Comprehensive Analysis of CapitaLand Integrated Commercial Trust and Peer Comparisons
OCBC Investment Research – 5 November 2024
The latest equity research report from OCBC Investment Research provides an in-depth analysis of CapitaLand Integrated Commercial Trust (CICT) alongside its peers in the Singapore real estate sector. This comprehensive review covers financial performance, investment thesis, potential catalysts, and risks, making it a crucial read for investors in the real estate investment trust (REIT) market.
CapitaLand Integrated Commercial Trust (CICT)
Solid Rental Reversions Amid Expected Moderation
CICT’s 3Q24 net property income (NPI) increased by 5.4% year-on-year (YoY) to SGD 289.8 million, driven by healthy rental reversions of 9.2% for its retail portfolio and 11.7% for its office portfolio. Despite these gains, overall portfolio committed occupancy dipped slightly to 96.4%, a 0.4 percentage point (ppt) decline quarter-on-quarter (QoQ). The aggregate leverage ratio also saw a slight sequential dip to 39.4%, with 76% of debt hedged.
Investment Thesis
CICT, the largest S-REIT by market capitalization and assets in Singapore, offers diverse exposure to suburban and downtown retail markets as well as the core CBD office sector. Additionally, it has smaller exposures to Germany and Australia. Positive leasing momentum continues for CICT’s retail operations, while office rental reversions, though solid in FY23 and 1H24, are expected to moderate in FY25. CICT’s aggregate leverage ratio remains above the coverage average but manageable, with 76% of borrowings hedged and a long average term to maturity among S-REITs.
Investment Summary
- 3Q24 NPI grew 5.4% YoY to SGD 289.8 million.
- Gross revenue for 3Q24 increased by 1.7% YoY to SGD 397.9 million.
- For 9M24, gross revenue and NPI grew by 2.0% and 5.4% YoY, respectively.
- Retail rental reversions remained healthy at 9.2%, with suburban and downtown malls registering almost similar rates of 9.0% and 9.4%, respectively.
- Singapore office portfolio rental reversions came in at 11.7% for 9M24, a moderation from 1H24 (15.0%).
- Aggregate leverage dipped to 39.4% from 39.8%, with 76% of debt hedged.
- Expected cap rate expansion for Australian properties, but overall portfolio valuation should remain stable.
- ESG rating upgraded in July 2022, with a strong performance in the “Opportunities in Green Building” category.
Financial Summary
CICT’s financial performance highlights its resilience and strategic management:
| Metrics |
FY23 |
FY24E |
FY25E |
| Gross Revenue (SGD m) |
1,560 |
1,518 |
1,545 |
| Net Property Income (SGD m) |
1,116 |
1,093 |
1,115 |
| Total Return for the Period (SGD m) |
869.2 |
700.6 |
753.7 |
| Distribution to Unitholders (SGD m) |
715.7 |
732.1 |
798.5 |
| DPU (S cents) |
10.75 |
10.81 |
10.99 |
| DPU Yield (%) |
5.3 |
5.3 |
5.4 |
| P/NAV (x) |
1.0 |
1.0 |
1.0 |
| ROE (%) |
6.1 |
4.7 |
4.9 |
| Gearing (%) |
39.9 |
38.5 |
38.7 |
Peer Comparisons
Frasers Centrepoint Trust (FCRT.SI)
Frasers Centrepoint Trust (FCRT) is another notable player in the Singapore real estate market. Here’s a detailed look into its performance metrics:
| Metrics |
FY24E |
FY25E |
| Price/Earnings |
19.5 |
18.5 |
| Price/Book |
1.0 |
1.0 |
| EV/EBITDA |
24.4 |
24.0 |
| Dividend Yield (%) |
5.5 |
5.7 |
| ROE (%) |
4.9 |
5.2 |
Mapletree Pan Asia Commercial Trust (MACT.SI)
Mapletree Pan Asia Commercial Trust (MACT) stands out with its strong dividend yield and efficient operations:
| Metrics |
FY24E |
FY25E |
| Price/Earnings |
16.4 |
15.4 |
| Price/Book |
0.3 |
0.3 |
| EV/EBITDA |
19.9 |
19.8 |
| Dividend Yield (%) |
6.3 |
6.6 |
| ROE (%) |
4.4 |
5.0 |
Starhill Global Real Estate Investment Trust (STHL.SI)
Starhill Global REIT is another significant player, offering a competitive dividend yield:
| Metrics |
FY24E |
FY25E |
| Price/Earnings |
12.2 |
12.4 |
| Price/Book |
0.7 |
0.7 |
| EV/EBITDA |
16.2 |
15.9 |
| Dividend Yield (%) |
7.5 |
7.6 |
| ROE (%) |
5.7 |
5.8 |
Paragon REIT (SPHR.SI)
Paragon REIT offers stable returns with a balanced portfolio:
| Metrics |
FY24E |
FY25E |
| Price/Earnings |
18.6 |
18.9 |
| Price/Book |
1.0 |
1.0 |
| EV/EBITDA |
18.3 |
17.8 |
| Dividend Yield (%) |
4.8 |
5.2 |
| ROE (%) |
5.1 |
5.1 |
Company Overview and Financials
As of 31 December 2023, CICT is the first and largest REIT listed on the Singapore Exchange with a market capitalization of SGD 13.7 billion. The trust owns a diverse portfolio of quality income-producing assets primarily used for commercial purposes in Singapore, Germany, and Australia. CICT’s portfolio comprises 21 properties in Singapore, two in Frankfurt, and three in Sydney, with a total property value of SGD 24.5 billion.
Financial Statements
Income Statement
| Metrics |
FY2019 |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
| Revenue (SGD m) |
786.7 |
745.2 |
1,305.1 |
1,441.7 |
1,559.9 |
| Gross Profit (SGD m) |
505.0 |
458.7 |
863.4 |
947.9 |
1,017.6 |
| Operating Income (SGD m) |
490.9 |
887.9 |
873.6 |
952.6 |
1,065.3 |
| Pretax Income (SGD m) |
696.9 |
349.7 |
1,102.3 |
730.0 |
879.3 |
| Net Income (SGD m) |
696.9 |
349.8 |
1,083.1 |
723.4 |
862.6 |
| Basic EPS (SGD) |
0.2 |
0.1 |
0.2 |
0.1 |
0.1 |
Profitability Ratios
| Metrics |
FY2019 |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
| Return on Common Equity (%) |
9.17 |
3.36 |
8.11 |
5.22 |
6.10 |
| Return on Assets (%) |
6.00 |
2.05 |
4.80 |
3.06 |
3.52 |
| Operating Margin (%) |
47.64 |
101.64 |
52.99 |
49.96 |
46.14 |
Credit Ratios
| Metrics |
FY2019 |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
| Total Debt/EBIT |
7.11 |
19.22 |
9.56 |
10.30 |
9.16 |
| Net Debt/EBIT |
6.71 |
18.82 |
9.13 |
10.03 |
9.02 |
| EBIT to Interest Expense |
4.33 |
3.48 |
4.71 |
4.03 |
3.01 |
| Long-Term Debt/Total Assets (%) |
28.21 |
34.80 |
33.37 |
34.41 |
34.50 |
In conclusion, the report from OCBC Investment Research provides a detailed and comprehensive analysis of CICT and its peers. Investors can leverage this information to make informed decisions, considering the potential catalysts and risks discussed. The financial performance, investment thesis, and strategic insights make this report a valuable resource for anyone looking to invest in the Singapore real estate market.
