CAPITALAND COMMERCIAL TRUST (SGX:C61U)
CapitaLand Commercial Trust - Riding The Office Upcycle
- New leases from banking and financial services, IT and hospitality service sectors underpinned leasing activities in 3Q19.
- We expect new contributions from Main Airport Center (MAC) to boost 4Q income.
- Maintain ADD with Target Price of S$2.25.
Average Singapore portfolio rent held steady q-o-q
- CAPITALAND COMMERCIAL TRUST (SGX:C61U)’s Singapore portfolio committed occupancy slipped 0.2% pt q-o-q to 98.1% at end-3Q while average portfolio rent remained fairly stable q-o-q at S$10.04 psf. The trust renewed 480k sq ft of space in 3Q19, of which 57% were new leases. Demand came from banking, financial services, IT and travel and hospitality sectors.
- CapitaLand Commercial Trust enjoyed positive rental reversion with signing rents in the range of S$9.20-13.00 psf vs. expiring rents of S$8.16-11.79 psf. The trust has a further 4% and 19% of gross rental income to be re-contracted for the remainder of FY19 and FY20.
Main Airport Center (MAC) to contribute from 4Q
- CapitaLand Commercial Trust completed the acquisition of a 94.9% interest in Main Airport Center (MAC) in Frankfurt in Sep 2019. As such, it should benefit from a full quarter’s contribution from this property in 4Q. In addition, committed occupancy for the property, located within the Frankfurt Airport office submarket, has ticked up to 93% from 90% in 2Q19.
- Meanwhile, CapitaLand Commercial Trust has increased pre-commitments at CapitaSpring to 31% with two new leases, totaling 45k sq ft, signed. Structural works are in progress for the Green Oasis at levels 17-20. The building is expected to be completed in 1H21.
Strong balance sheet, planned AEIs to boost returns
- CapitaLand Commercial Trust’s gearing stood at 35.5% at end-3Q and average debt maturity of 3.3 years. 92% of its debt is on fixed rates thus mitigating the trust from interest rate volatility. It has another 11% of debt to be refinanced in 4Q19-FY20.
- CapitaLand Commercial Trust is well placed to undertake planned asset enhancement initiatives for 6 Battery Rd and 21 Collyer Quay in 2020/21, totaling S$80m, with a target return on investment of 8-9%.
Maintain ADD rating
- CapitaLand Commercial Trust is the largest office SREIT by market cap. Our DDM-based Target Price of S$2.25 translates to a total return of 15%. Hence, we maintain our ADD call.
- See Capitaland Commercial Trust Share Price; Capitaland Commercial Trust Target Price; Capitaland Commercial Trust Analyst Reports; Capitaland Commercial Trust Dividend History; Capitaland Commercial Trust Announcements; Capitaland Commercial Trust Latest News.
- Re-rating catalysts include further accretive acquisitions.
- Downside risks include slower office demand due to a soft macro outlook.
LOCK Mun Yee
CGS-CIMB Research
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EING Kar Mei CFA
CGS-CIMB Research
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https://www.cgs-cimb.com
2019-12-09
SGX Stock
Analyst Report
2.250
SAME
2.250
