CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust - Driven by stronger Raffles City and CapitaGreen performance
- 1H16 DPU grew 1.9% y/y to 4.39c driven by stronger performance from CapitaGreen and Raffles City.
- 1H16 gross revenue and DPU came in at 45% and 50% of our FY16 forecasts respectively.
- 227k square feet of new leases and renewals in 2Q16, of which 27% were new leases.
- 100% income contribution from CapitaGreen starting 4Q16 to boost Revenue and NPI.
- 4% of office leases (by NLA) remains to be renewed this year and another 10% due in 2017.
- Maintain Reduce with unchanged target price of $1.29.
What is in the news?
227k square feet of new leases and renewals in 2Q16, of which 27% were new leases.
- New and renewed tenants in the quarter included the Economic Development Board, Freemont Capital, General Mills Singapore, Invictus Asset Management, The Korea Development Bank and Sea Hub Energy.
- Management guided that in the broader market, demand for office space is also coming from sectors such as Technology, Law, and tenants seeking “co-working space”.
- For CCT’s co-working space for lease in Capital Tower, clients include smaller consultancies, human resource companies, venture capitalists, and financial technology companies.
- Management opined that leasing co-working space to such companies also allows CCT to form close working relationships with growing companies and to tap on the increasing demand for office space as these companies expand.
100% income contribution from all of CapitaGreen’s tenants starting 4Q16 to boost top- line Revenue and NPI.
- 1H16 gross revenue and DPU came in at 45% and 50% respectively of our FY16 forecasts.
- With full contribution from all of CapitaGreen’s pre-committed tenants expected in 4Q16, this will be the top line growth driver in 2H16.
4% of office leases (by NLA) remains to be renewed this year and another 10% due in 2017.
- With average rents of expiring leases in 2017 ($10.77) and 2018 ($10.64) already higher than current average market rents of $9.50, and we expect rents to continue to trend down from here, chances of negative reversions are high in 2017 and 2018.
Investment Actions
- We maintain our “REDUCE” call on CCT with an unchanged DDM-derived target price of S$1.29.
- We believe sector demand supply dynamics are worse than during the Global Financial Crisis 2008-2009, made worse by developing structural issues within Singapore as highlighted in our initiation report.
- Our FY16e DPU of 8.7c and target price of $1.29 for CCT translates to a dividend yield of 6.7%.
Dehong Tan
Phillip Securities
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http://www.poems.com.sg/
2016-05-26
Phillip Securities
SGX Stock
Analyst Report
1.29
Same
1.29
