The Singapore retail and office portfolios achieved positive rental reversions of 9.3% and 15.0% respectively based on the average rent of signed leases in 1H24.
NPI increased 5.4% yoy and NPI margin expanded 2.2ppt yoy to 73.5% in 1H24 due to lower utility expenses and savings from the new property management agreement.
AEIs at IMM Building in Singapore and Gallileo in Frankfurt, Germany are on track for completion in 2H25. CICT provides a resilient 2025 distribution yield of 5.1%.
Maintain BUY. Target price: S$2.29.
NPI margin expanded 2.2ppt yoy to 73.5%
CapitaLand Integrated Commercial Trust (CICT) reported DPU of 5.43 S cents for 1H24 (+2.5% yoy), which is slightly above our expectation.
Gross revenue grew 2.2% yoy in 1H24 due to higher rental income, despite absence of income from Gallileo undergoing an asset enhancement initiative (AEI) since Feb 24.
Net property income for 1H24 increased 5.4% yoy due to lower utility expenses and savings from the new property management agreement.
Retail: Resilient performance from suburban malls
CapitaLand Integrated Commercial Trust retail portfolio achieved positive rent reversion of 9.3% based on the average rent of signed leases in 1H24 (suburban: 9.1%, downtown: 9.5%).
Occupancy edges higher by 0.3ppt qoq to 99.0% in 2Q24. Tenant retention was healthy at 85.7%. Tenant sales psf for suburban malls grew 1.8% yoy.
Tenant sales psf for downtown malls dropped 0.9% yoy due to: a) Clark Quay still ramping up, and b) higher outbound travel being exacerbated by the strong Singapore dollar.
In absolute dollar terms, tenant sales for downtown malls were up 4.3% yoy. New brands include SushiSamba at Capital Tower (dining and entertainment), IL Clay Supper Club at Clarke Quay (ItalianMediterranean restaurant) and Lola's Cafe at Tampines Mall.
Office: Maintained stable occupancy
The office portfolio achieved positive rent reversion of 15.0% based on the average rent of signed leases in 1H24. Occupancy was stable at 95.3% in 2Q24 (Singapore: 97.3%, Australia: 88.0%). Tenant retention was healthy at 81.5%.
Office tenants who signed new or renewed leases in 2Q24 include Jain Global (Singapore) and Wintermute Asia at CapitaGreen, China-Base Resource Singapore at Raffles City Tower and Wesfarmers Health at 66 Goulburn Street.
Rental reversion could be flattish in 2H24 due to high average rents for leases expiring of S$12.13psf for Asia Square Tower 2, S$12.01psf for CapitaGreen and S$12.29psf for Six Battery Road.
Cost of debt has stabilised
Aggregate leverage eased slightly by 0.2ppt qoq to 39.8% as of Jun 24 due to its distribution reinvestment plan. Average cost of debt was stable at 3.5% in 2Q24.
Management expects cost of debt to be stable at mid-3% in 2024. About 76% of its borrowings are on fixed interest rates while 80% of its borrowings due to expire in 2H24 have been refinanced or are in loan documentation stage.
Valuation/Recommendation
Maintain BUY. Our target price of S$2.29 is based on the dividend discount model (cost of equity: 6.75%, terminal growth: 2.2%).
There is steady recovery in shopper traffic and tenant sales at CICT’s downtown malls driven by a recovery in tourist arrivals and work-from-office momentum and asset enhancement and redevelopment of existing properties.
CapitaLand Integrated Commercial Trust share price chart
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