On 5 November 2024, CapitaLand Integrated Commercial Trust (“CICT”) announced their third quarter business update for FY2024. There were no significant changes noted in the financial business update itself, given that there is no dividend paid this quarter and therefore, the business update is generally brief similar to previous quarters.
Nonetheless, this quarter was relatively interesting, with the completion of the equity fund raising of approximately SGD1.1 billion, followed by the acquisition of 50% interest in ION Orchard. The equity fund raising was done at a price of SGD2.04 which is slightly below the net asset value as of 30 June 2024, something to take note of.
Subsequent to the business update, on 12 November 2024, CICT announced the divestment completion of 21 Collyer Quay for SGD688 million. Net proceeds amounted to SGD681 million, representing that the transaction costs amounted to SGD7 million which is around 1% of the transacted price. Management have disclosed that the exit yield is below 3.5%. As of today, there are no firm indications of the use of the divestment proceeds, though management illustrated the possibility to repay existing debt, allowing CICT to reduce their gearing as of 30 June 2024 from 39.9% to 38.3%.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: General Announcement::3Q 2024 Business Updates
Website: Asset Acquisitions And Disposals::Divestment Of 21 Collyer Quay
Photo source: https://fifthperson.com/cmt-cct-merger-pros-cons/
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | No Update | +2.5% |
| Rating | Favorable | Favorable |
Based on the announcement on 5 November 2024, DPU was not included in the business update for the third quarter of 2024. There is a mention that the net property income for the 9 months ending 30 September 2024 has increased by 5.4% year on year.
This metric was Favorable as of 30 June 2024 as DPU had increased by 2.5% for the first half of FY2024.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 96.4% | 96.8% |
| Rating | Favorable | Favorable |
Occupancy rate decreased slightly to 96.4% as of 30 September 2024. The metric remains Favorable as it is above my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 39.4% | 39.8% |
| Rating | Neutral | Neutral |
Gearing ratio decreased slightly to 39.4% as of 30 September 2024. The metric remains Neutral as it is still close to my threshold of 40.0%.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.0x | 3.0x |
| Rating | Favorable | Favorable |
The interest coverage remains unchanged at 3.0 times as of 30 September 2024. The metric remains Favorable as the interest coverage is at my preference of 3.0 times. The Group did not issue any hybrid securities; therefore the adjusted interest coverage is the same as interest coverage.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.8 years | 3.5 years |
| Rating | Favorable | Favorable |
Weighted average term to maturity of their debt has extended to 3.8 years as of 30 September 2024. The metric remains Favorable and it allows them sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.92 | 1.00 |
| Rating | Favorable | Favorable |
Based on the announcement on 5 November 2024, net asset value (“NAV”) was not included in the business update for the third quarter of 2024.
The Price to Book (“P/B”) ratio currently stands at 0.92. This is computed using the closing share price of SGD1.97 on 2 December 2024 and the net asset value per share of SGD2.13 as of 30 June 2024. The metric is Favorable as investors will be paying at book value for a REIT with a strong sponsor.
As of 2 December 2024, the Market Capitalization is approximately SGD14,525 million.
Website: Yahoo Finance: CapitaLand Integrated Commercial Trust (C38U.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 6.62% | SGD 0.130 |
| 2023 | 5.41% | SGD 0.107 |
| 2022 | 2.84% | SGD 0.056 |
| 2021 | 5.97% | SGD 0.118 |
| 2020 | 3.10% | SGD 0.061 |
With the rights issuance in September 2024, CICT have given an additional distribution of SGD0.0216 per share for the existing holders. This is so that moving forward, the distribution in the first quarter of 2025 will cover the period taking into consideration the enlarged unitholder base. Excluding this distribution, the dividend paid out for the calendar year 2024 from operations amounts to SGD0.1084 per share.
With a closing share price of SGD1.97 on 2 December 2024, this translates to a dividend yield of 5.50%. For my benchmark, a general reasonable yield would be around 5.00%. CICT’s dividend yield is above my benchmark and is Favorable.
Website: Reasonable Dividend Yield 2024Q4 – 5.00%
If using dividend yield of 6.00% as a benchmark, based on the dividend of SGD0.1084 there is potential for CICT to see its share price drop by another 8.3% to SGD1.81. This may occur should the interest rates and yield of safe assets increase.
| Yield | Share Price | Downside |
|---|---|---|
| Current (5.50%) | 1.97 | – |
| 6.00% | 1.81 | -8.3% |
| 7.00% | 1.55 | -21.4% |
Interest Rate Sensitivity
The Federal Reserve on 7 November 2024 have further slashed interest rate by a quarter point to a range of 4.50% to 4.75%. This is in line with earlier expectations for future rate cuts, which will benefit REITs in general.
Website: Federal Reserve cuts interest rates by a quarter point
The Federal Reserve has subsequently announced on 15 November 2024 that they will cut their key interest rate slowly and deliberately in the coming months, in part because inflation has shown signs of persistence, and the officials want to see where it heads next.
Website: Powell says Fed will likely cut rates cautiously given persistent inflation pressures
CICT have provided the interest rate sensitivity analysis as below. Should the interest rate change by another 1.0%, using FY2023 DPU of 10.75 cents as a base, DPU is expected to change by 3.1%.
| Change in Interest Rates | Change in DPU (cents) | Change as % of FY2023 DPU |
|---|---|---|
| 50 bps | 0.17 | 1.5% |
| 100 bps | 0.33 | 3.1% |
| 150 bps | 0.50 | 4.6% |
| 200 bps | 0.66 | 6.1% |
Tenant profile
CICT has a well-diversified tenant profile with the top 10 tenants contributing to 18.9% of their total gross rent with no single tenant accounting for more than 5.2% during the period, providing income diversity to the portfolio.
Heartland Living
The Singapore government intend for every town to have a shopping mall available and successful. Such that they are willing to have measures to help support heartland businesses financially. This means that as an investor of retail properties, you can be assured that there will almost always be tenants for your shopping malls, which translates to rental income. It may still be subjected to capital depreciation and appreciation when exposed to economic conditions, such as the current high interest rates. However as of now, your interests are in line with the government.
Website: The Bull Case For Investing In Singapore Retail Property
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | No Update | Favorable |
| Occupancy | 96.4% | Favorable |
| Gearing Ratio | 39.4% | Neutral |
| Interest Coverage | 3.0x | Favorable |
| Debt Maturity Profile | 3.8 years | Favorable |
| Price to Book Ratio | 0.92 | Favorable |
| Overall | Favorable |
Overall, the metrics remain Favorable to invest in CICT. The small business update has shown that CICT remained relatively stable this quarter, providing investors with assurance as the calendar year 2024 come to a close.
Background
CICT is the first and largest real estate investment trust (“REIT”) listed on Singapore Exchange Securities Trading Limited (“SGX ST”). It made its debut on SGX ST as CapitaLand Mall Trust (“CMT”) in July 2002 and was renamed CICT in November 2020 following the merger with CapitaLand Commercial Trust (“CCT”).
CICT owns and invests in quality income producing assets primarily used for commercial (including retail and/or office) purpose, located predominantly in Singapore.
CICT is managed by CapitaLand Integrated Commercial Trust Management Limited, a wholly owned subsidiary of CapitaLand Investment Limited (“CLI”), a leading global real estate investment manager with a strong Asia foothold.
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Website: CapitaLand Integrated Commercial Trust (SGX: C38U): 2024 Half Year Result
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