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Quarterly Report For The Financial Period Ended 30 June 2018

Financials Archive

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Condensed Consolidated Statement Of Comprehensive Income

Condensed Consolidated Statement Of Financial Position

Review of Performance

Quarter Results (2Q 2018 vs 2Q 2017)

The Group recorded gross revenue of RM87.4 million in 2Q 2018, a decrease of RM4.5 million or 4.9% against 2Q 2017. The decrease was mainly due to downtime from asset enhancement works at Sungei Wang (SW), The Mines (TM) and East Coast Mall (ECM), lower rental rates and occupancy at SW and TM whilst the lower gross revenue in 3 Damansara Property (3DP) was mainly due to lower occupancy at 3 Damansara (3D) and tenant renovation downtime at the office tower. The decrease was mitigated by better performance from Gurney Plaza (GP) and ECM on the back of higher rental rates.

Property operating expenses for 2Q 2018 were RM34.0 million, an increase of RM2.0 million or 6.2% against 2Q 2017. 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, higher property maintenance and reimbursable staff costs.

The net property income for 2Q 2018 of RM53.4 million was 10.8% lower than 2Q 2017.

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

Finance costs for 2Q 2018 of RM15.2 million were RM0.4 million or 2.5% higher than 2Q 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 2Q 2018 was 4.47% p.a. (2Q 2017: 4.39% p.a.).

CMMT has incurred RM9.2 million of capital expenditure during the quarter. This includes tenancy works mainly at GP, on-going enhancement works of an anchor space on Level 1 and new escalators installation on Ground Floor at ECM, design and professional fees of the new retail layout at SW 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 2Q 2018 was RM40.8 million, a decrease of RM1.1 million or 2.6% against 2Q 2017.

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

The Group recorded gross revenue of RM177.1 million, a decrease of RM7.2 million or 3.9% against the previous financial period. The decrease was mainly due to downtime from asset enhancement works at SW, TM and ECM, lower rental rates and occupancy at SW and TM whilst the lower gross revenue in 3DP was mainly due to lower occupancy in 3D and tenant renovation downtime at the 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 oneoff compensation and forfeiture of rental deposit for premature termination of a mini anchor tenant at SW.

Property operating expenses for YTD 2018 were RM66.7 million, an increase of RM1.9 million or 3.0% 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 RM110.4 million was 7.6% 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 RM30.2 million were RM0.7 million or 2.3% higher than YTD 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 YTD 2018 was 4.46% p.a. (YTD 2017: 4.39% p.a.).

CMMT has incurred RM10.2 million of capital expenditure during the period. This was mainly attributed to tenancy works mainly at GP, on-going enhancement works of an anchor space on Level 1 and new escalators installation on Ground Floor at ECM, design and professional fees of the new retail layout at SW 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 RM82.0 million, a decrease of RM2.2 million or 2.6% against YTD 2017.

Commentary on Prospects

In the first quarter of 2018, the Malaysian economy grew 5.4%, underpinned by growth in private sector spending and domestic demand (source: Bank Negara Malaysia). Although retail sales in the same quarter recorded a slight growth of 2.6% year-on-year, consumer spending is expected to improve for the rest of the year, in view of the consumption tax holiday from June 2018 (when the Goods and Services Tax became zero-rated) to August 2018 (when the Sales and Services Tax is expected to take effect from September 2018) (source: Malaysia Retail Group Industry Report, June 2018).

In light of the uncertainties on the global economic front, consumer and business sentiments are expected to remain cautious throughout 2018 as concerns over rising costs of living persist. With growing competition from e-commerce and an increasing shopping mall supply, the operating environment remains challenging. To mitigate these challenges, the Manager will continue to undertake proactive asset management initiatives and enhance the tenant mix in CMMT's malls to meet the changing needs of shoppers.

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 deliver sustainable income distributions to unitholders in the second half of 2018.

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