- 1Q15 DPU in line at 24% of FY15E. Better portfolio occupancy. 2% rental uptick. CapitaGreen now 76.4% committed at better rents.
- Option to acquire remainder of CapitaGreen priced in. Most expensive office REIT.
- Maintain HOLD with DDM-based TP of SGD1.77. Prefer Keppel REIT in office sector.
1Q15 DPU of 2.12 SGD cts (+3.9% YoY) met at 24% of our FY15E. Occupancy improved to 97.0% from 96.8% in 4Q14. Average office rents were up 2.0% to SGD8.78 psf. Leverage remained low at 29.9% with debt headroom of SGD1.2b to a 40% ratio. This implies it can comfortably purchase the remaining 60% of CapitaGreen without raising equity. Average interest cost climbed to 2.4% from 2.3% in 4Q14. Still, the trust has low exposure to rising interest rates as 83% of its borrowings are on fixed rates.
CapitaGreen 76.4% committed
As of 21 Apr, 76.4% of CapitaGreen has been committed. Committed rents of SGD12-16 psf were broadly higher than 4Q14’s SGD9-16 psf and market rents of SGD11.40 psf for Grade A office space, as estimated by CBRE.
Most expensive office REIT
Maintain HOLD and DDM-based (COE 7.7%, TG 2.0%) TP of SGD1.77. While its option to acquire the rest of CapitaGreen from its JV partners is positive, the deal can only be assessed after the determination of its transaction price. Moreover, we believe the market has priced in potential positives at 1.0x P/BV and 5.2% FY15E yields. CCT is the most expensive office REIT. We prefer laggard Keppel REIT (BUY, TP SGD1.32) in the office sector.
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