CapitaLand Integrated Commercial Trust - DBS Research 2020-12-09: Biggest S-REIT At A Bargain!

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CAPITALAND INTEGRATED COMM TR (SGX:C38U)

CapitaLand Integrated Commercial Trust - Biggest S-REIT At A Bargain!

• CapitaLand Integrated Commercial Trust, the combined entity of CapitaLand Mall Trust-CapitaLand Commecial Trust merger is the largest S-REIT offering the highest yield of c.6% among its large cap peers.
• FY21 will remain a year of cyclical recovery as the country emerges from the pandemic.
• Rapid progress on vaccine to normalise valuations.
• Maintain BUY; raise target price to S$2.50.

Big, cheap and fresh!

• The merger of CapitaLand Mall Trust and CapitaLand Commecial Trust led to the combined entity CapitaLand Integrated Commercial Trust (SGX:C38U) the largest integrated commercial Singapore Real Estate Investment Trust (SREIT) at attractive valuations close to 1.0x price/net asset value (P/NAV).
• With forward yields of c.6%, CapitaLand Integrated Commercial Trust offers the highest yield among its large cap peers which are trading at c.5% yield.

Riding the cyclical recovery trend.

• FY21 will continue to be a year of recovery as we progressively emerge from the COVID-19 pandemic and head towards a new normal.

Imminent vaccine to normalise valuations.

• With the rapid progress of COVID-19 vaccines, we believe that a V-shaped recovery will be the key catalyst to drive valuations close to its historical average (since it was listed) of 1.24x P/NAV.

Valuation:

• Maintain BUY, raise target price to S$2.50. Following the merger, we raised our CapitaLand Integrated Commercial Trust's target price from S$2.40 to S$2.50 which implies P/NAV of 1.24x, its historical average since listing.
• See 
  • CapitaLand Integrated Commercial Trust Share Price; 
  • CapitaLand Integrated Commercial Trust Target Price; 
  • CapitaLand Integrated Commercial Trust Analyst Reports; 
  • CapitaLand Integrated Commercial Trust Dividend History; 
  • CapitaLand Integrated Commercial Trust Announcements; 
  • CapitaLand Integrated Commercial Trust Latest News. 

Where we differ:

• Too big to ignore. We believe that as the largest S-REIT, CapitaLand Integrated Commercial Trust will be too big to ignore. The company’s integrated commercial assets will drive synergistic value from its existing portfolio. In addition, its size offers a bigger platform and opportunity to grow with acquisitions of integrated development led by the rising global trend of live-work-play.

Key Risks to Our View:

• The key risks to our view are an economic downturn, as well as a prolonged recovery and weak sentiment. Setbacks to vaccine distribution and new waves of the pandemic could further delay CapitaLand Integrated Commercial Trust’s recovery.

Singapore retail REIT sector report:

• See Singapore Retail REITs - DBS Research 2020-12-09: Defend & Conquer.

Rachel TAN DBS Group Research | Geraldine WONG DBS Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-12-09

SGX Stock Analyst Report BUY MAINTAIN BUY 2.50 UP 2.40