SINGAPORE (April 19): OCBC Investment Research is maintaining its “hold” on Capitaland Commercial Trust (CCT) with unchanged $1.39 fair value.

OCBC said 1Q16 numbers were within expectations. CCT’s 1Q16 distributable income increased by 3.3% y-o-y to $64.8 million mostly due to higher distributable income from its interests in CapitaGreen and Raffles City Singapore (RCS), respectively.

1Q16 gross revenues and NPI, however, dipped 1.9% and 3.6% y-o-y to $66.9 million and $52.0 million, respectively, largely because of higher property tax and lower occupancy rate at Capital Tower.

“We judge this set of results to be within expectations, as 1Q16 distributable income and net property income formed 24.1% and 26.3% of our full year forecast, respectively,” says lead analyst Eli Lee in a Monday report.

CCT’s overall occupancy rates improved q-o-q to 98.1% in 1Q16 from 97.1% last quarter; and due to active lease management, Capital Tower’s occupancy rate increased substantially from 94.1% to 98.1%.

The trust also signed roughly 162,000 sf of new leases and renewals in 1Q16, of which more than half are new leases. In terms of monthly average office rents, CCT’s portfolio rents similarly improved 0.7% q-o-q to $8.96 psf from $8.90.

“We see the scope for meaningful positive rental reversion ahead to be limited given a weak outlook for Grade A office rents, which is forecasted to dip 10% in 2016,” says Lee.

The trust’s balance sheet remains healthy with a relatively low gearing of 30.1%.

“There are key debt maturities in 2016 from RCS’s borrowings ($480 million fixed rate notes at 3.09%, $120 million term loan at 3.025% and $40 million revolving facility loan). We understand that management has already largely lined up unsecured bank facilities to refinance this.”

In end March, the trust also issued its maiden HKD medium term note amounting to HK$525 million ($102.5 million) at an all-in S$ fixed interest rate of 2.7% p.a. for five years maturing in Mar 2021.

CCT closed at $1.42 on Monday.