CapitaLand Commercial Trust - OCBC Investment 2016-04-18: 1Q16 results broadly in line

CapitaLand Commercial Trust - OCBC Investment 2016-04-18: 1Q16 results broadly in line CAPITALAND COMMERCIAL TRUST CCT C61U.SI 

CapitaLand Commercial Trust: 1Q16 results broadly in line 

  • Results within expectations 
  • Occupancy rates improved to 98.1% 
  • Maiden MTN issue in 1Q16 

1Q16 numbers within expectations 

  • CCT’s 1Q16 distributable income increased by 3.3% YoY to S$64.8m mostly due to higher distributable income from its interests in CapitaGreen and Raffles City Singapore (RCS), respectively. 
  • 1Q16 gross revenues and NPI, however, dipped 1.9% and 3.6% YoY to S$66.9m and S$52.0m, respectively, largely because of higher property tax and lower occupancy rate at Capital Tower. 
  • We judge this set of results to be within expectations, as 1Q16 distributable income and net property income formed 24.1% and 26.3% of our full year forecast, respectively. 

Portfolio occupancy rates improved to 98.1% 

  • CCT’s overall occupancy rates improved QoQ to 98.1% in 1Q16 from 97.1% last quarter; and due to active lease management (including a 22k sq ft lease on the 12th floor to offer co-working spaces), Capital Tower’s occupancy rate increased substantially from 94.1% to 98.1%. 
  • The trust also signed ~162k of new leases and renewals in 1Q16, of which more than half are new leases. 
  • In terms of monthly average office rents, CCT’s portfolio rents similarly improved 0.7% QoQ to S$8.96 psf from S$8.90. That said, we see the scope for meaningful positive rental reversion ahead to be limited given a weak outlook for Grade A office rents, which is forecasted to dip 10% in 2016. 

Maiden HK$ MTN issuance in Mar 2016 

  • There are key debt maturities in 2016 from RCS’s borrowings (S$480m fixed rate notes at 3.09%, S$120m term loan at 3.025% and S$40m revolving facility loan) and we understand that management has already largely lined up unsecured bank facilities to refinance this. 
  • In end Mar 2016, the trust also issued its maiden HKD medium term note amounting to HK$525m (S$102.5m) at an all-in S$ fixed interest rate of 2.7% p.a. for five years maturing in Mar 2021. The trust’s balance sheet remains healthy with a relatively low gearing of 30.1%. 
  • Maintain HOLD with an unchanged fair value estimate of S$1.39.

Eli Lee OCBC Securities | http://www.ocbcresearch.com/ 2016-04-18
OCBC Securities Analyst Report HOLD Maintain HOLD 1.39 Same 1.39