CapitaCommercial Trust (CCT) reported 1Q15 distributable income and net property income of S$62.8m and S$54.0m which increased 4.7% and 6.4% YoY, respectively. Distribution per unit for the quarter is announced to be an estimated 2.12 S-cents, up 3.9% YoY versus 2.04 S-cents for 1Q14.

We judge this set of results to be within expectations, as distributable income and net property income from the quarter forms 24.2% and 23.7% of our full year forecast, respectively. In terms of the topline, the trust’s 1Q15 revenues similarly increased 6.5% YoY to S$68.2m mostly due to higher rentals and occupancy rates across its office portfolio.

Including the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 97.0% and continued positive rental reversion trends for its Grade A office leases committed over the quarter (average portfolio rental up 2.0% QoQ to S$8.78 psf).

Our fair value estimate of CCT remains unchanged at S$1.67. Since we downgraded the counter to a SELL rating on 22 Jan 2015, the unit share has fallen 8.2% and we will now upgrade to HOLD on valuation grounds.

Source: OCBC Research - 22 Apr 2015