CapitaLand Integrated Commercial Trust - DBS Research 2022-10-25: Recovery Surpassing Pre-COVID

• See CapitaLand Integrated Commercial Trust's announcement dated 21 Oct 2022 for its 3QFY22 business update:
  • Revenue and NPI grew 14% and 13% respectively, in line.
  • Gearing inched up to 41.2% vs 40.6% in 2Q22 and average cost of debt increased marginally to 2.5% vs 2.4% in 2Q22. Hedging ratio relatively stable at 80% and based on CapitaLand Integrated Commercial Trust’s sensitivity, a 100bps increase in floating rates would impact DPU by 0.30 cents (~3%).
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• Singapore office occupancy had the highest improvement, +3.1ppts to 96% from 92.9% in 2Q22 while Germany and Australia’s portfolio occupancy were relatively stable. Six Battery Road’s committed occupancy increased to 91.2% vs 87.4% in 2Q22. Occupancies at other Singapore office assets continue to inch up with CapitaSpring at full occupancy (99.9%), Asia Square Tower 2 at 99.5% and Capital Tower at 90.7% (vs 77% in 2Q22) as the remaining pending leases were completed in 3Q22.
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• 21 Collyer Quay, which is fully leased to WeWork, officially opened on 6 Sept.
• 9M22 office reversions remained strong at 7.9% but moderated q-o-q. Singapore office reversions remained strong but appears to have moderated to ~6% in 3Q22 vs 9% in 1Q22. Office average rents remained stable at S$10.52 psf.
• Estimated 3Q22 retail reversions have turned marginally positive led by suburban malls (+1.2%). Despite downtown malls still recording negative reversions, this has narrowed to -1.3% (estimated) in 3Q22 vs -4.2% in 2Q22.
• 9M22 tenant sales psf has surpassed 2019 levels. Tenant sales continue to improve with 9M22 recording +21.3% y-o-y vs +15.9% y-o-y in 1H22. Suburban malls continue to trend upwards (9M22: +10.7% y-o-y) while downtown malls saw stronger recovery trajectory. Shopper traffic saw similar trends.
• CapitaLand Integrated Commercial Trust expects to raise service charge from Jan 23 to partially offset higher cost especially utility costs.

CapitaLand Integrated Commercial Trust – Valuation & Recommendation

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Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2022-10-25 SGinvestors.io

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