CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust (CCT SP) - Further Headwinds Ahead
- CCT’s 4Q15 results were within our expectations.
- Maintain SELL with an unchanged DDM-derived SGD1.15 TP (16% downside), which implies 0.66x FY15F P/BV.
- Its overall portfolio stood at c.97%, while average passing rental inch up slightly by 0.1% QoQ.
- Factoring in a 15% decline in office rents, we expect rental reversions to be negative for some of its assets, such as Six Battery Road.
Results in line while maintaining a healthy gearing level.
- CapitaLand Commercial Trust’s (CCT) 4Q15/FY15 results were in line with our expectations, with DPU up 0.9/1.9% YoY respectively. This met ~97% of our full-year estimate.
- The results were underpinned by a 1.9% YoY higher revenue, mainly driven by higher rental and occupancy rates. CCT’s gearing ratio remained stable at 29.5%, implying debt headroom of SGD650m, assuming a gearing level of 35%.
Declining committed rentals in CapitaGreen.
- CCT’s portfolio occupancy inched up to c.97%, while the REIT manager observed shrinking demand from the financial sector.
- Additionally, leasing proved to be difficult for its CapitaGreen asset as its occupancy inched up marginally to 91%, with lower committed rental rates inked by new tenants.
- Lastly, valuers’ cap rates across CCT’s portfolio remained largely unchanged, as the REIT registered 1.6% YoY higher portfolio valuation.
Talks on divesting One George Street (OGS) unconfirmed.
- While management did not confirm on the potential divestment of OGS, it did say that portfolio reconstitution has always been part of CCT’s core strategy.
- In addition, management said that it was unnecessary to divest OGS to fund the REIT’s potential acquisition of the 60% remaining stake in CapitaGreen, given its ample debt headroom.
Maintain SELL with an unchanged DDM-derived SGD1.15 TP.
- We expect some pressure on renewal rental rates from Six Battery Road, as the rates of its expiring leases are higher than the current market average.
- In addition, in view of a pessimistic outlook in the office leasing climate, we maintain our SELL recommendation and SGD1.15 TP.
Ivan Looi
RHB Invest
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http://www.rhbinvest.com.sg/
2016-01-21
RHB Invest
SGX Stock
Analyst Report
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