CapitaLand Commercial Trust - OCBC Investment 2017-01-18: Boost from higher stake in CapitaGreen

CapitaLand Commercial Trust - OCBC Investment 2017-01-18: Boost from higher stake in CapitaGreen CAPITALAND COMMERCIAL TRUST C61U.SI

CapitaLand Commercial Trust - Boost from higher stake in CapitaGreen

  • CapitaLand Commercial Trust (CCT)’s 4Q16 distributable income increased 10.1% YoY.
  • Mainly due to higher stake in CapitaGreen.
  • Golden Shoe Car Park (GSCP)redevelopment updates ahead.

4Q16 results mostly within expectations 

  • CCT’s 4Q16 distributable income increased 10.1% YoY mainly due to increased contributions from the Trust’s higher stake in CapitaGreen.
  • The trust reported an estimated DPU for the quarter of 2.39 S-cents which similarly grew 10.1% YoY and as a result, FY16 DPU now cumulates to 9.08 S-cents – up 5.3% YoY. 
  • Based on CCT’s last closing price of S$1.565, this translates to a distribution yield of 5.8%. 
  • In terms of the topline, 4Q16 gross revenues and net property income increased 32.7% and 35.4% to S$89.7m and S$70.8m, respectively, again primarily due to the Trust’s increased stake in CapitaGreen (now at 100% after the completion of the stake acquisition in Aug 2016). 
  • We deem these results to be mostly within expectations and note that 2H16 DPU (CCT pays its distributable income semi-annually) is expected to be paid on 27 Feb 2017.

Updates for GSCP redevelopment ahead 

  • The trust’s overall occupancy rate dipped slightly QoQ to 97.1% as at end 4Q16 from 97.4% in 3Q16. 
  • We understand that about half of the leases expiring in 2017 have already been renewed and that management will continue to take an active stance on retaining and attracting new tenants. 
  • Monthly average office rents for the Trust’s portfolio declined marginally to S$9.20 as at end 4Q16, versus S$9.22 in the previous quarter. 
  • CCT’s aggregate leverage remained at an acceptable 37.8% as at end 4Q16 and about 80% of the Trust’s debt is on fixed interest rates, which will buttress the group to an extent against rising interest rates anticipated ahead.
  • We look forward to further updates about the redevelopment of Golden Shoe Car Park (GSCP) ahead as management continues their financial feasibility study while seeking approvals from the government authorities. 
  • We update our valuation models for firmer rental assumptions over FY18- 19 and potential accretions gains from the GSCP redevelopment and our fair value estimate increases to S$1.53 from S$1.39. Maintain HOLD.

Eli Lee OCBC Investment | 2017-01-18
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.53 Up 1.390