Share price: SGD1.43
Target price: SGD1.50 (from SGD1.28)
All Eyes on CapitaGreen
Expect slightly better performance in FY14. CapitaCommercial Trust (CCT) has 13% of gross rental due for review and renewal in 2014. We expect marginal improvement in passing rents and occupancies for its existing portfolio in the new year, given that the next batch of sizeable Grade A office supply (CapitaGreen and South Beach) will come on-stream only in 4Q14. We forecast DPU CAGR of 2.6% over FY13F-FY15F.
All eyes on CapitaGreen. The 700,000-sq-ft CaptalGreen is on track to complete by 4Q14. CCT has a 40% stake in this development but has yet to announce any pre-commitments. Should the leasing market stay anaemic for the best part of 2014, there is a slight possibility that the pre-leasing activities at CapitaGreen may coincide with the marketing efforts to fill up the 782k sq ft at Asia Square Tower 2 and 527k sq ft at South Beach Development.
Capital Tower backfill by sponsor. CapitaLand Group announced in August that it will retain its corporate headquarters at Capital Tower in the CBD, reversing its intention a year ago to move to Westgate Tower. It was originally slated to occupy half of Westgate Tower, but instead signed a long-term lease for 100k sq ft at Capital Tower, including its existing occupied space on Level 30. The group is also in advanced talks to lease another 40k sq ft of space at Capital Tower. Upon the completion of this lease negotiation possibly in 4Q13, Capital Tower’s committed occupancy rate will be 100% (3Q13: 97.1% and the area leased to CapitaLand by CCT will go up from the existing 21k sq ft to 140k sq ft by 2015). With the increase, CapitaLand is expected to become the third-largest tenant in Capital Tower and fifth-largest tenant in CCT’s portfolio.
Up TP to SGD1.50. We will be monitoring closely CCT’s efforts to minimise the impact of the expiry of One George Street’s yield protection, as well as the progress of CaptiaGreen leasing. The next significant uplift in DPU is expected only in FY15, after the completion of CapitaGreen. Reiterate HOLD with the TP raised to SGD1.50 in anticipation of positive rental reversions in FY13F-14F.
Publish date: 06/12/13