Capitamalls Malaysia


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Quarterly Report For The Financial Period Ended 31 December 2018

Financials Archive

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Condensed Consolidated Statement Of Comprehensive Income

Condensed Consolidated Statement Of Financial Position

Review of Performance

Quarter Results (4Q 2018 vs 4Q 2017)

The Group recorded gross revenue of RM86.9 million in 4Q 2018, a decrease of RM5.1 million or 5.5% against 4Q 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 SW and TM. The decrease was mitigated by better performance from Gurney Plaza (GP) and higher rental contribution from the completed asset enhancement works at East Coast Mall (ECM).

Property operating expenses for 4Q 2018 were RM34.1 million, a decrease of RM0.3 million or 1.0% against 4Q 2017. This was mainly attributed to lower property maintenance and marketing expenses. The decrease is offset by an increase in the current year's property assessment fees at GP and 3D, higher quit rent at 3D and higher reimbursable staff costs.

The net property income for 4Q 2018 of RM52.8 million was 8.2% lower than 4Q 2017.

CMMT registered a net fair value gain of RM2.3 million on investment properties in 4Q 2018.

Finance costs for 4Q 2018 of RM15.5 million were RM0.4 million or 2.5% higher than 4Q 2017. The increase was mainly due to higher average cost of debt following the Overnight Policy Rate hike of 0.25% by Bank Negara Malaysia on 25 January 2018. Average cost of debt for 4Q 2018 was 4.47% p.a. (4Q 2017: 4.41% p.a.).

CMMT has incurred RM31.2 million of capital expenditure during the quarter. This included enhancement works on Level 4 and building works 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 food and beverage area on Level 2 at TM as well as the restroom upgrading works at 3D.

Overall, distributable income to unitholders for 4Q 2018 was RM40.5 million, a decrease of RM0.3 million or 0.7% against 4Q 2017.

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

The Group recorded gross revenue of RM350.1 million, a decrease of RM18.8 million or 5.1% against the previous financial year. The decrease was mainly due to lower occupancy at SW, TM and 3D, downtime from asset enhancement works at SW and TM, lower rental rates at SW and TM as well as tenant renovation downtime at Tropicana City Office Tower in 1H 2018. The decrease was mitigated by better performance from GP, higher rental contribution from the completed asset enhancement works at ECM and the one-off compensation and forfeiture of rental deposit for premature termination of a mini anchor tenant at SW.

Property operating expenses for FY 2018 were RM135.2 million, an increase of RM3.4 million or 2.6% against the previous financial year. This was mainly attributed to a one-off additional property assessment fees for prior years in GP, an increase in the current year's assessment fees at GP and 3D, higher quit rent at 3D, a one-off marketing expenses incurred for the renaming exercise at 3D, higher property maintenance and higher reimbursable staff costs. The increase was offset by a one-off service charge rebate at SW.

The net property income for FY 2018 of RM215.0 million was 9.4% lower than FY 2017.

CMMT registered a net fair value gain of RM1.1 million on investment properties in FY 2018.

Finance costs for FY 2018 of RM61.1 million were RM1.4 million or 2.4% higher than FY 2017. The increase was mainly due to interest expenses incurred on the additional revolving credit facilities (RCF) drawn down for the capital expenditure works and higher average cost of debt following the Overnight Policy Rate hike of 0.25% by Bank Negara Malaysia on 25 January 2018. Average cost of debt for FY 2018 was 4.47% p.a. (FY 2017: 4.40% p.a.).

CMMT has incurred RM51.9 million of capital expenditure during the financial year. This was mainly attributed to enhancement works on Level 4 and building works 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 and the food and beverage area on Level 2 at TM, 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 year was RM161.3 million, a decrease of RM6.0 million or 3.6% against FY 2017.

Commentary on Prospects

The Malaysian economy grew at a more moderate pace of 4.4% in the third quarter of 2018, on the back of higher domestic demand and private investment (source: Bank Negara Malaysia). Despite heightened global trade tensions and tighter financial conditions, Malaysia's 2018 full-year GDP is expected to expand by 4.8% (source: Ministry of Finance). Amidst increasing uncertainties in the global economy and persistent concerns about the rising costs of living, we foresee consumer and business sentiments to remain cautious. Retail sales in 2019 is expected to expand by 4.5%, marginally higher than the 4.4% for 2018 (source: Retail Group Malaysia).

In 2019, the scheduled completion of new retail mall supply - particularly in the Klang Valley - and the increasing popularity of e-commerce, are expected to intensify the competition among shopping malls. By keeping abreast of the constantly changing shopper needs and improving the trade mix, Sungei Wang and The Mines will complete their asset enhancement initiatives in 2019. The implementation of cashless parking and constant innovation of shopper-centric initiatives across CMMT malls would also serve to enhance their relevance and attractiveness to shoppers.

With a quality mix of destination and neighbourhood malls located in key urban centres across Malaysia, CMMT's portfolio has sustained its performance through different economic cycles and is expected to continue doing so.

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