DBS Group Research has reinstated coverage on CapitaLand Integrated Commercial Trust with a “buy” call and target price of $2.50.
In a Dec 10 research note, analysts Rachel Tan and Derek Tan state that CICT is a key proxy and beneficiary of the reopening play. “We estimate CICT could deliver c.12% of DPU growth in FY2022 and a 9% two-year compound annual growth rate, one of the stronger growth rates among peers,” they say.
Despite concerns surrounding the Omicron variant dampening reopening optimism, the analysts believe that quicker recovery is around the corner, underpinned by faster response from pharmaceutical companies and higher levels of vaccination rates.
To that end, the analysts anticipate CICT to benefit as tourists and employees gradually return to the CBD malls, which make up 50% of its portfolio.
In terms of office space, Rachel and Derek highlight that office vacancy concerns are a transitioning to a thing of the past for CICT given that CapitaSpring and Asia Square Tower 2 have achieved almost full committed occupancy. In addition, they note that newly completed and refurbished buildings will begin contributions in FY2022, including 21 Collyer Quay and Six Battery Road.
The analysts are also bullish on CICT’s access to good-quality office assets in Singapore from its sponsor. “CICT is one of the few commercial Singapore REITs that has the opportunity to acquire two newly completed prime Singapore office assets (79 Robinson and the remaining 50% stake in CapitaSpring) from its sponsor,” they point out.
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“As CICT had decided to upsize its latest private placement to $250m, we estimate that CICT has remaining cash (post divestment of One George St and acquisition of Australia assets) of [around] $250m, which gives them some firepower to acquire its next asset,” they add.
On the whole, Rachel and Derek view CICT, as the largest Singapore REIT, is too big to ignore. “The company’s integrated commercial assets drive synergistic value and its size offers a bigger platform to grow with acquisitions of integrated development led by the rising global trend of live-work-play,” they conclude.
Their target price of $2.50 implies a P/NAV ratio of 1.25 times, which is below one standard deviation of its historical range.
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As at 4.09pm, units in CICT are down 1 cent or 0.49% lower at $2.03.
Photo: CICT
