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Simons Trading Research

Author: simonsg   |   Latest post: Wed, 18 May 2022, 11:34 AM

 

CapitaLand Integrated Commercial Trust - in Recovery Mode; Visible Growth Drivers Into FY22e

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  • CapitaLand Integrated Commercial Trust (SGX:C38U)’s revenue and NPI grew q-o-q in 3Q21 at 5.8% and 7.8% respectively, underpinned by rising contributions from across its retail, office and integrated development assets. While occupancies were mainly lower, its retail rental reversion trend (especially for suburban malls) is on the right trajectory, while strong leasing at CapitaSpring will support office NPI growth in FY22E.
  • Risk-reward remains favourable, with CapitaLand Integrated Commercial Trust’s DPU recovery gaining traction from tenant expansion as office demand returns, and valuations compelling at 5.5% FY22 dividend yield and 1x P/B versus history and peers.
  • Maintain BUY rating on CapitaLand Integrated Commercial Trust with DDM-based target price of S$2.55 (COE: 5.9%, LTG: 1.5%).

Suburban Malls Leading Retail Recovering

  • CapitaLand Integrated Commercial Trust's retail occupancy was lower at 96.4% (from 97.0% in 2Q21) due to dips at its downtown malls, as occupancies were between 79.4% (at Clarke Quay) and 98.7% (for Bugis Junction), versus 97.3%-100% for its suburban assets.
  • Rental reversion at -3.0% for 9M21 improved from -4.5% in 1H21, and was better for its suburban malls at -0.9% (from -1.4% in 1H21), versus –8.0% (from -8.9%) for its downtown assets.
  • Tenant sales at 72-92% of 2019 levels continued to track ahead of shopper traffic at 55-64%, with room for recovery to strengthen into the seasonally strongest 4Q.

Office NPI Growth Backed by CapitaSpring

  • CapitaLand Integrated Commercial Trust's office occupancy dipped further to Collyer Quay and 6 Battery Road (post-AEI), should further back DPU recovery.

Catalysts From Deals, AEIs and Divestments

  • CapitaLand Integrated Commercial Trust's gearing was stable at ahead, redevelopment plans are medium-term catalysts to support CapitaLand Integrated Commercial Trust's DPU upside.

Source: Maybank Kim Eng Research - 24 Oct 2021

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