CapitaLand Integrated Commercial Trust could scale up on asset base, says Maybank

• CapitaLand Integrated Commercial Trust share price dips to S$2.18 per share
• Its gross revenue grew 64% in the first quarter, following the CCT-CMT merger
• RHB expects CapitaSpring’s signing rents to be around S$10-12 per square foot
• CIMB’s research team said CICT will likely benefit from a macroeconomic recovery
• Buy and sell CICT stocks with an IG account

Is CICT’s stock a ‘buy’?

Shares of Singapore’s biggest mall and office landlord, CapitaLand Integrated Commercial Trust (CICT), were trading 0.5% lower at S$2.18 as of 11:24 SGT on Tuesday, a day after it released business updates for 1Q2021.

RHB, maintaining ‘neutral’ on CICT units with a S$2.10 target, cited the stock’s ‘fair’ valuation at 1.1 times price-to-book-value ratio and its 5% yield.

Maybank analyst Chua Su Tye stayed at ‘buy’ with a S$2.55 target price. Near-term catalysts could come from a recovery in distribution per unit (DPU) in 2021 and medium-term earnings upside, he noted.

CICT is ‘well placed to benefit from a macro recovery given its diversified and stable earnings profile’, said CIMB, which reiterated ‘add’ on CICT shares and a S$2.56 target price.

Is the larger Reit set for growth?

On Monday morning (26 April), CICT announced that its net property income for the first quarter of 2021 had jumped 67% year-on-year to S$247.1 million, while gross revenue was up 64% to S$334.8 million.

That came after the merger of CapitaLand Commercial Trust and CapitaLand Mall Trust to form CICT in the fourth quarter of 2020.

Maybank’s Chua sees upside from the combined Reit’s higher development headroom. ‘We expect CICT to scale up on its enlarged asset base, supported by 40.8% gearing and S$3.8 billion debt headroom,’ he wrote.

Although the sponsor CapitaLand (SGX: C31) offers a S$5.2 billion acquisition pipeline, Maybank believes CICT may prioritise value-accretive asset enhancement initiatives and redevelopment plans. For these, its less-resilient downtown malls - Raffles City, Clarke Quay and Plaza Singapura - could be key candidates, Chua said.

RHB’s research team noted that CICT’s portfolio occupancy dipped slightly to 95.9% while rents remained under pressure. Its office assets’ negative rent reversions were attributed mainly to the backfilling of one large space that was given back.

‘On the positive side, 1Q tenant sales at its malls exceeded last year’s figure, while office leasing enquiries have picked up,’ RHB added.

What’s next for CapitaSpring?

CapitaSpring is a 51-storey integrated development comprising Grade A office, a 299-room service residence, ancillary retail space, and a food centre.

CICT said CapitaString is on track to complete in the second half of this year. Half of its total net lettable area has been inked for committed occupancy as of 15 April 2021; another 15% is under advanced negotiations.

RHB expects signing rents to be in the range of S$10-12 per square foot. The banking sector accounted for 70% of the leases committed so far, with anchor tenant JPMorgan moving out of Capital Tower, RHB noted.

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