SINGAPORE (July 14): CapitaLand Commercial Trust’s redevelopment plan for Golden Shoe Carpark though exciting in the long run, is expected to put pressure to near-term DPU, particularly after factoring in the recent sales of properties, says Religare.
CCT will embark on a JV with CapitaLand and Mitsubishi Estate (MEC) to redevelop GSCP. CCT and CL will each own a 45% stake in the JV while MEC will own a 10% stake.
The new development will have a NLA of 635,000 sf of office space, 12,000 sf of ancillary retail, 299 rooms of serviced apartments and 44,000 of food centre.
The total cost of redevelopment is estimated at $1.82 billion. While differential premium will account for 52.6% of total cost, the land lease of 64 years remaining will not be extended.
In a Thursday report, analyst Ti Pang Wee says it is positive on the redevelopment project as it demonstrates CCT’s ability to unlock value within its portfolio.
“However, with the loss of income from the recent divestment of 50% stake of One George Street, Wilkie Edge and GSCP, DPU in 3Q is expected to come under pressure,” says Ti.
After factoring in the capital that CCT has to inject into the JV in FY17/18, he expects CCT’s leverage to rise to 35.3%/36.7%, while DPU is expected to lose 2% as a result of the sale.
This coupled with earnings contributions from the redevelopment of GSCP to come through only by 2022; the 12.1% run-up in the unit price of CCT year to date and its FY18 dividend yield of 5.2% and 0.93x P/BV vs peers’ average of 5.4% and 0.88xP/BV, Ti believes CCT is fairly valued at this juncture.
“Maintain ‘hold,” concludes Ti. At 12.22pm, units of CCT are up 3 cents at $1.70.
