated by better performance from Gurney Plaza (GP) and higher rental contribution upon completion of asset enhancement works at East Coast Mall (ECM).

Property operating expenses for 3Q 2018 were RM34.4 million, an increase of RM1.8 million or 5.6% against 3Q 2017. This was mainly attributed to the increase in current year's property assessment fees at GP, higher utility expenses due to the electricity tariff surcharge, higher property maintenance and reimbursable staff costs.

The net property income for 3Q 2018 of RM51.7 million was 13.9% lower than 3Q 2017.

Finance costs for 3Q 2018 of RM15.4 million were RM0.4 million or 2.5% higher than 3Q 2017. The increase was mainly due to higher interest expenses from additional revolving credit facilities (RCF) drawn down for capital expenditure works and higher average cost of debt post the Overnight Policy Rate hike of 0.25% by Bank Negara Malaysia on 25 January 2018. Average cost of debt for 3Q 2018 was 4.48% p.a. (3Q 2017: 4.41% p.a.).

CMMT has incurred RM10.5 million of capital expenditure during the quarter. This included enhancement works of an anchor space on Level 1 and new escalator installations on the Ground Floor at ECM, Jumpa retail layout design and reconfiguration works at SW, enhancement works of the mini anchor space on Level 2 at TM as well as the restroom upgrading works at 3D.

Overall, distributable income to unitholders for 3Q 2018 was RM38.8 million, a decrease of RM3.5 million or 8.4% against 3Q 2017.

Financial Year-to-date Results (YTD 2018 vs YTD 2017)

The Group recorded gross revenue of RM263.2 million, a decrease of RM13.7 million or 4.9% against the previous financial period. The decrease was mainly due to lower occupancy at SW, TM and 3D, downtime from asset enhancement works at SW, TM and ECM, lower rental rates at SW and TM as well as tenant renovation downtime at Tropicana City Office Tower. The decrease was mitigated by better performance from GP and ECM on the back of higher rental rates as well as by the one-off compensation and forfeiture of rental deposit for premature termination of a mini anchor tenant at SW.

Property operating expenses for YTD 2018 were RM101.1 million, an increase of RM3.7 million or 3.8% against the previous financial period. This was mainly attributed to the one-off additional property assessment fees for prior years as well as increase in current year's assessment fees at GP, marketing expenses incurred for the renaming exercise at 3D and higher reimbursable staff costs. The increase was offset by one-off service charge rebate at SW.

The net property income for YTD 2018 of RM162.1 million was 9.7% lower than YTD 2017.

CMMT registered a net fair value loss of RM1.2 million on investment properties in YTD 2018.

Finance costs for YTD 2018 of RM45.6 million were RM1.0 million or 2.3% higher than YTD 2017. The increase was mainly due to higher interest expenses from additional RCF drawn down for capital expenditure works and higher average cost of debt post the Overnight Policy Rate hike of 0.25% by Bank Negara Malaysia on 25 January 2018. Average cost of debt for YTD 2018 was 4.47% p.a. (YTD 2017: 4.40% p.a.).

CMMT has incurred RM20.7 million of capital expenditure during the period. This was mainly attributed to tenancy works mainly at GP, enhancement works of an anchor space on Level 1 and new escalator installations on the Ground Floor at ECM, Jumpa retail layout design and reconfiguration works at SW, enhancement works of the mini anchor space on Level 2 at TM as well as the restroom upgrading works and the replacement of the directional signages with new mall logo at 3D.

Overall, distributable income to unitholders for the financial period was RM120.9 million, a decrease of RM5.7 million or 4.5% against YTD 2017.

Commentary on Prospects

Notwithstanding the Malaysian economy grew at a slower pace of 4.5% in the second quarter of 2018, private consumption and investment activities remained the primary drivers of growth. Given the lower rates of expansion in the first two quarters, GDP growth for the whole of 2018 has been revised to 5.0%, from the initial range of 5.5% to 6.0% (source: Bank Negara Malaysia). Despite the three-month tax holiday from June, retail sales in 2Q 2018 only recorded a slight year-on-year growth of 2.1% as consumer spending remained cautious (source: Malaysia Retail Group Industry Report, September 2018).

In view of uncertainties on the global economic front, the Manager continues to hold a cautious business outlook despite improvements recorded in the Malaysia Institute of Economic Research’s Consumer Sentiments Index and Business Conditions Index. With growing competition from e-commerce and an increasing shopping mall supply, the operating environment remains challenging. To mitigate these challenges, the Manager has embarked on asset enhancement initiatives at Sungei Wang and The Mines to increase their appeal. To enhance convenience and further engage shoppers, the CapitaStar mobile application was introduced in 3Q 2018 to keep abreast of shopper lifestyle changes.

The Manager is confident that the underlying strength of CMMT's portfolio of quality assets located in key urban centres across Malaysia will sustain its performance through different economic cycles and remains committed to deliver sustainable income distributions to unitholders.

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