The research team at Calamatta Cuschieri recently distributed an equity research report on Tigné Mall plc (TML) with a “Buy” recommendation and a one-year price target of €1.17, implying a potential capital upside of 24.5% to the current price of 94c as at the date of this writing.
TML engages in the ownership and management of ‘The Point Shopping Mall’, which is renowned as being Malta’s largest retail centre. The mall consists of 14,349 square meters of retail floor space and comprises 50 retail units which are distributed over three floors, in addition to a number of kiosks and two ATMs.
MIDI plc acquired the mall through a temporary emphyteutical concession for a period of 99 years, expiring in 2099. The property was transferred to TML during 2010 through a sub-emphyteutical deed with MIDI plc for the remaining period.
The company’s revenue is principally derived from operating lease rental income attributable to retail outlets in ‘The Point Shopping Mall’ together with the provision of related services.
During 2018, the cCompany acquired 132 car parking spaces from MIDI plc within The Point Shopping Mall’s proximity for a consideration of €4.6million. By virtue of this transaction, the car park spaces available to the company increased from 223 to 355.
Reasons to buy the stock:
• Occupancy - TML has a strong track record of full occupancy within the mall, and as such we expect that due its strategic location within Tigné peninsula and Sliema centre, the mall will continue to be fully occupied going forward.
• Profitability - The revenue and profitability potential of the TML in 2018 has been boosted through the acquisition of an additional 132 car parking spaces within the proximity of the mall. What makes TML more attractive to shareholders is the fact that the company also benefits from a favourable tax rate in relation to its gross rental income, which ultimately has resulted into higher levels of profits available to shareholders.
• Finance costs – In line with TML’s profitability, finance costs significantly decreased since 2013 due to the company repaying large portions of its existing loans on a yearly basis. In this regard, we expect the company’s profitability to continue increasing in the future as the borrowings are repaid and marginal revenue growth rates are sustained.
• Dividends – Although in 2018 TML has registered an increase in net profit, the company maintained the current levels of dividends, thus illustrating the potential that the company might be in a position to increase dividends in the future. Furthermore, TML has a positive track record of constant dividend distributions paid over recent years. TML is currently offering a reasonably attractive net dividend yield of 2.68%.
The main concern associated with the company’s overall operations stems from the increasing popularity of e-commerce which may negatively impact the performance of retail outlets. However, we expect the company to continue achieving positive financial results due to the strategic position of The Point Shopping Mall.
Given TML’s positive outlook and constant improvement in revenue and profitability potential, together with TML’s limited growth opportunities, we are of the view that the main reason to hold the stock primarily relates to the company’s constant dividend distributions, whereby dividend yield in 2018 currently stands at a healthy level of 2.68% and is expected to grow.
Disclaimer: This article was issued by Andrew Fenech, research analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.
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