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Sunday, October 24, 2021

CapitaLand Integrated Commercial Trust Review @ 24 October 2021

Basic Profile & Key Statistics

CapitaLand Integrated Commercial Trust (CICT) invests in mainly Retail and Office properties which currently owns 24 properties in Singapore and Germany.

Performance Highlight

The overall gross revenue and NPI have increased due to the merger with CapitaLand Commercial Trust in October 2021. Retail asset performance has also improved YoY. However, there is no apple to apple comparison for the office and integrated development performance. 

The tenant sales have recovered to 83.8% of the 2019 average despite shopper traffic at only 59.8% of the 2019 average.

Rental reversion is at negative 8% if compare year 1 rents vs outgoing final rents and negative 3.8% if compare incoming average rents vs outgoing average rents.

AEI for Lot One is completed where the cinema was opened on 24 September and library would be opened on 28 October. AEI for Six Battery Road is on track to complete by this year end. The newly announced AEI of Raffle City Singapore is expected to complete by 4Q 2022.

CapitaSpring is on track to complete by this year end where the committed occupancy is at 83.1%.

Related Parties Shareholding

  • REIT sponsor's shareholding is slightly low at 22.962%
  • REIT manager's shareholding is slightly low at 0.834%
  • Directors of REIT manager's shareholding is low at 0.012%

Lease Profile

  • Occupancy is moderate at 94.4%
  • WALE is short at 3 years
  • Highest lease expiry within 5 years is high at 30.6% which falls in 2022
  • Weighted average land lease expiry is long at 89.79 years

Debt Profile

  • Gearing ratio is high at 40.9%
  • Cost of debt is slightly low at 2.3%
  • Fixed rate debt % is slightly high at 84%
  • Unsecured debt % is high at 95.1%
  • WADM is long at 4.1 years
  • Highest debt maturity within 5 years is low at 17% which falls in 2023
  • Interest coverage ratio is moderate at 4.1 times

Diversification Profile

  • Top geographical contribution is high at 94.8% 
  • Top property contribution is low at 13.2% 
  • Top 5 properties contribution is low at 41.7% 
  • Top tenant contribution is low at 5.1% 
  • Top 10 tenants contribution is low at 20.8%

Key Financial Metrics

  • Property yield is low at 4.2%
  • Management fees over distribution is low at 11.6% in which unitholders receive S$ 8.62 for every dollar paid 
  • Distribution on capital is high at 4.3%
  • Distribution margin is slightly high at 53.8%

Trends

  • Slight Uptrend - NAV per Unit
  • Flat - Distribution Margin
  • Slight Downtrend - Distribution on Capital
  • Downtrend - DPU, Interest Coverage Ratio, Property Yield

Relative Valuation

  • P/NAV - Average for 1y, 3y & 5y
  • Dividend Yield - Above average for 1y & 3y; Average for 5y

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow Directors of REIT Manager's Shareholding
Long Weighted Average Land Lease ExpiryShort WALE
High Unsecured Debt %Concentrated Lease Expiry
Long WADMHigh Gearing Ratio
Well Spread Debt MaturityHigh Top Geographical Contribution
Low Top Property & Top 5 Properties ContributionsLow Property Yield
Low Top Tenant & Top 10 Tenants ContributionsDPU Downtrend
Competitive Management FeesInterest Coverage Ratio Downtrend
High Distribution on CapitalProperty Yield Downtrend

The performance has improved as compared to the previous quarter but declined slightly as compared to 1Q 2021. Although the extension of the COVID-19 restriction (until 21 Nov) would continue to impact CICT performance, the vaccinated travel lane (VTL) might be able to make up for some gaps. For CapitaSpring, the income contribution would start progressively in 1H 2022, which would further boost CICT performance. 


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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