Tuesday, October 22, 2013

CapitaCommercial Trust: Resilient to absence of OGS income support (OCBC)

CapitaCommercial Trust:
Fair value S$1.61
add: 12m dividend forecast S$0.08
versus: Current price S$1.44

Resilient to absence of OGS income support
• 3Q13 numbers within expectations
• Resilient DPU despite loss of OGS support
• Expect Grade A turning point in FY14

Distributable income for 3Q13 increased 1.6% YoY to S$58.8m mostly due to lower interest expenses and the distribution of S$1.7m in tax-exempt income from Quill Capita Trust (QCT), which offset the loss of income support from One George St (OGS).
Note that, going forward, CCT can still draw from S$10.9m of retained tax-exempt income from QCT, and also S$0.9m of retained taxable income from RCS Trust to be released in 4Q13. 9M13 distributable income cumulated to S$174.0m, up 2.2% YoY, which made up 75.9% of our FY13 forecast and is judged to be mostly within expectations. 3Q13 DPU is 2.04 S-cents which translates to a 5.7% distribution yield based on the last closing price of S$1.44. We expect CCT to benefit from an improving Grade A office market in FY14 as rental levels reach a turning point in an environment of resilient absorption and limited supply, with only CapitaGreen (~700k sq ft NLA) coming online in FY14 in the Core CBD sub-segment. Maintain BUY with an unchanged fair value estimate of S$1.61. (Eli Lee)

Distributable income up 1.6% YoY
Distributable income for 3Q13 increased 1.6% YoY to S$58.8m mostly due to lower interest expenses and the distribution of S$1.7m in tax-exempt income from Quill Capita Trust (QCT), which offset the loss of income support from One George St (OGS). Note that, going forward, CCT can still draw from S$10.9m of retained tax-exempt income from QCT, and also S$0.9m of retained taxable income from RCS Trust to be released in 4Q13. 9M13 distributable income cumulated to S$174.0m, up 2.2% YoY, which made up 75.9% of our FY13 forecast and is judged to be mostly within expectations. 3Q13 DPU is 2.04 S-cents which translates to a 5.7% distribution yield based on the last closing price of S$1.44.

Overall portfolio occupancy edged up to 97.6%
Over 2Q13, CCT’s overall portfolio occupancy edged up QoQ to 97.6% from 95.8% with ~347k sq ft of space being renewed or signed under new leases. In particular, we note that leasing activity was fairly positive at OGS as the group managed to backfill the bulk of the 9.4% in NLA vacated over 2H13 to maintain the asset’s occupancy level at 94.2%. Committed rents at OGS are in the range of S$8.6-S$10.0 psf pm and we understand management expects OGS occupancy to further improve ahead. Due to continued positive reversions, average committed office portfolio rentals increased QoQ to S$8.03psf from S$7.96psf. AEIs at 6BR and Raffles City remains on track to complete in 4Q13 and 2Q14, respectively, and we expect CCT to begin its S$40m AEI in Capital Tower in 4Q13. CapitaGreen also remains on track to complete by 4Q14.

Maintain BUY with unchanged S$1.61 fair value estimate
We expect CCT to benefit from an improving Grade A office market in FY14 as rental levels reach a turning point in an environment of resilient absorption and limited supply, with only CapitaGreen (~700k sq ft NLA) coming online in FY14 in the Core CBD sub-segment. Maintain BUY with an unchanged fair value estimate of S$1.61.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 21/10/13

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