CAPITALAND COMMERCIAL TRUST
CCT
C61U.SI
CapitaLand Commercial Trust: Positioning portfolio for weak outlook
3Q15 performance in line
Grade A outlook remains weak
Actively managing lease expiry profile
3Q15 results within expectations
- CapitaLand Commercial Trust (CCT) reported 3Q15 distributable income and net property income of S$63.2m and S$52.7m which increased 2.6% and 1.5% YoY, respectively.
- Distribution per unit (DPU) for the quarter is an estimated 2.14 S-cents, and 9M15 DPU cumulates to 6.45 S-cents which increased 3.5% YoY.
- In terms of the topline, the trust’s 3Q15 revenues rose 2.9% YoY to S$68.3m mostly due to higher rents across the portfolio except at Golden Shoe Car Park.
- We judge this set of results to be within expectations as 9M15 distributable income and net property income form 77.8% and 74.9% of our full year forecasts, respectively.
Scope for meaningful positive reversion ahead likely limited
- Over the quarter, we saw some pressure on CCT’s overall portfolio occupancy rates which dipped QoQ from 98.0% to 96.4%. In addition, as market Grade A office rents fell 3.5% QoQ to S$10.90 psf/mth, the rate of positive rental reversion for CCT’s portfolio also slowed to a grind; monthly portfolio average rents ticked up only marginally from S$8.88 psf in 2Q15 to S$8.89 psf in 3Q15.
- The scope for meaningful reversion upside ahead is likely limited, in our view, due to a weak outlook for Grade A office rents which we forecast to dip 10% to 20% in 2016.
Actively spreading out lease expiry profile of portfolio
- That said, management have indicated that they are cognizant of the significant office space supply in 2H16 and are actively spreading out the lease expiry profile of the portfolio with major leases expiring in 2019 and beyond.
- Similarly, for CapitaGreen (now 87.7% committed), CCT reports that most of the committed tenants are on leases longer than the usual three-year term.
- The trust’s balance sheet remains healthy with a relatively low gearing of 30.1% and a 2.4% average cost of debt.
- Maintain HOLD with an unchanged fair value estimate of S$1.39.
Eli Lee
OCBC Securities
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http://www.ocbcresearch.com/
2015-10-29
OCBC Securities
Analyst Report
1.39
Same
1.39
