CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust (CCT SP) - Best in a Difficult Sector
Maintain HOLD, TP still at SGD1.25
- CCT is our preferred office REIT.
- Low leverage of 30% should cushion it from impending interest-rate hikes more than its peers.
- The REIT also has smaller tenant exposure to the financial sector, at 33%.
- We forecast organic DPU growth of over 2% pa from incremental contributions from 40%-held CapitaGreen.
- Depending on the transacted price, its option to acquire the remaining 60% of CapitaGreen may provide upside to our DPU.
- Our unchanged TP of SGD1.25 is based on an FY16 yield target of 7.0%.
Not as vulnerable to rate hikes as peers
- The REIT has the lowest leverage among its peers of 30%: Suntec 37%, KREIT 43%.
- Also, as it has locked in 83% of its debt as fixed debt, it should be least exposed to rate hikes among office REITs.
Smallest exposure to financial sector
- Hiring sentiment in the financial sector is weak. This would inevitably affect demand for prime office space.
- However, we believe that CCT is least exposed to the financial sector, at 33% of tenants. KREIT and Suntec have bigger exposure of 48%.
- We already build in 50bp increases pa in its all-in-financing costs for FY16-17.
Capacity to snap up rest of CapitaGreen
- CCT has debt headroom of SGD1.3b. This would enable it to acquire the remaining 60% of CapitaGreen without fund-raising.
- Depending on the final price, its option to acquire the remaining 60% of this brand-new office building may provide upside to our DPU.
Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-01-13
UOB Kay Hian
SGX Stock
Analyst Report
1.25
Same
1.25
