Skip to content
Alpha Edge Investing

Alpha Edge Investing

"Investors operate with limited funds and limited intelligence, they don’t need to know everything. As long as they understand better than others, they have an edge.” – George Soros

  • Home
  • Earnings Updates/ Corporate Actions
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trust/ ETF
  • News
  • My Opinions/ Views
  • Others
  • About Me
  • Contact
  • Disclaimer
  • Community and Support Forums
  • Toggle search form

CIMB: Lendlease Global Commercial REIT – Add Target Price $1.02 (Previous $1.05)

Posted on August 11, 2022August 11, 2022 By alanyeo No Comments on CIMB: Lendlease Global Commercial REIT – Add Target Price $1.02 (Previous $1.05)

Recovery in tenant sales outstripping market

  • 2H/FY22 DPU of 2.45/4.85 Scts were in line at 51%/102% of our FY22F.
  • Portfolio occupancy was high at 99.8% with more organic growth expected.
  • Reiterate Add with lower DDM-based TP of S$1.02.
FY22 earnings lifted by acquisition of Jem and strong reopening

FY22 revenue/NPI grew by 29.3%/32.7% yoy to S$101.7m/S$75.5m, boosted by the accretive acquisition of Jem and better operating performance at [email protected] Consequently, DI/DPU grew by 29.7%/3.6% yoy. FY22 NPI margins improved yoy from 72.4% to 74.3% and are expected to remain at this normalised level. Tenant sales are c.15-18% above pre-COVID levels vs. market’s 10%. We understand that [email protected] has achieved higher pre-COVID sales level compared to Jem, lifted by returning tourists.

Organic growth on retail recovery and inflation-linked escalation

[email protected] and Jem have maintained high occupancy of 99.9% and 99.5%, respectively. FY22 reversions for [email protected] and Jem have been positive, with the former coming in at 3.6%. Going forward, we expect demand for these two well located, dominant malls to persist, keeping occupancy high. Portfolio valuation gained 2.5% yoy, attributable to uplift in market rents and improved market outlook while cap rates remain stable. Occupancy cost increased by 7-8% on the back of positive reversions, but remain c.10-15% below pre-COVID levels, implying more room for rental growth. Meanwhile, annual escalation for Sky Complex are based on 75% of Italy’s CPI growth, which increased 6.8% yoy in May 22. Impact from rising electricity rates is mitigated by fixed-rate electricity contracts, which will run until end-FY23 (Jun 23) while the master leasee is responsible for Sky Complex’s utility expenses under the triple-net lease structure.

Gearing still comfortable; more interest rate hedging expected

Post-acquisition of JEM, cost of debt jumped qoq from 0.98% to 1.69% while interest rate hedge declined from 90% to 59%. EUR loans account for 28% of total borrowings. 100%/43% of EUR/SGD loans have been hedged. Going forward, management intends to increase interest rate hedge. Gearing remains slightly elevated at 40%, but well within MAS’s 50% gearing limit, mitigated by robust ICR of 9.2x. LREIT employs a 12-month rolling FX hedge and its blended hedge rate on EUR is 1.56 (vs. spot rate of 1.40).

Reiterate Add with a lower DDM-based TP of S$1.02

FY23-24F DPU estimates lowered by 3.9-4.1% as higher revenue assumptions were wiped out by higher borrowing assumptions. Acquisition of Jem has strengthened LREIT’s portfolio, increasing market capitalisation/deposited property by 1.8x/2.1x to S$1.8bn/S$3.7bn, respectively. We expect organic growth on the back of positive reversions as well as the unlocking of c.10k sqft or 3.5% of untapped GFA at [email protected] LREIT’s pipeline assets include Parkway Parade and Paya Lebar Quarter, the latter could be acquired in tranches due to its strata title. Re-rating catalysts/downside risks include accretive acquisitions/weaker rental reversion.

Lendlease-Global-CommercialClick here to Download Full Report in PDF

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Telegram (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
Research - Equities Tags:Lendlease Global Commercial REIT

Post navigation

Previous Post: CIMB: Credit Bureau Asia Ltd – Add Target Price $1.20
Next Post: CIMB: Parkway Life REIT – Add Target Price

Related Posts

CIMB: Lendlease Global Commercial REIT – Add Target Price $0.88 (Previous $1.02) Research - Equities
DBS: LendLease Global Commercial REIT – Buy Target Price $1.00 Research - Equities
DBS: LendLease Global Commercial REIT – Buy Target Price $1.10 Research - Equities
DBS: Singapore Retail Real Estate Research - Equities
UOBKH: REITs – Singapore (Overweight) Research - Equities
DBS: Singapore REITs Research - Equities
DBS: Singapore REIT Research - Equities
UOBKH: Singapore Strategy Research - Equities
UOBKH: Lendlease Global Commercial REIT – Buy Target Price $0.99 Research - Equities
DBS: Regional Real Estate Research - Equities
UOBKH: Lendlease Global Commercial REIT – Buy Target Price $0.96 Research - Equities
UOBKH: Monthly Review and Outlook – Singapore Research - Equities

Leave a Reply

You must be logged in to post a comment.

Login

Log In
Register Lost Password
Get new posts by email
Chat on WhatsApp
  • Earnings Updates/ Corporate Actions
  • My Opinions/ Views
  • News
  • Others
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trusts/ ETF

Copyright © 2023 Alpha Edge Investing.

Powered by PressBook Grid Blogs theme