CapitaMalls Asia (JS8.SG) is up 1.6% at $1.9, rising in afternoon trade after the company says it will acquire Queensbay Mall in Penang, Malaysia, for about $275.6 million.
JPMorgan says the deal is accretive, and notes while the mall's current NPI yield is only 5.0%, it has been undermanaged with occupancy of about 91.5% and passing rents at less than CMA's other Penang mall, Gurney Plaza.
"Given 70% of the leases will be up for renewal in the next two years, we see potential for CMA to leverage on its scale and expertise to upgrade the mall and to achieve a yield on cost of about 7.5%-8.0% by 2012."
JPMorgan says CMA can potentially achieve IRR of about 12% on this acquisition, adding about $0.03/share to RNAV estimates.
The house adds, the stock is at "an attractive entry level," trading at a 30% discount to SOTP valuation and 1.2x FY10E book.
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