Looking forward to an even better 2H
? 2H/FY21 DPU are in line, at 49.6%/98.7% of our FY21 forecasts.
? Continued recovery in retail sales, new office contributions boost from 2H22.
? Reiterate Add rating with a DDM-based TP of S$2.57.
2H21 results highlights
CICT reported 2H21 gross revenue/NPI of S$659.4m/478.9m, +54.5%/61.6% yoy, thanks to the merger with CCT and consolidation of Raffles City Singapore contributions. 2H21 DPU of 5.22 Scts is 8.9% lower yoy due to a high base in 2H20 with the release of income held back in 1H20. Excluding this, DPU would have been higher yoy. Overall committed portfolio occupancy slipped slightly qoq to 93.9%, with retail at 96.4% with weighted average lease expiry lengthened to 3.2 years. CICT revalued its portfolio up by 3.5%,
bringing its BV/unit to S$2.06.
Continued recovery in the retail segment
CICT’s FY21 retail tenant sales were up 12.2% yoy and recovered to 99.8% of FY20 levels (87.8% of FY19) with suburban malls performing better, while shopper traffic also improved to 97.8% of FY20 volume (61.2% of FY19 level). CICT renewed 1.05m sqft of leases in FY21 and achieved average rental reversion was -3.2% vs. a year ago and -7.3% from FY19. CICT has 32%/25% of its retail gross rental income to be renewed in FY22/23F. Asset enhancement initiatives at Raffles City Singapore are ongoing to reconfigure the level 1 to 3 space to create smaller units for large format and specialty stores and improve vertical connectivity of the three levels. The makeover is targeted for completion by 4Q22. The space is currently about 30% pre-committed. Plans to makeover Clarke Quay are currently also under review. Looking ahead, management guided that it is cautiously optimistic on rental reversions for FY22F.
Expect better office contributions from 2H22F
Singapore office committed occupancy stood at 90.4% at end-FY21. It saw an increase in expansion leasing enquiries, coming from the TMT, banking and financial services and maritime and logistics sectors. CICT has completed renewals or is negotiating leases for c.85% of the 21.7% of leases expiring in FY22F, with another 13.7% expiring in FY23F. Meanwhile, CapitaSpring is 91.5% pre-leased. The committed leases, including WeWork’s lease, are expected to contribute to income progressively from 2H22. CICT continues to reconstitute its portfolio and optimise its balance sheet. It announced the purchase of a 50% stake in 101-103 Miller St and Greenwood Plaza in Sydney for S$409.3m in Dec 2021 and the divestment of JCube for S$340m. CICT is well placed to tap into inorganic growth opportunities, particularly in Singapore, Australia and Germany. Gearing stands at 37.2% as at end-FY21 (c.40% including recent Australian acquisitions).
Reiterate Add rating
We tweak down our FY22-23F DPU estimates marginally by 1.37-1.57% post results as well as factor in the impact of S$250m private placement done in Dec 21 and the Miller St and JCube transactions. We maintain our DDM-based TP of S$2.57. We believe CICT is well placed to benefit from a macro recovery given its diversified and stable earnings profile. Re-rating catalysts are more clarity on asset enhancement/redevelopment plans. Downside risks include slower-than-expected portfolio value creation and slower rental recovery outlook.