Capitaland Commercial Trust - OCBC Investment 2017-05-03: Divests 50% Of ONE GEORGE STREET

Capitaland Commercial Trust - OCBC Investment 2017-05-03: DIVESTS 50% OF ONE GEORGE STREET CAPITALAND COMMERCIAL TRUST C61U.SI

Capitaland Commercial Trust - DIVESTS 50% OF ONE GEORGE STREET

  • To sell 50% of OGS.
  • One time gain of c.S$85m.
  • Higher S$1.69 FV estimate.

Estimated gain of S$84.6m from OGS divestment 

  • CCT announced that it would divest 50.0% of One George Street (OGS) and recognize an estimated gain of S$84.6m. 
  • After taking into consideration the estimated transaction and related costs of S$4.9m, the approximate net gain is S$79.7m. 
  • The agreed valuation of OGS for the transaction is S$1,183.2m (or S$2,650 psf based on the building’s net lettable area), which is 16.7% above the property’s valuation as at 31 December 2016. 
  • Based on the asset’s net property income of S$38.0m for the last 12 months preceding 31 March 2017, the transaction valuation translates to a net property yield of 3.2% per annum. 
  • After the transaction, OGS will be owned by a limited liability partnership (OGS LLP) which is 50% held by insurer FWD group, with the remaining 50% held by CCT.

FV estimate raised to S$1.69; maintain HOLD 

  • To recap, the trust recently reported 1Q17 results that were within expectations. 
  • Gross revenue and NPI jumped 33.9% and 34.3% YoY to S$89.5m and S$69.9m, respectively, with the latter forming 24.6% of our FY17 forecast. This was largely driven by its increased stake in CapitaGreen and higher portfolio occupancy rate. 
  • DPU grew 9.6% YoY to 2.40 S cents and accounted for 25.7% of our full-year projection.
  • Operationally, CCT’s portfolio committed occupancy improved 0.7 ppt QoQ to 97.8%, as at 31 Mar 2017; while its average gross rent declined marginally by 0.2% QoQ to S$9.18 psf/month for the quarter. 
  • The trust also announced that it has obtained provisional permission from URA with regards to its plans to redevelop Golden Shoe Car Park, and will decide on the next course of action pending the outcome of a feasibility study subject by SLA of the amount of differential premium payable. 
  • We update our valuation model with our latest assumptions and the trust’s divestment of a 50% stake in OGS, and our fair value estimate increases from S$1.53 to S$1.69. 
  • Maintain HOLD.

Eli Lee OCBC Investment | 2017-05-03
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.69 Up 1.530