1Q2022 Business Update: En route to recovery
- CICT’s revenue and NPI saw 1.5% and 0.5% y-o-y increase respectively, in line.
- Key Positives: i) higher signing office rents with vacancy progressively being backfilled; ii) progressive recovery in retail, and can expect more after further relaxation measures, iii) new asset acquisition to start contributions, mainly in 2Q22.
- Key Negatives: i) retail rental reversions remain negative, though improvement seen q-o-q; ii) higher utility costs may see some impact to DPU.
- Maintain BUY; TP of S$2.45. CICT is a reopening play coupled with increased pace of asset recycling into accretive assets.
| Summary of results | 1Q2022 | 4Q2021 | % q-o-q | 1Q2021 | % y-o-y |
| Revenue (S$m) | 339.7 | 330.4 | 3% | 334.8 | 1% |
| NPI (S$m) | 248.3 | 236.3 | 5% | 247.1 | 0% |
| Gearing (%) | 39.1% | 37.2% | 1.9 ppt | 40.8% | -1.7 ppt |
| Average cost of debt (%) | 2.3% | 2.3% | 0 ppt | 2.4% | -0.1 ppt |
| WALE (yrs) | 3.7 | 3.2 | 0.5 | 4.1 | -0.4 |
| ICR (x) | 4.2 | 4.1 | 0.1 | 3.7 | 0.5 |
| Key Operational Data | 1Q2022 | 4Q2021 | % q-o-q | 1Q2021 | % y-o-y |
| Portfolio occupancies | 93.6% | 93.9% | -0.3 ppt | 95.9% | -2.3 ppt |
| Retail | 96.6% | 96.8% | -0.2 ppt | 97.1% | -0.5 ppt |
| Office | 91.4% | 91.5% | -0.1 ppt | 94.9% | -3.5 ppt |
| Integrated Developments | 97.6% | 96.0% | 1.6 ppt | n/a | n/a |
| Rental reversions (%) | |||||
| Retail (cumulative) | -4.1% | -7.3% | 3.2 ppt | -ve double digit | n/a |
| – suburban | -0.2% | -2.4% | 2.2 ppt | n/a | n/a |
| – downtown | -7.1% | -13.8% | 6.7 ppt | n/a | n/a |
| Office (cumulative) | 9.3% | -1.5% to 13% | n/a | -4% to 1.4% | n/a |
| Portfolio WALE (years, GRI) | 3.7 | 3.2 | 0.5 | 3.1 | 0.6 |
| Retail | 2.0 | 1.9 | 0.1 | 1.8 | 0.2 |
| Office | 4.0 | 3.2 | 0.8 | 3.0 | 1 |
| Integrated development | 5.4 | 5.0 | 0.4 | 5.0 | 0.4 |
| Shopper Traffic (y-o-y, cumulative) | -5.3% | -2.2% | -3.1 ppt | -24.7% | 19.4 ppt |
| Tenant Sales (y-o-y, cumulative)) | 0.6% | -0.2% | 0.8 ppt | 2.9% | -2.3 ppt |
| Av office rent (S$psf pm) – SG | 10.49 | 10.33 | 2% | 10.28 | 2% |
Key Highlights / Observations
Office rents continue to trend upwards with vacancy progressively being filled; progressive recovery from retail in both rents and tenant sales though a little slower; locked in higher utility rates in FY22.
- Portfolio occupancy inched down marginally to 93.6% from 93.9% in 4Q21 mainly due to lower occupancy in Clarke Quay (retail ex Clarke Quay at 98.3%) and newly acquired Australian asset (75.5% as at Mar22; 79.1% including leases executed / under advanced negotiation in Apr22).
- CapitaSpring occupancy is close to 100% while Six Battery Road committed occupancy is at 88%. CapitaSpring has achieved 98.5% occupancy as at Mar22 vs 91.5% in Dec21. Six Battery Road AEI will TOP in Feb22 with committed occupancy of 88.4%. Overall, Singapore office occupancy increased to 92.3% vs 90.4% in 4Q21.
- Retail reversions improved though still negative. The negative retail rental reversions have narrowed further to -4.1% vs -7.3% in 4Q21. Suburban malls recorded minimal negative reversions at -0.2% while Downtown malls saw reversions improved to -7.1% vs -13.8% in 4Q21.
- Office average signing rents +1.5% to S$10.49psf with strong reversions recorded of 9.3% in 1Q22. Physical occupancy currently stood at 47% for the week ended 22 Apr 2022.
- 1Q22 tenant sales improved 0.6% y-o-y. Based on ballpark estimate, 1Q22 tenant sales is still a little below or on par with pre-COVID levels. Interestingly, tenant sales were led by improvement at downtown malls.
- Higher utility cost is estimated to have a c.4% to 5% impact on FY21 DPU. CICT has signed fixed energy rate until end of 2022 which is almost double of the previous contract which expired end of 2021. It is estimated that the doubling of FY21 utilities cost would have a c.4% to 5% impact on FY21 DPU.
- Interest rates sensitivity of +1% p.a. has 0.2 Scents impact on DPU.
- Gearing expected to increase to 41% post the latest acquisition of CapitaSky (79 Robinson Road) vs 39.1% as at Mar22.
More details after the briefing on 4 May.