CapitaLand Integrated Commercial Trust - CGS-CIMB Research 2021-04-26: Performance In Line


CapitaLand Integrated Commercial Trust - Performance In Line

  • CapitaLand Integrated Commercial Trust's 1Q21 gross revenue/NPI within expectations, at 25.3%/25.5% of our FY21F forecasts.
  • Committed portfolio occupancy remains high at 95.9%.
  • Reiterate ADD with unchanged DDM-based target price of S$2.56.

CICT's 1Q21 business update highlights

  • CapitaLand Integrated Commercial Trust (SGX:C38U) reported 1Q21 gross revenue/NPI of S$334.8m/247.1m, +63.9%/+66.6% y-o-y, in line with our expectations at 25.3%/25.5% of our FY21F forecasts.
  • The improved performance was due to the inclusion of CCT’s contributions post-merger and consolidation of income from Raffles City Singapore (previously a JV), partly offset by lower retail revenue.
  • Committed portfolio occupancy stood at 95.9%, with the retail portion slightly higher at 97.1%.
  • Gearing stood at 40.8% at end-1Q21.

Y-o-y improvement in retail sales in 1Q21

  • In 1Q21, CapitaLand Integrated Commercial Trust’s portfolio retail sales improved 2.9% y-o-y, with suburban malls performing better than downtown malls. Meanwhile, shopper traffic recovered to 75.3% of the year-ago level.
  • Trade sectors that did well in 1Q include jewellery & watches, home furnishing and sporting goods. While no statistic was shared, management guided that it saw a negative rental reversion in 1Q21.
  • CapitaLand Integrated Commercial Trust has a remainder of 21.8% of gross retail rental income to be re-contracted in FY21 and we anticipate the negative reversion to persist as tenants continue adapting to a post-COVID-19 world.

Keeping office occupancies high

  • Office committed occupancy stood at 94.9% with 291.8k sqft of new and renewal leases transacted in 1Q21. CapitaLand Integrated Commercial Trust has 16.3% of gross office rental income to be renewed for the rest of FY21F. With Singapore expiring rents at S$10.41psf, broadly in line with market, we anticipate relatively flat reversions going forward.
  • CapitaLand Integrated Commercial Trust restructured the RC Hotel lease with effect from 1Q21 to rebalance the fixed and variable components, while extending the lease by another 5 years to 2041. While this could impact near-term contributions, the new structure would likely enable the trust to leverage more on the upside when recovery kicks in, in our view. To be sure, RC Hotel contributed 5% of total gross revenue in 1Q21 and we think any drag in the short term would likely not be very significant.

Uptick in pre-leasing levels at CapitaSpring

  • CapitaLand Integrated Commercial Trust’s ongoing redevelopment and asset enhancement initiatives at 6 Battery Rd, 21 Collyer Quay and Lot One Shoppers’ Mall remain on track to complete in 2H21F. Meanwhile, CapitaSpring is 50% pre-leased at end-1Q21 with another 15% under negotiation.
  • CapitaLand Integrated Commercial Trust said it would also continue to evaluate portfolio reconstitution and explore acquisition strategies.

Reiterate ADD rating on CapitaLand Integrated Commercial Trust

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | 2021-04-26
SGX Stock Analyst Report ADD MAINTAIN ADD 2.560 SAME 2.560