CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust (CCT SP) - Best-Positioned in Tough Office Market
Maintain HOLD; 4Q15 no surprise
- Reiterate HOLD on CCT and SGD1.25 TP, based on a 7.0% FY16 yield target. 4Q15 results offered little surprise.
- While the REIT is bestpositioned among its office peers, we see no reason to raise exposure, given a difficult office market.
- Higher occupancy 4Q15 DPU of 2.17 SGD cts (+0.9% YoY, +1.4% QoQ) met expectations, with FY15 at 101% of our forecast.
- Despite difficult market conditions, occupancy improved to 97.1% (3Q15: 96.4%).
- CapitaGreen is now 91.7% committed (3Q15: 85.5%); its NPI included SGD4.4m of non-recurring income from rent amortization in 4Q15.
- Exposure to interest-rate hikes is low, at 84% of fixed-rate debt and 29.5% leverage, the lowest among peers.
- Excluding forward renewals, its exposure to peak supply years in 2016/17 should be manageable, at 10%/14% of office income.
Manageable exposure
- Asset valuation improved by 1.6% YoY to SGD7.5b.
- Assumptions used were largely unchanged from mid-2015, except for lower rent-growth assumptions of 3.8%, from 3.9%. The REIT has manageable exposure to the banking, insurance and financial sector at 33% of total income. Also, its tenants have no pre-termination clauses, although management is open to negotiating terms if conditions worsen.
Not a passive REIT manager
- Management is constantly evaluating ways of creating shareholder value.
- Firstly, it will monitor the performance of CapitaGreen and will only acquire the balance 60% when it is yield-accretive.
- Secondly, it will evaluate options for its assets and may sell at the right price.
- Lastly, the redevelopment of Golden Shoe Carpark remains possible, despite hurdles.
- Management does not intend to venture overseas without a proper platform as it does not believe in being passive investors.
Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-01-20
Maybank Kim Eng
SGX Stock
Analyst Report
1.25
Same
1.25
