• CapitaLand Integrated Commercial Trust's 1H21 DPU of S$0.0518 is in line, at 49.6% of our full-year forecast.
• Retail segment remains challenging near term; stable performance from office segment.
• Reiterate ADD rating on CapitaLand Integrated Commercial Trust, with a DDM-based target price of S$2.56.

CapitaLand Integrated Commercial Trust (CICT)'s 1H21 Results Highlights

• CapitaLand Integrated Commercial Trust (SGX:C38U) reported 1H21 gross revenue/NPI of S$645.6m/S$472.2m, up 102.8%/118.2% y-o-y, due to the inclusion of CCT’s contributions post-merger and consolidation of income from Raffles City Singapore (previously a JV).
• CapitaLand Integrated Commercial Trust's 1H21 distributable income of S335.9m (+206.2% y-o-y) translates to a DPU of S$0.0518. Committed portfolio occupancy stood at 94.9% as at end-1H21 (vs. 95.9% in 1Q21).

Tenant Sales Improved But Shopper Traffic Continues to Lag

• 1H retail occupancy was 97%. Portfolio retail sales in 1H21 beat 1H20’s by 5.3% but flat vs 2019’s level at 86.3%. Shopper footfall was 4.2% higher y-o-y but only 61.3% of 2019’s level, with suburban malls performing better than downtown malls on both metrics. Trade sectors that did well in 1H include jewellery & watches, home furnishing, and education.
• In 1H21, CapitaLand Integrated Commercial Trust renewed/leased 0.54m sq ft of retail space with a -9.1% reversion, although the decline rate slowed in 2Q. CapitaLand Integrated Commercial Trust has a remainder of 7.2% of retail leases by portfolio gross rental income to be renewed in 2H21. We anticipate the negative reversion to persist as tenants continue to adapt to a post-COVID-19 world.
• In 1H21, CapitaLand Integrated Commercial Trust granted S$18.9m of rental waivers to tenants, particularly during the first P2 (Heightened Alert) period.

Maintaining High Office Occupancy

• End-Jun office committed Lot One Shoppers’ Mall is currently undergoing fit-out works, on track to reopen in 2H21.
• Office space at 21 Collyer Quay has been handed over to WeWork, and the lease is set to commence in late-2021.
• With a 40.5% gearing, CapitaLand Integrated Commercial Trust said it would also continue to evaluate portfolio reconstitution including divestments and explore acquisition strategies, focusing on developed markets.

Reiterate ADD Rating on CICT

• We leave our FY21-23F DPU estimates for CapitaLand Integrated Commercial Trust unchanged and maintain our DDM-based target price of S$2.56.
• We believe CapitaLand Integrated Commercial Trust is well placed to benefit from a macro recovery given its diversified and stable earnings profile.
• Potential re-rating catalysts are slower rental recovery outlook.

Source: CGS-CIMB Research - 29 Jul 2021