SINGAPORE (Jan 18): It was CapitaGreen that saved the day for CapitaLand Commercial Trust (CCT) in a softening market outlook, says Religare Capital Markets.

(See also: <a href="http://www.theedgemarkets.com.sg/sg/article/capitaland-commercial-trust-reports-101-rise-4q-dpu-239-cents-capitagreen%E2%80%99s-contribution" target="_blank">CapitaLand Commercial Trust reports 10.1% rise in 4Q DPU to 2.39 cents on CapitaGreen’s contribution</a>)

CCT’s 4Q16 results came in line with Religare’s estimates, with the full year’s revenue and DPU accounting for 104% and 100% of its full-year forecasts respectively.

“Despite a softer office market with potential of negative rental reversion, we expect CCT’s performance to remain relatively stable in the quarters ahead as additional contribution from the 60% stake in CapitaGreen continues to come through,” says analyst Tata Goeyardi in a Wednesday report.

CCT delivered on DPU despite lower occupancy. Gross revenue jumped 32.7% y-o-y in 4Q16 to $89.7 million due to the acquisition of the 60% stake at CapitaGreen in August.

But CCT’s portfolio occupancy dipped 0.3% y-o-y, with weakness in Twenty Anson and Golden Shoe Car Park. Portfolio rent eased by 0.2% during the quarter to $9.20 psf/month.

However, distributable income for the quarter rose 10.4% y-o-y to $70.8 million due to higher distribution from JVs, including RCS Trust and MSO Trust (holds CapitaGreen).

As such, DPU improved 10.1% in 4Q16 to 2.39 cents.

However, Goeyardi says DPU could potentially drop by as much as 4% if the full $175 million worth of bonds convertible in 2017 and currently priced at $1.4816 are converted to shares.

Leverage remains unchanged at 37.8%; translating to a further debt headroom of $320 million to fund further acquisitions.

With only 7% of leases by gross rental income due to expire in FY17, CCT’s portfolio appears well-positioned against a soft-market outlook on the back of the impending completion of Marina One.

But with an average rent of $10.85 psf expiring at Six Battery Road, One George Street and Raffles City Tower in 2017, while market rents currently standing at low-$9, amid a soft outlook, CCT is expected to face negative reversion for these leases, says the analyst.

However, any weakness will likely be mitigated by the additional contribution from CapitaGreen.

Religare is reviewing its “hold” call on CCT with a target price of $1.46.

At 11.21am, units of CCT are trading 1 cent higher at $1.57.

CapitaGreen saves the day for CCT

US stock faithful ride US$7 trillion rally as market timing backfires

Qarbotech named winner of inaugural EQT Impact Challenge

MSCI boss warns of climate risks

Keppel to acquire 50% stake in European asset manager Aermont Capital for up to $517 mil

CapitaGreen saves the day for CCT

Related News

Highlights

US stock faithful ride US$7 trillion rally as market timing backfires

Related News

Banks, industrials, tech and telcos to benefit from adoption of GenAI: Maybank

Is it time to add into S-REITs despite the sector's 7% gain in November?

UOB Kay Hian lowers MPACT’s TP, DPU on lower contributions from China and further depreciation on forex