CapitaLand Integrated Commercial Trust - DBS Research 2024-08-14: Dividend Growth A Surprise

• CapitaLand Integrated Commercial Trust (SGX:C38U)’s 1H24 revenues and net property income (NPI) came in at S$791.9mil (+2.2% y-o-y, +0% h-o-h) and S$582.4mil (+5.4% y-o-y, +3% h/h), respectively. The stronger growth in net property income was driven by stringent cost containment measures, savings from utilities, and reimbursement under the new property management agreement.

1H24 showed strong momentum; retail portfolio was resilient, office continued to deliver strong reversions.

• - Read this at SGinvestors.io -
• Distributable income increased by a smaller +3.7% y-o-y due to slight y-o-y increase in interest costs, translating to a DPU of 5.43 cents (+2.5% y-o-y), ahead of estimates. See CapitaLand Integrated Commercial Trust's distribution dates.

Our view

Resilient financial metrics.

• - Read this at SGinvestors.io -
• The MAS leverage ratio remained stable at 39.8% (+0.2 ppt q-o-q), with debt (+perpetual)/asset ratio steady at 38.3%. We note that these percentages remain conservative at <40%, reflecting the management’s conservative financial management style.
• Overall interest cost was 3.5% (flat q-o-q) but cost should remain close to this level. However, it could drop if the interest rate environment turns down, mainly from the REIT’s floating rate debt. As such, adjusted interest coverage ratio (ICR) remains stable and comfortable at 3.0x (flat q-o-q) and our calculated adjusted EBITDA ICR ratio (accounting for perpetual securities distributions) is at ~3.1x.

Robust operational metrics.

• Read more at SGinvestors.io.

Derek TAN DBS Group Research | Geraldine WONG DBS Research | https://www.dbs.com/insightsdirect/ 2024-08-14 SGinvestors.io

---