Analysts from PhillipCapital and UOB Kay Hian are positive on CapitaLand Integrated Commercial Trust’s (CICT) prospects after the REIT posted its business update for the 1QFY2022 ended March.
PhillipCapital analyst Natalie Ong has upgraded her call to “buy” with a raised target price of $2.46 from $2.39.
CICT’s 1QFY2022 revenue and net property income (NPI), at a respective $339.7 million and $248.3 million, stood in line with the analyst’s estimates at 23.7% of her full-year forecasts.
Ong also remains positive on the REIT’s narrowing negative reversions and office reversions at a positive 9.3%.
On the other hand, the higher electricity costs in the FY2022 are a concern.
“Electricity accounts for c.5% of [CICT’s] operating expenses (opex). The impact of rolling onto new electricity contracts at tariffs that are 90% higher y-o-y, will be felt in 1QFY2022 as well as in FY2023 when the fixed contracts expire,” Ong writes in her May 9 report.
See also: Analysts positive on CICT amid greater reopening and economic recovery
Looking ahead, the analyst sees the acquisition of 66 Goldburn Street and 100 Arthur Street in Australia, as well as the 70% stake in CapitaSky to feature more prominently in the 2QFY2022 onwards. The above acquisitions were completed in March and April respectively.
On this, Ong has raised her distribution per unit (DPU) estimates for the FY2023 to FY2026 by 3.1% to 3.3% on the back of the 70% acquisition in CapitaSky.
“CICT is positioned to benefit from the economic reopening given its exposure to downtown malls and returning office leasing demand,” Ong says.
See also: Test debug host entity
“Catalysts for CICT include asset enhancement initiatives (AEIs), potential development, and acquisitions,” she adds.
See what the other analysts have to say about CICT here.
UOB Kay Hian analyst Jonathan Koh has kept “buy” on CICT with a slightly lower target price of $2.46 from $2.50 previously.
Koh has also trimmed his DPU estimates for the FY2023 and FY2024 to factor in the higher cost of electricity.
“CICT has already experienced a 90% increase in [the] cost of electricity during 1QFY2022. Management expects [the] cost of electricity to increase by another 10% in subsequent quarters,” he writes in his May 9 report.
To Koh, the REIT’s suburban mails remained resilient as its retail occupancy stood stable at 96.6% during the 1QFY2022.
The REIT’s transitory vacancies are also being progressively backfilled, another positive in Koh’s view.
For more stories about where money flows, click here for Capital Section
To him, the REIT represents a “triple-play” on Singapore’s reopening, especially with the lifting of the Covid-19 measures.
Catalysts to the REIT’s unit price include the recovery in shopper traffic and tenant sales at retail malls. An improvement in physical occupancy at office buildings with the easing of social distancing measures are also another catalyst to the re-rating of CICT’s unit price.
The AEIs as well as the redevelopment of CICT’s existing properties, which the REIT is currently doing for Raffles Shopping Centre and the former Liang Court, is also another catalyst, according to Koh.
Units in CICT closed 2 cents higher or 0.89% up at $2.26 on May 9.
