PP 7767/09/2010(025354)

Malaysia RHB Research

Institute Sdn Bhd
New Listing A member of the
RHB Banking Group
Company No: 233327 -M

CapitaMalls Malaysia Trust 8 July 2010

MARKET DATELINE

Offer Price : RM1.10* (Institutional)

Public Issue of 22m New Units & Offer For Sale Of 764.5m RM1.08^ (Retail)
Existing Units Fair Value : RM1.10
* To be determined by way of bookbuilding
^ The lower of RM1.08 or institutional price less 2sen

Table 1: Investment Statistics Bloomberg Ticker : CMMT MK

FYE
Grs Rev NPI Net Profit Dis Inc DPU Chg P/NTA Gearing ROE Yield
Dec
(RMm) (RMm) (RMm) (RMm) (sen) (%) (x) (x) (%) (%)
2009
191.1 134.3 - - - - - 0.35 - -
2010f
200.6 141.6 150.5 97.8 7.23 - 1.1 0.35 10.9 6.6
2011f
210.7 149.3 92.4 102.2 7.51 3.9 1.1 0.35 6.7 6.8
2012f
221.2 157.4 98.2 108.6 7.92 5.5 1.1 0.35 7.1 7.2
Issued Capital (m shares) 1,350.0 Major Shareholder (%)
Market Capitalisation (RMm) 1,485.0 CapitaMalls Asia Ltd 41.7
Main Market Listing /Non-Trustee Stock/Syariah Approved Stock By The SC
Valuations based on estimated fair value of RM1.10/unit

X CapitaMalls Malaysia Trust (CMMT) is a pure retail real estate LISTING DETAILS
investment trust (REIT) based in Malaysia with three assets valued Listing Sought Main Market of Bursa
at RM2.13bn comprising Gurney Plaza in Penang, part of Sungei Malaysia
Listing Date 16 July 2010
Wang Plaza in Kuala Lumpur and The Mines in Selangor (see Table
Sector REITS
2). In FY12/09, CMMT reported RM134.3m net property income
Tax Resident Malaysia
on RM191.1m gross revenue. Public Issue 22m units to the Malaysian
public
1) 719m units to
X In terms of contributions by property, Gurney Plaza contributed Offer For Sale
Of institutional investors
39%, 38% and 40% of total in terms of net property income in 2) 45.5m units to the
FY12/09, and net lettable area (NLA) and asset value as at 30 Apr Malaysian public,
2010, followed by Sungei Wang Plaza (37%, 24%, and 35%) and eligible directors and
employees
The Mines (24%, 38% and 25%).
MAJOR SUBSIDIARIES
X The bases of the investment case for CMMT are: Sungei Wang Plaza 62.8%
Management Corp

1. It is a good proxy to the M-REIT sector that we believe is due MANAGEMENT FORECAST
for another round of re-rating; FY12/11
Net Earnings (RMm) 91.5
2. It is a good proxy to the vibrant retail sector in Malaysia; and Distributable income (RMm) 101.3
Distribution rate (%) 100

3. Its growth prospects are good, underpinned by growing Distribution per unit (sen) 7.45

rentals and acquisitions.

Joshua Ng
Please read important disclosures at the end of this report. (603) 92802151
joshuang@rhb.com.my

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 8 July 2010

Table 2: Asset Portfolio (As at 30 Apr 2010)

No Property Location NLA Occupancy Key tenant/trade/% of gross Market
(sq ft) rate rental income^ value
(%) (RMm)
1 Gurney Plaza 3km from the 707,503 96.4 1. Parkson/departmental store 5.6 850
commercial district 2. Padini/fashion 2.6
of Georgetown, 3. Esprit-Red Earth/fashion 1.8
Penang 4. Cold Storage/supermarket 1.6
5. Nichii/fashion 1.4

2 Part of Sungei Within KL’s prime 450,470* 98.8 1. Parkson/departmental store 11.1 740
Wang Plaza financial/commercial 2. F.O.S./fashion 3.1
precinct 3. Giant/supermarket 2.5
4. KFC/F&B 2.4
5. McDonald’s/F&B 1.8

