CapitaLand Commercial Trust - Phillip Securities 2020-05-05: Attractive Valuations For A Stable Portfolio

CAPITALAND COMMERCIAL TRUST (SGX:C61U) | SGinvestors.io CAPITALAND COMMERCIAL TRUST (SGX:C61U)

CapitaLand Commercial Trust - Attractive Valuations For A Stable Portfolio

  • CapitaLand Commercial Trust's 1Q20 revenue was in line, DPU of 1.65cents came in lower, at 18.3% of FY20e DPU, due to retention of distributable income in anticipation of cashflow disruptions from rental deferment.
  • Upgrade to ACCUMULATE, with Target Price of $1.74 (previously $2.18).
  • FY20e DPU was cut by 15% from 9.03cents to 7.67cents, representing a yield of 5%. Cost of equity was increased from 6.34% to 7.25% and beta was raised by 13bps to reflect higher market risk and lower our terminal growth assumption from 1.85% to 1.6% to factor in weaker leasing demand.



The Positives


c.10% of lease expiries for the year remain, 60% of FY20’s expiries committed.

  • CapitaLand Commercial Trust (SGX:C61U) signed approx. 303K sqft of leases in 1Q20 with positive reversions ranging 0% to 31%. 22% of leases signed were new leases with demand coming from Financial Services, Legal Energy, Commodities, Maritime and Logistic sectors. With weaker economic sentiments, leasing demand is expected to be muted, with more renewals than new leases expected.


The Negatives


Portfolio occupancy fell from 98.0% to 95.2%.

  • This was largely attributed to lower occupancy at Six Battery Road (-20.2ppts from 98.7% to 78.5%) due to AEIs following the anchor tenant’s (Standard Charted) downsizing upon lease expiry in January 2020. Occupancy at Raffles City Tower also fell by 5ppts q-o-q from 97.2% to 92.2%.


Outlook

  • CapitaLand Commercial Trust will be passing on property tax rebates at the respective rates to all their tenants; Retail and F&B tenants (mostly under RCS) will be receiving approximately 2 months of rental rebates (property tax rebate inclusive). RCS will waive turnover rent for the hotel operators for the month of April (variable rent accounted for 22% of rents from hotels operators in FY19).
  • Two properties will be undergoing AEIs in FY20 - partial closure of Six Battery Road after and full closure of 21 Collyer Quay after the end of HSBC’s lease in April 2020. Capex costs expected to be $35mn and $45mn respectively.


Upgrade to ACCUMULATE with lower Target Price of S$1.74 (previously $2.18).






Natalie Ong Phillip Securities Research | https://www.stocksbnb.com/ 2020-05-05
SGX Stock Analyst Report ACCUMULATE UPGRADE NEUTRAL 1.74 DOWN 2.180



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......