CapitaLand Commercial Trust (CCT) reported its 1Q17 results this morning which met our expectations. Gross revenue and NPI jumped 33.9% and 34.3% YoY to S$89.5m and S$69.9m, respectively, with the latter forming 24.6% of our FY17 forecast.

This was largely driven by its increased stake in CapitaGreen (now at 100% after the completion of the stake acquisition in Aug 2016) and higher portfolio occupancy rate. DPU grew 9.6% YoY to 2.40 S cents and accounted for 25.7% of our full-year projection.

Operationally, CCT’s portfolio committed occupancy improved 0.7 ppt QoQ to 97.8%, as at 31 Mar 2017; while its average gross rent declined marginally by 0.2% QoQ to S$9.18 psf/month for the quarter.

Some negative rental reversions were likely recorded, as committed rents were S$10.70-S$12.00 for Six Battery Road and S$9.00-S$11.20 for One George Street, versus average expired rents of S$14.17 and S$10.83, respectively.

On a positive note, CCT announced that it had obtained provisional permission from URA with regards to its plans to redevelop Golden Shoe Car Park. CCT will decide on the next course of action pending the outcome of a feasibility study subject by SLA of the amount of differential premium payable.

We maintain our HOLD rating and S$1.53 fair value estimate on CCT.

Source: OCBC Research - 19 Apr 2017