Improving outlook
- 1H22 DPU of 5.22 Scts was deemed in line, at 46.3% of our FY22F forecast.
- Office and retail segments performed better, driven by acquisitions and organic improvement.
- Reiterate Add rating with an unchanged TP of S$2.57.
1H22 results highlights
CICT reported 1H22 revenue/NPI of S$687.6m/S$501.6m, up 6.5%/6.2% yoy, due to contributions from CapitaSky and 3 Australian assets as well as better performance of its existing portfolio, partly offset by divestment of JCube and higher operating expenses. NPI margin dipped slightly from 73.1% in 1H21 to 72.9% in 1H22. Distribution income of S$347.3m translates to DPU of 5.22 Scts, +0.8% yoy and flat hoh. Overall portfolio occupancy stood at 93.8%. Gearing rose slightly to 40.6% at end-1H with 81% of total debt hedged to fixed rates. Management guided that for every 1% pt change in average funding cost, DPU could be impacted by 0.28 Scts.
Higher retail revenue on better tenant sales and shopper traffic
CICT reported 1H retail revenue/NPI of S$276m/S$197m, +3.1%/4.5% yoy. Retail occupancy stood at 96.5% at end-1H. Tenant sales improved 15.9% yoy (+26.4% for downtown malls) while shopper traffic rose 12.5% yoy. CICT also benefited from improved tenant performance with gross turnover rent making up 7% of retail revenue. Meanwhile, retail rental reversion averaged -0.5% in 1H, an improvement over the -1.3% reported in 1Q. That said, excluding Raffles City Singapore, which is undergoing rejuvenation of tenant mix, average rent reversion would have been +1.1% in 1H22. Suburban malls performed well, achieving rental reversion of 1.2% in 1H. The best performing tenant trade sectors in 1H include entertainment, shoes & bags, department store, fashion and sporting goods categories.
New acquisitions and higher occupancy boost office performance
Office revenue grew 11.9% yoy to S$214.9m in 1H, while NPI increased 10.8% yoy to S$163m with the acquisition of CapitaSky in Apr 22 and purchase of 66 Goulburn St and 100 Arthur St in Australia in Mar 2022 and 101 Miller in Jun. 21 Collyer Quay also commenced contributions during this period. Occupancy improved to 91.9% in 1H. Rental reversion was +8.5% yoy, with a 91.4% retention rate. CICT renewed 1.1m sqft in 1H (2Q: 290.5k sqft), with demand coming from the financial services, IT, media, telecoms and business consultancy sectors. CapitaSpring’s take-up rate improved to 99.5% while Raffles City Singapore office saw take-up rising to 99.4% in 1H. We expect the full impact of contributions from the new properties to be felt from 2Q22F onwards. Looking ahead, we believe CICT remains well-positioned to explore inorganic growth opportunities.
Reiterate Add rating
We keep our FY22-24F DPU estimates unchanged and 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. Potential re-rating catalysts are more clarity on its asset enhancement/redevelopment plans. Downside risks include slower-than-expected portfolio value creation and slower rental recovery outlook.
