CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust - Rising CapitaGreen contributions
- 1QFY16 results in line, DPU of 2.19 Scts at 25% of our full-year forecast.
- Portfolio rents ticked up marginally qoq, new demand from diversified sources.
- Narrowing gap between passing and market rents suggests renewals would be fairly neutral, with possibility of negative reversions in 2017.
- Low gearing of 30.1%; option to purchase the remaining 60% of CapitaGreen.
- Maintain Hold, with target price unchanged at S$1.48.
■ Lifted by CapitaGreen contributions
- CCT achieved 1QFY16 DPU of 2.19 Scts, up 3.3% yoy, accounting for 25% of our fullyear estimate.
- Although gross revenue dipped 2% yoy to S$66.9m, distribution income rose 3.3% to S$64.8m, aided by higher JV contributions, largely from its 40% stake in CapitaGreen. The property is 92.8% committed as at end Mar 16.
■ Diversified new demand sources kept occupancy high
- Average portfolio rents ticked up 0.7% qoq to S$8.96psf, with occupancy climbing 1% pt qoq to 98.1%.
- In 1Q, CCT signed new and renewal leases for 162ksf of space with positive reversions ranging from low single digit to low teens.
- 54% of the leasing activity are from new demand from tenants in the maritime and logistics, real estate, legal, financial services, manufacturing and distribution sectors.
■ Focus on tenant retention
- CCT has 12% and 13% of gross rental income to be re-contracted in the remainder of 2016 and in 2017, respectively. Average expiring office rent is S$9.42psf in 2016, S$10.17psf in 2017 and S$10.62psf in 2018.
- CBRE’s average current market rent is S$9.90psf. Hence, we expect lease renewals to remain fairly netural as market rents continue to trend south with the incoming supply.
- We think the impact of negative rental reversions could likely show from FY17 onwards, with higher expiring rents.
■ Strong balance sheet raises inorganic growth potential
- CCT’s gearing stands at a low 30.1% as at Mar 16, with average interest cost of 2.5%. Some 91% of its interest cost is hedged.
- The low leverage ratio puts the trust in a good position to expand inorganically. It has the option to buy the remaining 60% share of CapitaGreen when income from this asset stabilises.
- Based on a 40% gearing, CCT has potential debt headroom of cS$1.1bn-1.2bn.
■ Maintain Hold
- We leave our FY16-18 DPU estimates unchanged and maintain our Hold rating for the stock. CCT offers investors FY16F DPU yield of 6.1%, with limited upside to our DDM-backed target price of S$1.48.
LOCK Mun Yee
CIMB Securities
|
YEO Zhi Bin
CIMB Securities
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http://research.itradecimb.com/
2016-04-15
CIMB Securities
SGX Stock
Analyst Report
1.48
Same
1.48
