CapitaLand Integrated Commercial Trust Review @ 14 May 2023

Basic Profile & Key Statistics

• Main Sector(s): Retail, Office & Hospitality
• Country(s) with Assets: Singapore, Australia, Germany, China, Malaysia
  
• No. of Properties (exclude development/associate/fund): 26

Key Indicators

Performance Highlight

Gross revenue and NPI have improved yoy mainly due to contributions from 66 Goulburn Street, 100 Arthur Street, 101-103 Miller Street, Greenwood Plaza and CapitaSky which were acquired between March to June 2022.

Shopper Traffic and Tenant Sales

Both tenant sales and shopper traffic have improved YoY.

Rental Reversion

Rental reversion is at +6% for the retail portfolio and +4.2% for the office portfolio.

Asset Enhancement Initiative

AEI for CQ @ Clarke Quay is ongoing and lifts upgrading for 66 Goulburn Street is progressively carried out.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 10% or more
• REIT Manager's Shareholding: Below median by 10% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Occupancy: ± 5% from median
• WALE: ± 10% from median
• Highest Lease Expiry within 5 Years: ± 10% from median; Falls in 2024
• Weighted Average Land Lease Expiry: ± 10% from median

Debt Profile

• Gearing Ratio: ± 10% from median
• Cost of Debt: Below median for more than 10%
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: ± 10% from median
• WADM: Above median by 20% or more 
• Highest Debt Maturity within 5 Years: Below median by 20% or more; Falls in 2024
• Interest Coverage Ratio: ± 10% from median

Diversification Profile

• Top Geographical Contribution: Above median by 20% or more
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 20% or more
• Top Tenant Contribution: Below median by 20% or more
• Top 10 Tenants' Contribution: Below median by 20% or more

Key Financial Metrics

• Property Yield: Below median by 10% or more
• Management Fees over Operating Distributable Income: Below median by 10% or more; $7.63 distribution for every dollar paid 
• Operating Distributable Income on Capital: Below median by 10% or more
• Operating Distributable Income Margin: ± 10% from median
• Operating Distribution Proportion: ± 5% from median

DPU Breakdown

• TTM DPU Breakdown:
• 93.8% from Operation
• 6.2% from Management Fees Paid in Units
• TTM DPU = 98.3% of Distributable Income

Trends

*As CapitaLand Mall Trust and CapitaLand Commercial Trust merger was completed in 4Q 2020, so let's focus on after this period.

• Uptrend: NAV per Unit, Property Yield, Operating Distributable Income on Capital
• Flat: DPU from Operation, Occupancy, Operating Distributable Income Margin
• Slight Downtrend: Interest Coverage Ratio

Relative Valuation

• P/NAV: Average for 1y, 3y & 5y
• Dividend Yield: Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Directors of REIT Manager's Shareholding
Low Cost of Debt	High Top Geographical Contribution
Long WADM	Low Property Yield
Well Spread Debt Maturity	Low Operating Distributable Income on Capital
Low Top Property & Top 5 Properties' Contributions
Low Top Tenant & Top 10 Tenants' Contributions
Competitive Management Fees
NAV per Unit Uptrend
Property Yield Uptrend
Operating Distributable Income on Capital Uptrend

The performance has shown improvement compared to the previous quarter and the occupancy rate has steadily increased from its low point of 93.6% in 1Q 2022 to its current level of 96.2%. In terms of debt, only 4% needs refinancing this year, with the fixed rate being around the median level for SREITs. However, for the lease at Gallileo, Commerzbank A.G. has given notice to end the lease in January 2024. The manager expected the building to be non-income generating for at least 18 months, and Commerzbank A.G. is 1 of the top 10 tenants, contributing 1.8% of gross rent.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.