CAPITALAND INTEGRATED COMM TR (SGX:C38U)
CapitaLand Integrated Commercial Trust - Future Proofing Its Assets
- Post recent merger completion with CapitaLand Commercial Trust, CapitaLand Integrated Commercial Trust is now the largest S-REIT in terms of market cap and total assets. The combined portfolio should provide diversification benefits and lower its cost of capital.
- Near-term challenges remain in terms of retail headwinds and slow office leasing activity. Current CapitaLand Integrated Commercial Trust valuations are not compelling, with the stock trading at 1x P/BV, offering a FY21F yield of 5.4%.
Portfolio reconstitution, the key near-term priority.
- During our recent investor call, CapitaLand Integrated Commercial Trust (SGX:C38U)'s management highlighted that its key near-term priority is to rationalise and reconstitute its portfolio and monetise some non-core assets so that it has good balance sheet headroom to tap future opportunities. We believe some of the assets that could potentially be divested include smaller ones like JCube and Bukit Panjang Plaza.
- Asset enhancement plans are currently being chalked out for Clarke Quay to reposition its trade/tenant mix from predominantly night life activities to all day trade sectors.
- Similarly, CapitaLand Integrated Commercial Trust is also looking to improve IMM’s trade mix – which currently caters mainly to the mid-level segment – to more mid-upper level segments.
Looking at asset redevelopment options in the mid-term.
- Management is currently deep diving into each individual asset to identify potential viable redevelopment opportunities. Such plans could take several years before they start materialising, as necessary approvals are needed. CapitaLand Integrated Commercial Trust also noted that construction costs and development charges are elevated currently, making it hard to commit to such projects at the moment.
Exploring options for Robinsons space in Raffles City.
- Robinsons, which currently occupies ~85,000sqf at Raffles City mall, announced that it is winding up its Singapore operations. CapitaLand Integrated Commercial Trust's management is not overly concerned, as it noted that the prime space was eyed by many premium tenants in the past.
- CapitaLand Integrated Commercial Trust is currently studying two options. One is for a single operator to take up the entire space for the interim (2-3 years), during which it can evaluate on the potential options based on the layout. The other is to cut it into smaller spaces, which might result in a higher vacancy in the near term, but could help in better curating the tenant mix and maximise rent.
Expect interest cost savings.
- ~S$1.4bn in debt is maturing in 2020- 2021, for which CapitaLand Integrated Commercial Trust expects 60-70bps savings in interest costs. The acquisition debt of S$1bn has also been kept as floating loans instead of assumed fixed rate loans at 2.7%, based on pro-forma assumptions. This is expected to result in ~100 bps savings in interest costs.
- 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.
- We revised our 2020-22 forecasts for CapitaLand Integrated Commercial Trust to take into account contributions from the merger. Keep NEUTRAL with a higher S$2.10 target price from S$2.03, 1% upside.
Vijay Natarajan
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-12-11
SGX Stock
Analyst Report
2.10
UP
2.03
