- BUY Entry – 2.19 Target – 2.35 Stop Loss – 2.14
- CapitaLand Integrated Commercial Trust (CICT) is the first and largest real estate investment trust (REIT) listed on Singapore Exchange Securities Trading Limited (SGX-ST). CICT owns and invests in quality income-producing assets primarily used for commercial (including retail and/ or office) purposes, located predominantly in Singapore.
- A strong set of FY21 financials. CICT recorded gross revenue of S$1.3bn and distributable income of S$687.4mn in FY2021, an increase of 75.1% and 83% YoY respectively. DPU stood at 10.4 SG Cents in FY21, up 19.7% YoY from 8.69 SG Cents. As of 31 December 2021, CICT’s aggregate leverage was 37.2%, well below MAS’ regulatory limit of 45% to 50%. The average cost of debt was stable at 2.3% per annum.
- Reopening play. The Singapore government announced on 25 March 2022 that all vaccinated travellers can enter Singapore without quarantine from the first of April. Travellers will no longer be required to take only designated flights to enter Singapore quarantine-free, and will not have to take the antigen rapid test (ART) within 24 hours of arrival. This latest round of easing will make travelling as seamless as it was before the pandemic. Out of CICT’s Retail REIT portfolio, Clarke Quay’s occupancy was the lowest at 73.5% as of 31 December 2021. The recent easing of regulations which includes alcohol after 1030pm and the upcoming reopening of all nightlife activities, such as clubs and discos starting 19 April is expected to boost the laggard retail mall. As for CICT’s Office REIT portfolio, the occupancy rate is currently at 91.5% and further upside is driven by the relaxation to 75% of workers being able to return to office, compared to 50% previously.
- Inflationary hedge. Out of CICT’s total borrowings of S$8.6bn as of 31 December 2021, 83% are on fixed interest rates, which is able to shield the impact of upcoming interest rate hikes. In addition, because rents and property value tend to increase amidst the increase in overall prices, the REITs whose properties are able to capitalise on that can provide an inflation hedge.
- Recent acquisitions. On Friday (Mar 25), CICT and CapitaLand Open End Real Estate Fund (Coref) announced that they had entered into an agreement to acquire 79 Robinson Road with a respective 70% and 30% ownership.
- Positive consensus estimates. Currently, CICT has a consensus rating of 17 BUYS, 3 HOLDS and 0 SELL, and a 12M TP of S$2.44.The FY22F/23F dividend yield is 5.1%/5.3%.
Capitaland Integrated Commercial Trust (CICT SP) (Source: Bloomberg)