CapitaLand Commercial Trust - OCBC Investment 2016-10-21: Plans to redevelop Golden Shoe Car Park

CapitaLand Commercial Trust - OCBC Investment 2016-10-21: Plans to redevelop Golden Shoe Car Park CAPITALAND COMMERCIAL TRUST C61U.SI

CapitaLand Commercial Trust - Plans to redevelop Golden Shoe Car Park

  • 3Q16 numbers in line.
  • Boost from higher CapitaGreen stake.
  • Plans to redevelop Golden Shoe Car Park.

Distributions boosted by increased CapitaGreen stake 

  • 3Q16 distributable income increased 8.1% YoY mostly due to increased contributions from CapitaGreen after the acquisition of CCT’s remaining 60% stake on 31 Aug 2016 and stronger numbers from RCS Trust that holds Raffles City Singapore. 
  • Topline and net property income for the quarter similarly increased 8.9% and 8.3% YoY to S$74.4m and S$57.0m, respectively, mainly because of the boost from the trust’s higher stake in CapitaGreen. 
  • As a result, the trust reported an estimated DPU of 2.30 S-cents for 3Q16 (up 7.5% YoY) and we deem 3Q16 results to be in line with expectations.

In discussions to redevelop Golden Shoe Car Park 

  • The trust’s overall occupancy rate remained stable QoQ at 97.4% versus 97.2% as at end 2Q16. 
  • Despite taking on new debt to fund the remaining stake in CapitaGreen, CCT’s aggregate leverage remains at an acceptable 37.8% as at end Sep 2016, below the regulatory limit of 45%, with an average cost of debt at 2.5% and we understand that 80% of the trust’s total borrowings are fixed rate. 
  • Management also announced that, subject to approvals from government authorities, they plan to redevelop Golden Shoe Car Park in Raffles Place into a higher value commercial development with approximately one million sq ft, which will include an office tower of up to 280m above ground with a remaining leasehold tenure of 65 years. Approvals will include a change of use to commercial, and is subject to a differential premium and re-zoning of the Master Plan. 
  • While this development is potentially accretive, we understand that the discussions are preliminary and all relevant approvals and completion of a feasibility study will only be completed in 2H17. 
  • In the meantime, we continue to be cautious on the outlook of Grade A office rents and maintain our HOLD rating with an unchanged fair value estimate of S$1.39.

Eli Lee OCBC Investment | 2016-10-21
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.39 Same 1.390