CapitaLand Integrated Commercial Trust - DBS Research 2023-02-02: Going From Strength To Strength

• CapitaLand Integrated Commercial Trust (CICT, SGX:C38U)'s FY22 DPU +2% y-o-y to S$0.1058, in line. 2H22 DPU +3% y-o-y to S$0.0536.
• 4Q22 revenue and NPI was relatively stable, +2% q-o-q and - 2% q-o-q to S$380m and S$268m, respectively.
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• Average cost of debt inched up by 20bps q-o-q to 2.7% from 2.5% in 3Q22.

CICT's portfolio performance was stable with positive contributions from completed AEI

• CapitaLand Integrated Commercial Trust's portfolio occupancy is stable at 95.8% vs 95.1% in 3Q22, mainly led by the retail portfolio (1.5ppt q-o-q), while office was stable and integrated developments saw a slight dip (- 0.4ppt q-o-q), possibly due to the AEI at Raffles City, Singapore.
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• Estimated 4Q22 retail reversions have turned positive. This was led by suburban malls (+2.6%) and downtown malls, which have turned positive (+0.9%) for the first time.
• FY22 tenant sales psf remained higher than 2019 levels with the highest improvements seen in leisure & entertainment, shoes & bags, and department stores. Tenant sales continue to improve +25% y-o-y in FY22 vs +22% y-o-y in 9M22. Suburban malls continue to trend upwards (FY22: +11.5% y-o-y) while downtown malls saw a stronger recovery trajectory (+38.1%). Shopper traffic saw similar trends.
• AEIs have been completed at Raffles City Singapore and Six Battery in 2022 and we expect more positive contributions going into 2023. AEI at CQ@ Clarke Quay is on track to be completed by 3Q23. Two new operations, The Singapore Club and Drinks&Co. Grill, were successfully signed and are expected to begin operations in 2Q23.
• CapitaLand Integrated Commercial Trust has raised its service charges from Jan 23, to partially offset rising costs, and have hedged energy rates for 2023.
• Portfolio valuation (like-for-like basis) was relatively stable (+0.5%), despite its Germany portfolio seeing a valuation decline (-18.5%). Cap rates remained relatively stable except for its Germany portfolio, which saw its discount rate expand by 25bps to 135bps and terminal yield expand by 20bps to 25bps. Valuation for Gallileo was impacted by the impending departure of Commerzbank in Jan 24.

Maintain BUY; raised target price to S$2.40.

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Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-02-02 SGinvestors.io

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