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June 17 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings believes the operational performance of leading mall operators (BR Malls, Multiplan, Iguatemi, General Shopping Brasil, Aliansce and Sonae Sierra Brasil) should remain stable despite weak economic growth, increasing domestic inflation and deceleration of retail consumption.
The structure of the leases and the shortage of high quality malls continues to give operators a strong position. This should enable them to have high EBITDA margins and strong cash flow generation in 2014.
The sector’s leading companies have healthy levels of occupancy rates at 97%. Late payments are also manageable at only 2%. Same store sales (SSS) and same store rents (SSR) have slowed toward the end of 2013 and in the first-quarter 2014 vis-a-vis 2011-2012 but remains at adequate levels of 8%-9%. Fitch expects to see some retraction in SSS and SSR during the World-Cup soccer event, but it should not have a material impact upon 2014 results.
The sector’s gross leasable area (GLA) has increased at a compound annual growth rate (CAGR) of 8.5% during the last five years ending Dec. 31, 2013, and the number of shopping malls increased to 495 in 2013 from 392 in 2009. During the next two years, growth should moderate due to less greenfields and a more cautious approach to investments during a period of slow economic growth.
Over the medium term, expansion in the average income of Brazilians and favorable population demographics should continue to benefit the growth of the shopping mall industry. The sector’s low penetration - around 60 square meters per 1,000 inhabitants for the country - also supports continued growth of GLA.