Capitamalls Malaysia

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Quarterly Report For The Financial Period Ended 31 March 2018

Financials Archive

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Condensed Consolidated Statement Of Comprehensive Income

Condensed Consolidated Statement Of Financial Position

Review of Performance

Quarter Results (1Q 2018 vs 1Q 2017)

The Group recorded gross revenue of RM89.7 million in 1Q 2018, a decrease of RM2.7 million or 2.9% against 1Q 2017. The decrease was mainly due to lower rental rates and occupancy, mitigated by the one-off compensation and forfeiture of rental deposit for premature termination of a mini anchor tenant at Sungei Wang (SW). Lower gross revenue was recorded for The Mines (TM) mainly due to lower rental rates whilst lower gross revenue in Tropicana City Property (TCP) was mainly due to lower occupancy. The decrease was mitigated by better performance from Gurney Plaza (GP) and East Coast Mall (ECM) on the back of higher rental rates.

Property operating expenses for 1Q 2018 were RM32.7 million, a decrease of 0.1% against 1Q 2017. This was mainly attributed to lower utilities consumption, reimbursable staff costs and the one-off service charge rebate at SW. The decrease was, however, offset by a one-off additional property assessment fees for prior years at GP.

The net property income for 3Q 2017 of RM60.1 million was 2.2% lower than 3Q 2016.

Finance costs for 3Q 2017 of RM15.0 million were 0.7% higher than 3Q 2016. The increase in finance costs was mainly due to higher interest expenses from additional revolving credit facilities drawn down for capital expenditure works, partly offset by lower average cost of debt and commitment fees. Average cost of debt for 3Q 2017 was 4.41% p.a. (3Q 2016: 4.46% p.a.).

The net property income for 1Q 2018 of RM57.0 million was 4.5% lower than 1Q 2017.

Finance costs for 1Q 2018 of RM15.0 million were 2.0% higher than 1Q 2017. The increase was mainly due to higher interest expenses from additional revolving credit facilities 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 1Q 2018 was 4.44% p.a. (1Q 2017: 4.39% p.a.).

CMMT has incurred RM1.0 million of capital expenditure during the quarter. This was mainly attributed to the commencement of the assets enhancement works of anchor space on Level 1 and new escalators on Ground Floor at ECM and design fee of the new retail layout at SW.

Overall, distributable income to unitholders for 1Q 2018 was RM41.2 million, a decrease of RM1.1 million or 2.6% against 1Q 2017.

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

Review of financial year-to-date results is the same as above.

Commentary on Prospects

The Malaysian economy grew 5.9% in 2017, driven mainly by continued improvement in domestic demand. Moving into 2018, the Malaysian economy is expected to remain on a steady growth path and expand by 5.5% to 6.0%, underpinned by strong domestic fundamentals and a resilient export sector in view of strengthening global economic conditions (source: Bank Negara Malaysia Annual Report 2017). Retail sales are estimated to grow by 4.7% this year (source: Malaysia Retail Group Industry Report, March 2018).

Despite the global economic recovery, we expect business and consumer sentiments in Malaysia to remain cautious amidst ongoing concerns about rising costs of living. The retail real estate environment will remain challenging, with growing competition arising from new shopping malls coming onstream, particularly in the Klang Valley, and e-commerce.

We are cognisant of the changing competitive landscape and will implement asset enhancement, tenant remixing, introduce new retail concepts and marketing initiatives with the goal of stabilising yields and returns, while continuing to seek quality acquisition opportunities.

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