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Maintain Add rating with unchanged DDM-based TP of S$2.45.
2HFY24 results highlights
Capitaland Integrated Commercial Trust (CICT) reported 1.2%/1.3% yoy gains in 2H24 revenue/NPI to S$794.4m/S$571.1m, on positive rental reversions, uptick in portfolio occupancy, partly offset by income vacuum from Gallileo and sale of 21 Collyer Quay in Nov 2024.
2H24 distributable income of S$385.7m, +6.4% yoy, included maiden contributions from the 50% stake in ION Orchard. However, 2H24 DPU of 5.45 Scts was stable yoy, due to a larger unitholder base following its equity fundraising in Sep 2024.
Portfolio valuation +6.2% to S$26.0bn in its end-FY24 valuation exercise, lifted by the ION Orchard acquisition and valuation upside from the Singapore and Germany portfolios, but slightly offset by declines in Australia.
Aggregate leverage dipped to 38.5% as divestment proceeds were utilised to pare down debt. All-in debt cost averaged 3.6% at end-Dec 2024. Management has guided that the cost of debt will be kept below 4.0% for FY25F.
Strong retail performance underpinned by ION acquisition
Overall portfolio committed occupancy was 96.7%, with retail at 99.3% (+0.3% pt qoq) and office at 94.8% (+0.2% pt qoq). CICT renewed 857.4k sq ft of retail space in FY24 (4Q24: 180.2k sq ft).
FY24 tenant sales rose 3.4% yoy, with suburban malls +0.4% and downtown malls +8.8%. Excluding the impact of the 2 months of ION Orchard’s tenant sales, portfolio and downtown malls tenant sales would have decreased c.1% yoy.
Meanwhile shopper traffic grew by 8.7% yoy in FY24, with downtown malls +17% yoy and suburban malls +1.3% yoy. Excluding the ION Orchard impact, retail portfolio/downtown malls shopper traffic would have increased by 4%/8% yoy.
Office rental reversion to remain positive in FY25F
Office portfolio committed occupancy stood at 94.8% at end-FY24. An estimated 966.3k sq ft of office space was leased/renewed in FY24 (4Q24: 187.4k sq ft), mainly from financial services, IT & telecoms, as well as energy & natural resources sectors.
CICT achieved +11.1% rental reversion for its office portfolio in FY24. Management guided that it expects office rental reversions to remain positive in FY25F.
Management indicated that contributions from Gallileo, post completion of AEI by 2H25F, should be felt more from FY26F as handover of the space is scheduled to start progressively from 2H25F.
Valuation/Recommendation
Reiterate Add rating. We lower our FY25-26F DPU by 2.02-2.48% as we adjust for the enlarged units base following its fund-raising exercise. However, our DDM-based TP is unchanged at S$2.45 (cost of equity: 7.5%) as we roll forward our assumptions.
Potential catalyst: clear inorganic growth prospects. Downside risks: slower-than-expected rental recovery, escalating opex or cost overruns with AEIs, affecting projected returns.
CapitaLand Integrated Commercial Trust share price chart
You can find the full report here and the company website here.
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