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Sunday, May 22, 2022

CapitaLand Integrated Commercial Trust Review @ 22 May 2022

Basic Profile & Key Statistics
  • Main Sector(s): Retail, Office & Hospitality
  • Country(s) with Assets: Singapore, Australia, Germany, China, Malaysia
  • No. of Properties (exclude development/associate/fund): 25

Performance Highlight

Gross revenue and NPI have improved yoy slightly.

Shopper Traffic and Tenant Sales
Overall tenant sales psf has improved despite a decline in shopper traffic. 

Rental Reversion
Rental reversion is at negative 4.1% if compare year 1 rents vs outgoing final rents and negative 1.3% if compare incoming average rents vs outgoing average rents.

Acquisition & Divestment
From March to April, CICT has divested JCube and acquired 66 Goulburn Street, 100 Arthur Street and 70% interest in CapitaSky.

Development & Asset Enhancement Initiative
F&B tenants in CapitaSpring have opened since 1Q while retail units at L1 podium of 6 Battery Road have progressively been opened as well.

Tampines Mall would be part of the Tampines DDC (Distributed District Cooling) network, which is expected to be operational by 2025. CapitaGreen is performing an ongoing trial for the ClimaControl System QRW which could reduce the downstream chiller system energy consumption for more than 5%. Raffles City Singapore is performing another ongoing trial for LumenAire UV Air Disinfection system to improve indoor air quality. 

Sensitivity to Interest Rate
For every 1% increase in interest rate, DPU would be impacted by 0.20 cents per annum, which is around 1.9%.

Related Parties Shareholding

  • REIT sponsor's shareholding: Below median for more than 10%
  • REIT manager's shareholding: ± 10% from median
  • Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

  • Occupancy: ± 5% from median
  • WALE: ± 10% from median
  • Highest lease expiry within 5 years: ± 10% from median; Falls in 2024
  • Weighted average land lease expiry: ± 10% from median

Debt Profile

  • Gearing ratio: ± 10% from median
  • Cost of debt: ± 10% from median
  • Fixed rate debt %: Above median for more than 10%
  • Unsecured debt %: Above median for more than 20%
  • WADM: Above median for more than 20%
  • Highest debt maturity within 5 years: Below median for more than 20%; Falls in 2023
  • Interest coverage ratio: ± 10% from median

Diversification Profile

  • Top geographical contribution: Above median for more than 20%
  • Top property contribution: Below median for more than 20%
  • Top 5 properties' contribution: Below median for more than 20%
  • Top tenant contribution: Below median for more than 20%
  • Top 10 tenants' contribution: Below median for more than 20%

Key Financial Metrics

  • Property yield: Below median for more than 10%
  • Management fees over distribution: Below median for more than 10%; $8.20 distribution for every dollar paid 
  • Distribution on capital: Below median for more than 10%
  • Distribution margin: ± 10% from median

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: Above +1SD for 1y; Average for 3y & 5y
  • Dividend Yield: Below -1SD for 1y; Average for 3y; Below average for 5y

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow REIT Sponsor's Shareholding
High Fixed Rate Debt %Low Directors of REIT Manager's Shareholding
High Unsecured Debt %High Top Geographical Contribution
Long WADMLow Property Yield
Well Spread Debt MaturityLow Distribution on Capital
Low Top Property & Top 5 Properties ContributionsDPU Downtrend
Top Tenant & Top 10 Tenants Contributions 
Competitive Management Fees 
Interest Coverage Ratio Uptrend 
Property Yield Uptrend 
Distribution on Capital Uptrend

The performance is improved slightly as compared to the previous quarter. Moving forward, with the income contribution from CapitaSpring, 6 Battery Road and newly acquired 66 Goulburn Street,100 Arthur Street and 70% interest in CapitaSky, coupled with relaxation of COVID-19 restrictions, CICT performance is expected to improve in the coming quarters.


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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 due to 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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