With the exception of UOB Kay Hian Research, analysts have kept their calls and target prices for CapitaLand Integrated Commercial Trust (CICT) unchanged following its 1HFY2021 ended June results release on July 28.
See: CICT posts 1H2021 distributable income of $335.9 mil; DPU of 5.18 cents
In a July 29 research note, UOB Kay Hian analyst Jonathan Koh maintained his “buy” call while raising his target price from $2.42 to $2.50.
His higher target price reflects an increased 2022 distribution per unit (DPU) forecast by 3.9% due to lower cost of debt assumptions. For the 1HFY2021, CICT's average cost of debt improved 0.7 percentage points to 2.4% after it refinanced existing borrowings.
Koh is upbeat on CICT’s prospects, stating that the trust “provides a diversified play on the re-opening of the domestic economy”, given its portfolio which spans offices, malls and integrated developments.
The way he sees it, the Singapore government’s target vaccination rate of 75% by October will pave the way for social distancing measures to be eased in the 4Q.
He is also positive on CICT’s CapitaSpring development, which has a committed occupancy of 61.8%, increasing from 50% the previous quarter. “Committed leases will start contributing progressively from 1H2022,” Koh remarks.
For CGS-CIMB Research analysts Lock Mun Yee and Eing Kar Mei, CICT’s diversified portfolio boosts its resilience. "We believe CICT is well placed to benefit from a macro recovery given its diversified and stable earnings profile," they explain in a July 29 note.
While the trust’s 1HFY2021 DPU of 5.18 cents was in line with their forecasts, Lock and Eing highlight that its retail segment continues to face headwinds.
In the 1HFY2021, CICT renewed and leased 0.54 million square feet of retail space with a -9.1% reversion, although the decline rate slowed in 2Q. “We anticipate the negative reversion to persist as tenants continue to adapt to a post-Covid-19 world,” the analysts say.
They have kept their “add” rating for CICT with an unchanged target price of $2.56.
For Lock and Eing, potential re-rating catalysts include more clarity on its asset enhancement and redevelopment plans, while downside risks include slower-than-expected portfolio value creation and slower rental recovery outlook.
Maybank Kim Eng’s Chua Su Tye also maintainedhis “buy” call and target price of $2.55 for CICT after its 1HFY2021 results came in line with his estimates.
In a July 28 note, Chua notes that CICT's valuations at 5% dividend yield and one time P/B are undemanding versus history and peers.
Similar to Koh, Chua holds an optimistic view that a stronger 4Q recovery lies ahead given the accelerated pace of the vaccine roll-out, which should improve CICT's retail performance. “However, expiring leases at Funan in its first renewal cycle in FY2022-2023 could cap growth upside,” he cautions.
He also notes that CICT’s office portfolio occupancy dipped slightly to 93% mainly due to the anchor tenant lease expiry for Asia Square Tower 2 in Singapore.
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Nonetheless, Chua views that the risk-reward balance for CICT remains “favourable”, given rental waivers will likely taper down and negative rental reversions are expected to ease further into 2H2021.
“Growth levers from its sponsor’s pipeline, AEIs and value-accretive redevelopment plans are near to medium term catalysts that could support DPU upside,” Chua adds.
PhillipCapital analyst Natalie Ong has also maintained her "accumulate" rating for CICT. While she has tweaked her FY2021 DPU forecast downwards by 8.3% after factoring in one month of rental rebates for retail tenants (0.3 months in 1H2021 and 0.7 months in 2H2021), her target price of $2.54 remains unchanged post-rounding.
Meanwhile, RHB Group Research’s Vijay Natarajan has maintained his “neutral” call and target price of $2.10.
In contrast to CGS-CIMB and Maybank Kim Eng, CICT’s 1HFY2021 results “slightly missed” Natarajan’s forecasts, given the rent relief offered in the 2Q. “More rent relief is expected to be granted in 3Q before Singapore’s expected transition to a new normal of living with an endemic Covid-19,” he comments in a July 29 note.
He notes that CICT is currently trading at 1.1 times P/B, which he views as a fair valuation.
As at 3.15pm, units in CICT are 3 cents or 1.42% higher at $2.14.
Photo: CICT
