Simons Trading Research

Author: simonsg   |   Latest post: Tue, 13 Dec 2022, 10:52 AM


CapitaLand Integrated Commercial Trust 3Q21 Business Update - Good Things Come to Those Who Wait for the Reopening

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  • CapitaLand Integrated Commercial Trust (SGX:C38U)’s retail portfolio achieved stable occupancy of 96.4% but its office portfolio suffered transitory vacancies at AST2 and CapitaGreen. Vaccinated employees are allowed to work from their office starting 1 Jan 22, leading to an improved physical occupancy for CapitaLand Integrated Commercial Trust’s office buildings and bringing relief to its downtown malls.
  • CapitaLand Integrated Commercial Trust would benefit as the recovery broadens to offices and downtown malls in 2022. 2022 distribution yield is 5.3%. Maintain BUY. Target price: S$2.39.

CapitaLand Integrated Commercial Trust’s (CICT) 3Q21 Business Update Was in Line With Our Expectations

  • The results reflected a full contribution from the merger of CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT), which was completed on 21 Oct 20. 3Q20 was a low base as CMT, the predecessor of CapitaLand Integrated Commercial Trust, granted a rental waiver of S$29.5m to assist retail tenants.

Suburban malls stay resilient.

  • Retail occupancy eased working from home has disproportionately affected downtown malls.

Office portfolio hit by transitory vacancies.

  • Occupancy for Singapore rents for the Singapore office portfolio eased 1.8% q-o-q to S$10.07/psf.

CapitaSpring is well taken-up.

  • CapitaSpring of above 90% by end-21. Committed leases start contributing from 2H22.

Refinancing supported by relationship banks.

  • Aggregate leverage edges term to maturity is healthy at 4.1 years.

Potential Easing Could be Forthcoming

  • Current 26.3% of gross rental income will expire in 2022.

AEIs for Raffles City Singapore (RCS).

  • The three floors of retail space at RCS previously occupied by Robinsons are leased to BHG Singapore (concept stall One Assembly for beauty, fashion and home products at Level 1&2 and Mummy’s Market (motherhood products at Level3). CapitaLand Integrated Commercial Trust plans to reconfigure the three floors into smaller units for large format and specialty retail. Vertical connectivity between the three levels will be improved with new escalators. Management estimated capex at S$50-60m and targets completion by 4Q22. CICT is under advanced negotiation with international fashion, beauty and lifestyle retailers.

AEI for Six Battery Road on track for completion at end-21.

  • The new through-block link at Six Battery Road has a banking hall on one side and new retail offerings on the other. Standard Chartered Bank opened the new retail banking hall on 22 Jun 21. 57% of the space undergoing AEI is already pre-leased.

Earnings Revision & Recommendation

  • We trimmed CapitaLand Integrated Commercial Trust's 2022 DPU based on DDM (cost of equity: 6.0%, terminal growth: 1.2%).
  • Catalysts:
    • Gradual but steady recovery in shopper traffic and tenant sales, accompanied by progressive easing of social distancing measures.
    • Asset enhancement and redevelopment of existing properties.

Source: UOB Kay Hian Research - 25 Oct 2021

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