Thursday 22 January 2015

CapitaCommercial Trust

OCBC on 22 Jan 2015

CCT reported 4Q14 distributable income and net property income of S$63.6m and S$50.6m which increased 5.7% and 3.0% YoY, respectively. DPU for the quarter is an estimated 2.15 S-cents, up 2.9% YoY versus 2.09 S-cents for 4Q13. We judge this set of results to be within expectations, as FY14 distributable income and net property income forms 102.7% and 100.4% of our full year forecast, respectively. Excluding the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 99.4% and positive rental reversions for its Grade A office leases committed over the quarter. The newly completed CapitaGreen is now 69.3% committed and we note that the trust, which holds a call option to buy the 60% remaining interest in CapitaGreen from 2015-17, has a debt headroom of S$1.3b assuming a 40% gearing. Our fair value estimate remains unchanged at S$1.67 but we downgrade our rating to SELL on valuation grounds.

4Q14 results within expectations
CapitaCommercial Trust (CCT) reported 4Q14 distributable income and net property income of S$63.6m and S$50.6m which increased 5.7% and 3.0% YoY, respectively. DPU for the quarter is an estimated 2.15 S-cents, up 2.9% YoY versus 2.09 S-cents for 4Q13. We judge this set of results to be within expectations, as FY14 distributable income and net property income forms 102.7% and 100.4% of our full year forecast, respectively. In terms of the topline, the trust’s 4Q14 revenue similarly increased 3.1% YoY to S$66.4m mostly due to higher rentals and occupancy rates across its office portfolio. 

Average portfolio rents up 5.9% YoY to S$8.61 psf
Excluding the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 99.4% and positive rental reversions for its Grade A office leases committed over the quarter. Over the year, the trust signed leases for 900k sqft of NLA, of which 15% are new leases and management reports a tenant retention rate of 86% in 2014, significantly higher than 67% in 2013. Mainly due to positive rental reversions and the inclusion of CapitaGreen, CCT’s average portfolio rents continued its uptrend, rising 5.9% from S$8.13 psf as at Dec 13 to S$8.61 as at Dec 14. The group’s balance sheet remain healthy with gearing at 29.3% as at end 4Q14 and an average cost of debt of 2.3%.

CapitaGreen achieves 69% commitment
As at end 4Q14, CapitaGreen (which achieved TOP status on 18 Dec 2014) was valued at S$1,526m and CCT’s 40% interest held through MSO Trust is S$610.4m. The asset is now 69.3% committed, above the trust’s target occupancy of 50%. We note that the trust has a debt headroom of S$1.3b assuming a 40% gearing, and is holding a call option to buy the 60% remaining interest in CapitaGreen from 2015-17. Our fair value estimate remains unchanged at S$1.67 but we downgrade our rating to SELL on valuation grounds.

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