CapitaMalls Malaysia Trust Declines in Trading Debut on Economic Outlook

CapitaLand Ltd.’s Malaysian property trust fell on its first day of trading on concern slowing growth will depress rents at its three malls in Southeast Asia’s third- largest economy.

CapitaMalls Malaysia Trust, the nation’s second-biggest property trust, raised 852 million ringgit ($266 million) last week. The stock dropped 2 percent to close at 98 sen, from the 1 ringgit price for shares to institutional investors. Individual investors paid 98 sen apiece.

Eight out of 13 companies that went public on the Kuala Lumpur stock exchange this year before today’s debut are trading below their offer prices, data compiled by Bloomberg show. Since CapitaMall’s pricing, the government raised interest rates, the government cut fuel and sugar subsidies, as the Malaysian Institute of Economic Research said the nation’s economic growth will slow in the second half.

“The market is generally not very excited right now, because the expectations on the outlook is not really that great,” said Scott Lim, chief executive officer of MIDF Amanah Asset Management Bhd. in Kuala Lumpur, which manages the equivalent of $670 million. “There could be a significant correction in the second half of the year.”

CapitaMalls joins a growing list of companies that underperformed in their trading debuts, signaling concerns risk appetite for equities is waning.

Sunway, Agricultural Bank

Sunway Real Estate Investment Trust, the nation’s biggest property trust, fell 1.7 percent on its first day of trading on July 8 and is still trading below its offer price. Agricultural Bank of China Ltd., the country’s largest bank by customers, rose 0.8 percent on its debut in Shanghai yesterday, the smallest first-day gain among the nine lenders that have sold shares in the city in the past four years.

Singapore-based CapitaMalls Asia Ltd., owner of shopping malls in the region, last week priced shares of the Malaysian unit at the low end of its projected range ahead of today’s trading. CapitaMalls Asia is a unit of CapitaLand, Southeast Asia’s biggest developer.

For CapitaMalls Malaysia, “the business environment is expected to be challenging with stiff competition from other shopping malls,” PM Securities Sdn. said in a report today. The stock’s fair value is 95.5 sen, it said.

Lower Dividend Yield

OSK Research Sdn. analyst Mervin Chow Yan Hoong said in a report on July 14 that the dividend yield of 7.5 percent is “well below” the average 8.5 percent of other Malaysian REITs, he said.

“We expect some retail investors who may not understand the REIT market to trade a little bit day one,” Lim Beng Chee, chief executive officer of CapitaMalls Asia, told reporters in Kuala Lumpur today. “But my sense is that it will pick up over time.”

CapitaMalls Asia plans to set up a 1 billion ringgit fund within a year to build and prepare a pipeline of assets for the Malaysian property trust, he said.

JPMorgan Chase & Co., CIMB Investment Bank Bhd., and Maybank Investment Bank Bhd. jointly managed the sale. CapitaMalls Asia is part of CapitaLand Ltd., Southeast Asia’s biggest developer, which owns shopping malls in China, India and Singapore. CapitaMalls Malaysia is the owner of the Sungei Wang Mall in Kuala Lumpur, The Mines mall, which is south of the city center, and Gurney Plaza in Penang, according to the company’s prospectus.

To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net;

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