Monday, October 7, 2013

CapitaCommercial Trust : Reasonable return, decent growth, fair value (Nomura)

CapitaCommercial Trust
Target price Increased from 1.46 - SGD 1.48
Closing price September 27, 2013 SGD 1.48
Reasonable return, decent growth, fair value

Action: Neutral; reasonable return, decent growth but fair value
CCT has underperformed the other REITs year to date (-12.2%, vs. FSTREI’s -5.6%). Our “true” yield analysis suggests CCT offers a reasonable return over the long term risk-free rate even if we were to remove all short-term distribution boosts (“true” yield spread 2.1pp, vs. trough spread 1.4pp). Projected DPU growth profile is decent (3-year CAGR = 3%) with one of the strongest balance sheets in the sector (gearing = 0.29x as of end-June). That being said, the current valuation appears to have already priced in most of the positives, in our view.

Catalyst: Maiden pre-commitment at CapitaGreen?
Incremental leasing demand is likely to continue to be driven by nonbanking sectors, which should translate into better occupancy for 6 Battery Road when its asset enhancement is completed by end-2013, in our view. Another potential catalyst could be the announcement of CapitaGreen’s maiden pre-commitment in coming months.

Valuation: TP raised to SGD1.48 (from SGD1.46)
We raise our TP to SGD1.48 (from SGD1.46) to chiefly reflect a higher NAV estimate (SGD1.52 to SGD1.57; higher valuation for 60% stake in Raffles City hotel).

As a cross-check, our current TP translates into a P/B multiple of 0.9x based on the end-June book value of SGD1.65, which is in line with the average multiple that CCT has traded at since 2005.

Our TP SGD1.48 implies a potential total return of 5.4% (nil potential upside + FY14F yield of 5.4%). Maintain Neutral.

Source/Extract/Excerpts/来源/转贴/摘录: Nomura-Research,
Publish date: 02/10/13

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