Broker: OCBC Investment Research
Date of Report: 25 April 2025

CapitaLand Integrated Commercial Trust: Solid Portfolio Resilience Amid Mixed Trends and Lower Borrowing Costs

Overview: Market Leadership and Diverse Exposure

CapitaLand Integrated Commercial Trust (CICT), Singapore’s largest S-REIT by market capitalization and assets, offers investors broad exposure to both suburban and downtown retail markets, as well as core CBD office spaces. With additional holdings in Germany and Australia, CICT stands out for its diversified commercial real estate portfolio. The trust is managed by CapitaLand Integrated Commercial Trust Management Limited, a wholly owned subsidiary of CapitaLand Investment Limited, a global real estate investment manager with a strong Asia presence.

Key Highlights from 1Q25 Performance

• 1Q25 gross revenue and net property income (NPI) both declined 0.8% year-on-year to SGD395.3 million and SGD291.5 million, primarily due to the divestment of 21 Collyer Quay.
• Retail rental reversions accelerated to an impressive 10.4%, while office rental reversions moderated to 5.4%.
• Aggregate leverage ratio inched up 0.2 percentage points quarter-on-quarter to 38.7%.
• Committed occupancy edged down 0.3 percentage points quarter-on-quarter to 96.4%.

Investment Thesis: Scale, Sponsor Strength, and Portfolio Diversity

CICT’s scale, strong sponsorship from CapitaLand Investment Limited, and the successful integration with CapitaLand Commercial Trust in 2020 have cemented its status as a market leader. The trust continues to benefit from positive leasing momentum in its retail operations and robust, albeit moderating, rental reversions in its Singapore office portfolio. With 78% of borrowings hedged and an average debt maturity among the sector’s longest, CICT remains well-positioned in the current interest rate environment.

Financial Performance and Security Information

• Ticker: CMLT.SI
• Market Cap: SGD 15.6 billion
• Shares Outstanding: 7,298 million
• Top Shareholder: Temasek Holdings Pte. Ltd. (24%)
• Free Float: 76%
• Daily Turnover: SGD 53.8 million

Operational Performance: Retail and Office Trends

Retail Segment:

• Rental reversions surged to +10.4% in 1Q25, up from +8.8% in FY24.
• Downtown malls outperformed with +11.2% rental reversions; suburban malls recorded +9.5%.
• Headline tenant sales per square foot per month rose 17.5% year-on-year in 1Q25 due to ION Orchard’s inclusion; on a like-for-like basis, tenant sales declined 0.5% year-on-year.
• Shopper traffic increased 23.0% year-on-year, or +2.7% excluding ION Orchard.

Office Segment:

• Rental reversions moderated to 5.4% in 1Q25, down from 11.1% in FY24.
• Average passing rents increased 0.3% quarter-on-quarter to SGD10.76 psf pm.
• Office rent reversions are projected to remain in the low-to-mid single digit range.
• Singapore office portfolio achieved higher sequential occupancy, but this was offset by lower occupancy in Germany and Australia.

Occupancy Metrics:

• Overall portfolio committed occupancy: 96.4% (-0.3 ppt QoQ).
• Retail: 98.8% (-0.5 ppt QoQ)
• Office: 94.7% (-0.1 ppt QoQ)
• Integrated developments: 98.6% (-0.3 ppt QoQ)

Financial Health: Leverage and Borrowing Costs

• Aggregate leverage ratio increased slightly from 38.5% to 38.7% at the end of 1Q25.
• 78% of debt hedged; average term to debt maturity at 4.2 years.
• Recent issuance: SGD150 million, 7-year fixed rate notes at 3.088% per annum.
• Interest coverage ratio: 3.2x.
• Average cost of debt declined 20bps to 3.4% and is expected to remain at this level.

ESG Commitment and Sustainability Initiatives

• CICT’s ESG rating was upgraded in July 2022, excelling in “Opportunities in Green Building.”
• Aligned with CapitaLand’s net zero by 2050 and 1.5°C carbon emissions reduction targets.
• Focus areas: portfolio resilience/resource efficiency, thriving future-adaptive communities, and sustainability innovation/collaboration.
• Board-level oversight on ethics, anti-corruption, and whistleblower policies, with an independent majority board and fully independent audit committee.

Potential Catalysts for CICT

• Asset divestments at prices significantly above valuation.
• DPU-accretive acquisitions.
• Stronger-than-expected footfall and tenant sales recovery in malls.

Risks to Watch

• Macroeconomic slowdown threatening consumer and business sentiment.
• Rising interest rates could increase borrowing costs.
• Weaker-than-expected rental reversion recovery across the portfolio.

Peer Comparison: Valuation and Metrics

Company Overview and Portfolio Snapshot

• First and largest REIT listed on SGX-ST, market cap SGD14.1 billion (as of 31 Dec 2024).
• Debuted as CapitaLand Mall Trust in 2002, renamed CICT after 2020 merger.
• Portfolio: 21 properties in Singapore, 2 in Frankfurt, Germany, and 3 in Sydney, Australia.
• Total property value: SGD26.0 billion (as of 31 Dec 2024).
• Portfolio breakdown by segment: Retail (36.4%), Office (33.6%), Integrated Developments (30.0%).
• FY24 portfolio committed occupancy: 96.4% (historical high: 99.3% in FY19).
• Distribution per unit (DPU) for FY24: 10.88 S cents.
• Aggregate leverage ratio ended FY24 at 38.5% (down from 39.9% at end-FY23).

Comprehensive Financials Snapshot

Conclusion: Investment Outlook

CICT continues to demonstrate stable fundamentals, with a robust asset base, prudent capital management, and increasing focus on sustainability. While facing headwinds from asset divestments and moderating rental reversions, the trust remains a compelling choice for investors seeking exposure to Singapore’s commercial real estate sector. The maintained fair value estimate of SGD2.35, alongside a resilient distribution profile and improving ESG credentials, positions CICT as a key player to watch in the S-REIT landscape.