3 The Mines Mines Resort City, 719,563 97.5 1. Giant/supermarket 6.6 540
Selangor, 15km to 2. Challenger/IT 2.6
the south of KL City 3. Cobay/leisure 1.9
Centre 4. Spices of M’sia/F&B 1.7
5. Nichii/fashion 1.6
Total 1,877,536 2,130
* 511,103 sq ft in terms of retail floor area, equivalent to 61.9% of total retail floor area of Sungei Wang Plaza
^ 4M ended 30 Apr 2010

Impending re-rating of the M-REIT sector

X We believe the M-REIT sector is due for another round of re-rating, thanks largely to the rising
investability of the sector on the back of a quantum-leap in the sector’s size after the listing of at least
three new M-REITs comprising Sunway REIT, CapitaMalls Malaysia Trust and Qatar REIT. While there
has been a re-rating of the M-REIT sector in recent years, it has very much gone unnoticed due to the
lack of research coverage. We believe this is about to change.

X The re-rating of the M-REIT sector, which we define as the valuation convergence between M-REITs
and their more established peer S-REITs, has actually become apparent since 2007. On a normalised
basis (i.e. excluding 4Q08, 1Q09 and 2Q09 at the height of the recent financial crisis), the yield gap
between M-REITs and S-REITs has narrowed from 316 bps in 2007 to 197 bps in 2008, and further to
132 bps in 2009-2010 (see Chart 1). With the more-than-doubling in the M-REIT sector’s market
value from about RM5bn currently to RM11bn over the near term that will bring along with it a much
improved relative investability of the M-REIT sector vis-à-vis the S-REIT sector, we expect the
convergence/re-rating to accelerate further.

Chart 1 : Yield* Gap Between M-REITs And S-REITs

(% )
13

11

13 2 b p s
7 19 7 b p s

C r is is
3 16 b p s
5

3
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10

M - R E IT s ( % ) S - R E IT s ( % )

* Net yield
Source: RHBRI

CAPITAMALLS 2 MALAYSIA TRUST

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 8 July 2010

Bright prospects of Malaysia’s retail sector

X Independent global data provider Business Monitor International projects Malaysia’s retail sales to grow
at a CAGR of 14% between 2009 and 2013 from US$30.5bn (RM97.6bn) to US$51.6bn (RM165.1bn)
underpinned by “a low unemployment rate, rising disposable income, strong tourism industry, growing
urbanisation and improved standards of living for rural dwellers” (see Chart 2). This is consistent with
our positive view on the retail sector in Malaysia, backed by a vibrant consumer sector. Private
consumption in Malaysia in real terms has nearly doubled between 2000 and 2009 from RM155.9bn to
RM278.8bn, growing at a CAGR of 6.7%. In 2010, RHBRI’s economics team projects private
consumption to grow by 4.8% to RM292.1bn in the early stage of the global economic recovery cycle.
In terms of private consumption’s share of GDP, it grew steadily from 43.8% in 2000 to 53.7% in
2009. RHBRI’s economic team projects it to inch up further to 53.8% in 2010 (see Chart 3).

Chart 2 : Retail Sales In Malaysia

US$bn

55 51.6

44.2

40 37.9

33.2
30.4 30.5

24.1
25
19.8

10
2006 2007e 2008e 2009f 2010f 2011f 2012f 2013f

Source: Business Monitor International

Chart 3 : Retail Sales In Malaysia

RMbn %
350 56
300 54

250 52
50
200
48
150
46
100 44
50 42
0 40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

Private Consumption (LHS) Private Consumption's share of GDP (RHS)

Source: Department of Statistics, RHBRI

CAPITAMALLS 3 MALAYSIA TRUST

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 8 July 2010

X The consumer sector in Malaysia is expected to remain vibrant for many years to come based on
certain favourable structural attributes, namely: (1) A young demographic structure; (2) Private
consumption’s share of GDP that is still low by regional and global standards; and (3) Savings rate that
is still high by regional and global standards.

X According to US Census Bureau, in 2005, 46.7% of Malaysia’s population fell within the age bracket of
20-54 years. Looking forward, in 2025, the size of this “working group” is projected to increase to
47.4% as new additions to the group grow at a rate that is faster than those who drop out. The
“working group”, i.e. those in the age bracket of 20-54 years, is associated with spending power due to
their ability to generate incomes. The propensity to spend has been rising, fuelled largely by the newer
additions to the group, i.e. the new generation in their 20s who value lifestyle more than their parents
thanks to the wider exposure of education as well as media, and more importantly, the parents who
have already over-saved for them.

