PhillipCapital Bullish

PhillipCapital Bullish On CapitaLand Integrated Commercial Trust’s Prospects

SINGAPORE – Following the publication of CapitaLand Integrated Commercial Trust’s (CICT) business update for the first quarter of the year, two analysts including one from PhillipCapital has become more upbeat on the prospects of the real estate investment trust (REIT), reported The Edge on Monday evening (9 May, SGT).

As a matter of fact, PhillipCapital analyst Natalie Ong upgraded her call to “buy” with a higher target price of S$2.46 from S$2.39 previously.

She explained that CICT’s revenue for Q1 2022 reached S$339.7 million, while net property income (NPI) hit S$248.3 million. Notably, both are in line with Ong’s estimates at 23.7 percent of her full-year projection.

In addition, she remains bullish on CapitaLand Integrated Commercial Trust’s narrowing negative reversions and office reversions at positive 9.3 percent.

However, CICT’s higher power costs for this year is a concern. “Electricity accounts for approx. 5 percent of [the REIT’s] operating expenses (OPEX). The impact of rolling onto new electricity contracts at tariffs that are 90 percent higher year-on-year will be felt in Q1 FY2022 as well as in FY2023 when the fixed contracts expire,” Ong stated in a report published on Monday.

Nonetheless, she believes CapitaLand Integrated Commercial Trust’s purchase of office properties – 66 Goldburn Street and 100 Arthur Street in Australia as well as the 70 percent interest in CapitaSky in Singapore – will contribute significantly to the REIT’s earnings in Q2 2022 and onwards. The aforementioned commercial property purchases were concluded in March and April of this year respectively.

Regarding this, Ong has increased her distribution per unit (DPU) forecast for CICT for the FY2023 to FY2026 by 3.1 percent to 3.3 percent thanks to the acquisition of the 70 percent stake in CapitaSky.

“CICT is positioned to benefit from the economic reopening given its exposure to downtown malls and returning office leasing demand,” said Ong, adding that catalysts for CICT include acquisitions, potential development, and asset enhancement initiatives (AEIs) of its commercial properties.

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