CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust - Unlocking Shareholder Value
- We upgrade CCT to BUY (from Neutral) with a DDM-derived TP of SGD 1.68 (from SGD1.33, 8% upside) as we believe the growth catalysts are now in place with:
- Potential redevelopment of GSCP into prime Grade-A office space;
- Yield accretion from AEI works at Raffles City Shopping Centre.
- Despite near-term headwinds facing Singapore’s office sector, we believe CCT is relatively well-positioned to cushion the impact, with is near-full portfolio occupancy and limited lease expiry profile.
Redeveloping GSCP to unlock shareholder value.
- CapitaLand Commercial Trust (CCT) has submitted much-anticipated plans to authorities to redevelop Golden Shoe Car Park (GSCP) into a higher-value commercial development. GSCP could potentially add 1m sq ft of commercial GFA in Singapore’s CBD once fully redeveloped. Works, set to commence in 2H17, are expected to be completed by 2021 – subject to obtaining all relevant approvals and the completion of a feasibility study.
- We estimate total development costs (including differential premium) to be in the range of SGD1.5-2bn, based on a similar redevelopment of Market Street Car Park. We are positive on the value unlocking move, considering the prime location and limited visibility of office space coming on-stream post 2020.
Raffles City Shopping Centre getting a brand new look.
- CCT will undertake asset enhancement initiative (AEI) works at Raffles City Shopping Centre (60% stake) which includes refurbishing the main entrance, mall interiors, upgrading lift lobbies and revamping the central atrium. The AEI is expected to be completed by 1Q18 at an estimated cost of SGD 54m.
- Management noted that upgrades will be done in phases and expects minimal disruption to the ongoing leases. The AEI is necessary to maintain the premium positioning of the mall, considering increased competition among mall owners to attract and retain tenants amidst a challenging Singapore retail climate.
Upgrade to BUY with a SG1.68 TP.
- We revise our FY17F-18F DPU by 6-13%, factoring in additional income (100%) from the CapitaGreen acquisition.
- Our new TP reflects a COE of 7.8% and TG of 1.5%.
- We have not factored in any potential upside from the redevelopment of GSCP, which is pending approvals.
- Despite potential headwinds facing the office sector, we believe CCT is relatively well-positioned to cushion the near-term impact of the challenges due to its healthy occupancy rate and diversified tenant base.
Vijay Natarajan
RHB Invest
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http://www.rhbinvest.com.sg/
2016-10-20
RHB Invest
SGX Stock
Analyst Report
1.68
Up
1.330
