UOB Kay Hian’s Jonathan Koh and Loke Peihao have maintained their “hold” rating on CapitaLand Commercial Trust (CCT) with a lower target price of $1.63, from $1.66 previously, as it prepares for its merger with CapitaLand Mall Trust (CMT) to form CapitaLand Integrated Commercial Trust (CICT).
“Each CCT unit is equivalent to 0.72 new CMT unit plus cash of 25.9 cents, which is worth $1.63 based on a unit price of $1.91 for CMT. Our target price is based on a swap ratio of 0.72 x CMT unit + cash 25.9 cents,” say Koh and Loke in a report dated Oct 22.
CCT will be delisted from the SGX on Nov 3.
CCT, on Oct 21, reported its results for 3QFY2020 with a distribution per unit (DPU) of 2.00 cents, 9.1% lower y-o-y.
See: CapitaLand Commercial Trust reports 9.1% lower DPU of 2 cents for 3Q, trust scheme of arrangement effective Oct 21
CCT’s gross revenue for 3QFY2020 dropped 8.7% y-o-y, which was partly affected by asset enhancement works at Six Battery Road and the expiry of HSBC’s lease at 21 Collyer Quay on Apr 30. This was mitigated by Raffles City Square’s (RCS) revenue, which rebounded 12.2% q-o-q. CCT’s rental waiver amounted to $0.9 million in 3QFY2020, compared to the $11.9 million in 1HFY2020.
Overseas, CCT benefited from full-quarter contribution from Main Airport Centre (MAC), which was acquired in September 2019, and higher contribution from Gallileo, both located in Frankfurt, Germany.
CCT also registered positive rental reversions with the signing of 276,000 square feet of office space in 3QFY2020. Committed rents at Six Battery Road and Raffles City Tower for new and renewed leases were $10.32-$12.40 per square foot per month and $9.00-$10.30 per square foot per month respectively. New demand came mainly from real estate & property services and financial services.
WeWork, the sole tenant at 21 Collyer Quay, is now financially more stable due to corporate customers now using WeWork’s flexible office space as their satellite offices.
Committed occupancy for CapitaSpring still remains low at 34.9%. Construction has pushed ahead and structural works have reached level 50. The building is targeted for completion in 2H2021.
On that, Koh and Loke have maintained their earnings forecasts for the counter.
They also identified catalysts for CCT’s share price growth such as higher-than-expected signing rentals and occupancies at CapitaSpring and accretive acquisitions in Singapore or Germany.
CCT’s share price last traded at $1.65 on October 19, and has ceased to trade since then.
