CGS International
April 25, 2025
CapitaLand Integrated Commercial Trust (CICT): 1Q25 Operating Performance in Line with Expectations
Key Takeaways from CICT’s 1Q25 Update
- Financial Performance: CICT’s 1Q25 revenue and Net Property Income (NPI) aligned with forecasts, reaching S\$395.3 million and S\$291.5 million, respectively, representing 24% of the FY25F forecast [[1]].
- Guidance Maintained: CICT is holding steady on its FY25F guidance, anticipating positive office and retail rental reversions [[1]].
- Rating: CGS International maintains an Add rating for CICT, with an unchanged DDM-based target price of S\$2.45 [[1]].
In-Depth Analysis of CICT’s 1Q25 Results
Capitaland Integrated Commercial Trust (CICT) reported a slight year-over-year decrease of 0.8% in revenue/NPI, primarily due to the divestment of 21 Collyer Quay. However, on a like-for-like basis, revenue and NPI saw increases of 1.1% and 1.4% respectively. The trust’s aggregate leverage stood at 38.7%, and the all-in debt cost averaged 3.6% at the end of 1Q25, a decrease of 0.2% quarter-over-quarter. Portfolio occupancy remained strong, with overall committed occupancy at 96.4%, retail at 98.8%, office at 94.7%, and integrated development at 98.6% [[1]].
Retail Rental Reversion: A Robust Increase
CICT demonstrated strong performance in retail rental reversion, achieving +10.4%. This was supported by the renewal of 209.5k sq ft of retail space, with 21% attributed to new leases in F&B, fashion & accessories, and digital and appliance segments. Downtown malls contributed 11.2% to the reversion, while suburban malls added 9.5%. Management anticipates rental reversions to remain in the mid-single-digit range for FY25F. Tenant sales increased by 17.5% year-over-year, with suburban malls up 0.3% and downtown malls up 39.3%. Factoring out the impact of ION Orchard’s tenant sales, portfolio and downtown malls tenant sales would have decreased 0.5% and 0.4% year-over-year, respectively. Shopper traffic grew by 23% year-over-year, with downtown malls up 49.7% and suburban malls down 0.8%. Excluding the ION Orchard impact, retail shopper traffic increased by 2.7% year-over-year. The progressive completion of the asset enhancement initiative (AEI) at IMM Building from 4Q24-3Q25F is expected to further bolster contributions. Additionally, CICT plans to undertake an AEI at Tampines Mall in 4Q25, aligning with the government’s launch of the Tampines 5-year Masterplan [[1]].
Office Sector: Positive Rental Reversion Forecast
Approximately 203.5k sq ft of office space was leased/renewed in 1Q25, primarily from the financial services, IT & telecoms, and legal sectors. CICT achieved a 5.4% rental reversion for its office portfolio in 1Q25. Management expects office rental reversions to remain in the low to mid-single-digit positive territory in FY25F. Contributions from Gallileo, post completion of AEI by 2H25F, should be more noticeable from FY26F, as handover of the space is scheduled to start progressively from 2H25F [[1]].
Investment Thesis: Add Rating Reaffirmed
CGS International has kept the FY25-27F DPUs unchanged and maintains a DDM-based TP of S\$2.45, with a cost of equity of 7.5%. CICT’s diversified portfolio, including exposure to the resilient suburban retail segment and a sturdy balance sheet, remains appealing. Potential re-rating catalysts include clear inorganic growth prospects and maintaining robust occupancy and rental reversions. Downside risks include slower-than-expected rental recovery and escalating opex or cost overruns with AEIs, affecting projected returns [[1]].
SREIT Peer Comparison
A comparison of SREIT peers, focusing on share price, target price, market cap, asset leverage, NAV, and dividend yield forecasts, provides context for CICT’s valuation and potential [[2]].
ESG Analysis
CICT received a B for its 2023 ESG ranking from LSEG, including Environmental (B+), Social (C), and Governance (B+) pillars. It achieved an A+ for its ESG controversies pillar. CICT is aligned with Capitaland Investment’s commitment to Net Zero by 2050 and elevated carbon emissions reduction target to 1.5ºC. It aims to reduce its carbon emission/energy/water intensity to 72%/15%/15% by 2030, vs. the base year of 2019. It also targets a recycling rate of 25% and renewable energy at 45% of total electricity consumption, by 2030. CICT maintained a 5-star rating in the Global Real Estate Sustainability Benchmark (GRESB) 2023 and scored an ‘A’ for public disclosure. As of end-FY23, 99% of CICT’s portfolio by gross floor area (GFA) had achieved at least BCA Green Mark certified or equivalent [[3]].
According to LSEG, CICT’s shareholder score stood at D in FY23, while CSR strategy was rated C. Emissions score stood at B+ in FY23. CGS International has not applied any premium/discount for ESG in the fundamental valuation of CICT [[3]].
CICT’s ESG score of B ranked it 6th among Singapore companies. Some of its ESG highlights in FY23 include lowering its absolute scope 1 & 2 GHG emissions and carbon emissions by 10% and 19%, respectively (vs. baseline year 2019). It also reduced its energy and water consumption intensity by 15% (vs. baseline year). It generated 2,094 MWh of renewable energy, making up 1.3% of total energy consumption. As at end-FY23, over 90% of CICT’s Singapore properties, by net leaseable area (NLA), have adopted green leases. In addition, it gives its new tenants a green fit-out guide to encourage the adoption of greener fit-outs, lighting efficiency requirements and promote green practices and behaviour [[3]].
CICT targets to achieve 78%, 35% and 45% reductions in carbon emission intensity, energy intensity and water intensity, respectively, by 2030, from the base year of 2008 [[3]].
CICT’s strongest ratings come from workforce (A), product responsibility (A), resource use (A-), environmental innovation (A-) and management (A-) [[3]].
Financial Analysis and Key Ratios
Analysis of CICT’s financial statements, including profit and loss, cash flow, and balance sheet, provides insights into the trust’s financial health and performance [[4, 5]].
- Gross Property Revenue Growth: 8.20% (Dec-23A), 1.69% (Dec-24A), 4.21% (Dec-25F), 4.97% (Dec-26F), 3.23% (Dec-27F) [[5]]
- NPI Growth: 6.96% (Dec-23A), 3.37% (Dec-24A), 5.08% (Dec-25F), 4.58% (Dec-26F), 3.49% (Dec-27F) [[5]]
- Net Property Income Margin: 71.5% (Dec-23A), 72.7% (Dec-24A), 73.3% (Dec-25F), 73.1% (Dec-26F), 73.2% (Dec-27F) [[5]]
- DPS Growth: 1.61% (Dec-23A), 1.21% (Dec-24A), 2.20% (Dec-25F), 5.83% (Dec-26F), 4.47% (Dec-27F) [[5]]
Key drivers include rental rates per square foot per month, net lettable area, and occupancy rates [[5]].