X At 45.2% in 2008, Malaysia’s private consumption’s share of GDP (nominal) was the third lowest in the
region after China and Singapore (see Chart 4). On the other hand, at 37.9% of GNP in 2008,
Malaysia’s saving rate was the third highest, also after China and Singapore (see Chart 5). These
suggest that Malaysians generally still under-spend and over-save vis-à-vis their peers in the region.

Chart 4 : Private Consumption’s Share Of GDP By Chart 5 : Savings Rate By Country

Country
% of GNI
% of GDP
60.0
80.0

70.0 50.0

60.0 40.0
50.0
30.0
40.0
20.0
30.0

20.0 10.0

10.0
0.0
M alay s ia

H ong Kong

Indones ia

J apan

US
C hina

Singapore

S.Korea

Thailand

Taiw an
0.0 Philippines
Taiwan

Indonesia

Japan

Thailand
Hong Kong

S.Korea

Malaysia

Singapore

China
US
Philippines

Source: Asian Development Bank Source: Asian Development Bank

Good growth prospects of CMMT

X The growth prospects of CMMT are good, driven by rising rental rates in all its three shopping malls on
the back of a vibrant retail sector in Malaysia. Also, CMMT will embark on acquisitions to expand its
asset base, the first potentially being the RM215m Gurney Plaza extension with an NLA of 135,000 sq
ft that could potentially increase CMMT’s total NLA by 7.2% from 1.88m sq ft to 2.01m sq ft.

X At the helm of the company is CEO Sharon Lim Hwee Li who has had over 14 years of experience in
property development and investment in key ASEAN countries and Australia. She holds an MBA from
Murdoch University, Australia and a Bachelor of Business (Distinction) from the Royal Melbourne
Institute Of Technology, Australia.

X At the retail offer price of RM1.08, the public issue of 22m new units will raise RM23.8m gross proceeds
(see Table 3 for IPO proceeds utilisation). Post IPO, CMMT’s gross debt is projected at RM744m,
translating into a gearing (defined as gross debt over asset value for REITs) of 0.35x that is
manageable.

X We project FY12/11-12 distribution per unit (DPU) to grow at 3.9% and 5.5% driven largely by higher
rental rates and efficiency gains. We have arrived at a fair value of RM1.10/share for CMMT based on
our projected FY12/11 DPU of 7.51sen and a yield target of 6.8%, at a 20% premium to M-REITs’
average of 8.5%, largely to reflect CMMT’s expected much superior investability based on its large
market value and expected high share liquidity.

CAPITAMALLS 4 MALAYSIA TRUST

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Table 3: Utilisation Of Gross IPO Proceeds

RM m
Working capital 3.8
Estimated expenses for REIT financing 6.0
Estimated listing expenses 14.0
Total 23.8

Table 4 : Earnings Review And Forecasts (RMm)

FYE Dec 2008 2009 2010F 2011F 2012F

Gross revenue 139.7 191.1 200.6 210.7 221.2

Gross rental 113.5 161.2 169.3 177.8 186.6
Car park 9.9 12.8 13.5 14.1 14.9
Others 16.2 17.0 17.9 18.8 19.7
Maintenance (9.8) (14.7) (15.3) (15.9) (16.6)
Utilities (15.2) (21.5) (22.3) (23.2) (24.1)
Other op. expenses (14.7) (20.5) (21.3) (22.2) (23.1)
Net property income 99.9 134.3 141.6 149.3 157.4
Other income & expenses - - 8.8* (56.9) (59.1)
Pretax profit - - 150.5 92.4 98.2
Taxation - - 0.0 0.0 0.0
Earnings - - 150.5 92.4 98.2
Non-cash items^ - - (52.6)** 9.7 10.4
Distributable income - - 97.8 102.2 108.6
DPU (sen) - - 7.23 7.51 7.92
Chg (%) - - - 3.9 5.5
Yield (%) - - 6.57 6.83 7.20
No. of units (m) - - 1,354.1 1,360.9 1,371.0
*Including fair value gains
**Including fair value gains, listing expenses
^Predominantly management fee payable in units
Valuations based on estimated fair value of RM1.10/unit

CAPITAMALLS 5 MALAYSIA TRUST

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IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next
6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an
absolute return of 15% or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform
call. It is generally for investors who are willing to take on higher risks.

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6-12 months.

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the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12
months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12
months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12
months.

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