• Results within expectations
• Occupancy rates improved to 98.1%
• Maiden MTN issue in 1Q16

1Q16 numbers within expectations

CCT’s 1Q16 distributable income increased by 3.3% YoY to S$64.8m mostly due to higher distributable income from its interests in CapitaGreen and Raffles City Singapore (RCS), respectively. 1Q16 gross revenues and NPI, however, dipped 1.9% and 3.6% YoY to S$66.9m and S$52.0m, respectively, largely because of higher property tax and lower occupancy rate at Capital Tower. We judge this set of results to be within expectations, as 1Q16 distributable income and net property income formed 24.1% and 26.3% of our full year forecast, respectively.

Portfolio occupancy rates improved to 98.1%

CCT’s overall occupancy rates improved QoQ to 98.1% in 1Q16 from 97.1% last quarter; and due to active lease management (including a 22k sq ft lease on the 12th floor to offer co-working spaces), Capital Tower’s occupancy rate increased substantially from 94.1% to 98.1%.

The trust also signed ~162k of new leases and renewals in 1Q16, of which more than half are new leases. In terms of monthly average office rents, CCT’s portfolio rents similarly improved 0.7% QoQ to S$8.96 psf from S$8.90. That said, we see the scope for meaningful positive rental reversion ahead to be limited given a weak outlook for Grade A office rents, which is forecasted to dip 10% in 2016.

Maiden HK$ MTN issuance in Mar 2016

There are key debt maturities in 2016 from RCS’s borrowings (S$480m fixed rate notes at 3.09%, S$120m term loan at 3.025% and S$40m revolving facility loan) and we understand that management has already largely lined up unsecured bank facilities to refinance this.

In end Mar 2016, the trust also issued its maiden HKD medium term note amounting to HK$525m (S$102.5m) at an all-in S$ fixed interest rate of 2.7% p.a. for five years maturing in Mar 2021. The trust’s balance sheet remains healthy with a relatively low gearing of 30.1%. Maintain HOLD with an unchanged fair value estimate of S$1.39.

Source: OCBC Research - 18 Apr 2016