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Wednesday, February 16, 2022

CapitaLand Integrated Commercial Trust Review @ 16 February 2022

Basic Profile & Key Statistics

CapitaLand Integrated Commercial Trust (CICT) invests in mainly Retail and Office properties which currently owns 23 properties in Singapore and Germany.

Performance Highlight

Gross revenue, NPI and distributable income have increased YoY due to enlarged portfolio from the merger with CapitaLand Commercial Trust in October 2020. However, DPU is lower due to the enlarge unitholders base from merger.

Tenant Sales & Shopper Traffic

The shopper traffic and tenant sales for 4Q are similar to 3Q due to phase 2 heightened alert and stabilization phase which ended in 21 Nov. After which, some slight improvement achieved in 4Q. As compared to 2019 average, FY21 tenant sales has recovered to 87.8% despite shopper traffic at only 61.2%.

Rental Reversion

Rental reversion is at negative 7.3% if compare year 1 rents vs outgoing final rents and negative 3.2% if compare incoming average rents vs outgoing average rents.

Acquisition
In December, CICT has announced for the proposed acquisition of 3 Australian properties. These acquisitions are expected to be completed in 1Q 2022. 

Divestment

In January 2022, CICT announced for divestment of JCube, which is expected to be completed in 1Q 2022. Besides this, CICT has also completed the divestment of George Street in December 2021.

Development

CapitaSpring has achieved TOP in Nov 2021. Leased to be commenced progressively starting from 1Q 2022. 

Asset Enhancement Initiatives

AEI for 21 Collyer Quay has completed where WeWork lease is commenced in December 2021. AEI for Six Battery Road is targeted to TOP in 1Q 2022. AEI for Raffle City Singapore has commenced in January 2022 and expected to be completed in 4Q 2022. 


Related Parties Shareholding

  • REIT sponsor's shareholding is low at 22.565%
  • REIT manager's shareholding is low at 0.818%
  • Directors of REIT manager's shareholding is low at 0.01%

Lease Profile

  • Occupancy is moderate at 93.9%
  • WALE is short at 3.2 years
  • Highest lease expiry within 5 years is moderate at 26.7% which falls in 2022
  • Weighted average land lease expiry is long at 89.54 years

Debt Profile

  • Gearing ratio is moderate at 37.2%
  • Cost of debt is moderate at 2.3%
  • Fixed rate debt % is slightly high at 83%
  • Unsecured debt % is high at 95%
  • WADM is long at 3.9 years
  • Highest debt maturity within 5 years is low at 17% which falls in 2023
  • Interest coverage ratio is low at 4.1 times

Diversification Profile

  • Top geographical contribution is high at 95.1% 
  • Top property contribution is low at 14.4% 
  • Top 5 properties contribution is low at 42.4% 
  • Top tenant contribution is low at 4.9% 
  • Top 10 tenants contribution is low at 20.8%

Key Financial Metrics

  • Property yield is low at 4.4%
  • Management fees over distribution is low at 12.2% in which unitholders receive S$ 8.20 for every dollar paid 
  • Distribution on capital is low at 3.1%
  • Distribution margin is slightly high at 50.7%

Trends

As CapitaLand Mall Trust and CapitaLand Commercial Trust merger was completed in 4Q 2020, so let's focus on after this period.
  • Uptrend - Interest Coverage Ratio, Property Yield, Distribution on Capital
  • Flat - NAV per Unit, Distribution Margin
  • Downtrend - DPU

Relative Valuation

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

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow REIT Sponsor's Shareholding
Long Weighted Average Long Lease ExpiryLow REIT Manager's Shareholding
High Unsecured Debt %Low Directors of REIT Manager's Shareholding
Long WADMShort WALE
Well Spread Debt MaturityLow Interest Coverage Ratio
Low Top Property & Top 5 Properties ContributionsHigh Top Geographical Contribution
Low Top Tenant & Top 10 Tenants ContributionsLow Property Yield
Competitive Management FeesLow Distribution on Capital
Interest Coverage Ratio UptrendDPU Downtrend
Property Yield Uptrend 
Distribution on Capital Uptrend

The performance of 2H has improved slightly as compared to 1H. Moving forwards, CICT performance is expected to improve further with the contributions from CapitaSpring, 21 Collyer Quay as well as 3 Australian properties acquisition (target to complete in 1Q 2022). The gradual recovery and more employees return to work should benefits CICT as well.


You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts


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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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