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The equity research team at Calamatta Cuschieri recently made available to its clients a report on Tigné Mall plc (TML), whereby it was given a “Buy” recommendation with a one-year target price of €1.15, giving a potential capital upside of 20% to the current price of €0.96 as the date of this writing. Furthermore, TML has constantly increased the amount of dividends paid over the past four years and it’s currently offering a net dividend yield of 2.7%.
TML is the owner of The Point Shopping Mall in Sliema and owns 253 car spaces within the public parking facilities owned by MIDI plc at the Tigné Point site which are operated by Solutions & Infrastructure Services Limited. The Point is the No. 1 shopping mall in Malta in terms of footfall and size. The mall consisting of 14,349 sqm comprises approximately 50 retail units distributed over three floors, in addition to a number of kiosks and two ATMs. MIDI 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 for the remaining period.
Reasons to buy the stock
• The Mall – The Point is in a prime location and even if we had to see a downturn in property prices, the location should not suffer much due to its positioning.
• Profitability – the Company has shown increasing profitability in the past years supported by the strategic position of the mall, which has allowed to achieve and maintain high occupancy and rental rates. Finance costs have almost halved since 2013 following the annual repayment of the Company’s bank borrowings. We expect the Company’s profitability to continue increase in future as the borrowings are repaid and marginal revenue growth rates are sustained.
• The Dividend – The shares are trading on an attractive net dividend yield of 2.7%. We don’t see the dividend at risk in the short to medium term. On the contrary, we expect dividends to increase on the back of the expected increasing profitability of TML.
• Online Sales – Although consumers nowadays are looking at purchasing goods online, we believe there will always be demand for retail space. The fact that the mall is in a prime location contributes to reduce this risk.
• Risk to the business model – We attach a low risk to this business model due to its type of investments and simplicity (i.e. not a portfolio of various properties in various locations creating further subjectivity).
• The weighted average cost of capital – A discount rate of 7.4% is fair game for this business model.
In conclusion, investors should consider TML to form part of their portfolio if they are looking for a reliable dividend paying stock, with limited downside risk and good return potential. Caution should be taken, however, as the low liquidity of the stock could play a part in your investment decision, and as is a general theme on the Malta Stock Exchange be wary of potentially large bid-ask spreads when attempting to trade the stock.
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