Core PATMI missed the mark. Excluding revaluation and portfolio gains, CMA reported a 45% YoY growth in FY12 core PATMI to SGD175.7m, missing the consensus estimate of SGD208.5m. This was due mainly to higher-than-expected corporate costs and pre-opening expenses. Operationally, the malls are largely performing in line with expectations, with quite a number of recently completed malls to contribute more strongly in FY13. CMA has proposed a final dividend of 1.625 cents, for a full-year dividend of 3.25 cents. Maintain BUY.

Earnings quality is improving. CMA’s portfolio net property income increased by 45% YoY, mainly on the back of higher contributions from Japan following the acquisition of OLINAS Mall and the additional stakes in three other Japanese malls. The NPI growth is expected to be carried over into FY13, as The Star Vista in Singapore and the seven malls in China which were opened in 2012 contribute to full-year earnings. Rental reversion is expected to remain strong for its China malls, where tenants continued to experience strong sales growth of 9.8% in FY12 as shopper traffic grew by 7%.

2013 a year of consolidation? Management suggested that while it continues to assess new deals, there may not be any major acquisitions and divestments in 2013. Despite its committed CAPEX of ~SGD1.3b over FY13-14, CMA will largely fund it from its cash-on-hand of SGD675m and additional debt, which means no immediate need for capital recycling. For this year, CMA will focus on completing Westgate mall (50% committed) and Bedok Mall (65% committed) in Singapore, and Tianfu, Meilicheng and Jinniu (Ph 2), all of which are in Chengdu.

Still our top pick. We have lowered our FY13-14 core earnings forecasts by 16% each as we raise our cost assumptions. However, CMA remains our top big-cap pick for its best-in-class retail focus and its market-leading positions in Singapore and China. Reiterate BUY, with a target price of SGD2.55, pegged at a 10% discount to RNAV.

Source: Maybank Kim Eng Research - 08 Feb 2013