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CapitaLand Commercial Trust - Maybank Kim Eng 2016-01-13: Best in a Difficult Sector

CapitaLand Commercial Trust - Maybank Kim Eng 2016-01-13: Best in a Difficult Sector CAPITALAND COMMERCIAL TRUST C61U.SI 

CapitaLand Commercial Trust (CCT SP) - Best in a Difficult Sector 


Maintain HOLD, TP still at SGD1.25 

  • CCT is our preferred office REIT. 
  • Low leverage of 30% should cushion it from impending interest-rate hikes more than its peers. 
  • The REIT also has smaller tenant exposure to the financial sector, at 33%. 
  • We forecast organic DPU growth of over 2% pa from incremental contributions from 40%-held CapitaGreen. 
  • Depending on the transacted price, its option to acquire the remaining 60% of CapitaGreen may provide upside to our DPU. 
  • Our unchanged TP of SGD1.25 is based on an FY16 yield target of 7.0%. 

Not as vulnerable to rate hikes as peers 

  • The REIT has the lowest leverage among its peers of 30%: Suntec 37%, KREIT 43%. 
  • Also, as it has locked in 83% of its debt as fixed debt, it should be least exposed to rate hikes among office REITs. 

Smallest exposure to financial sector 

  • Hiring sentiment in the financial sector is weak. This would inevitably affect demand for prime office space. 
  • However, we believe that CCT is least exposed to the financial sector, at 33% of tenants. KREIT and Suntec have bigger exposure of 48%. 
  • We already build in 50bp increases pa in its all-in-financing costs for FY16-17. 

Capacity to snap up rest of CapitaGreen 

  • CCT has debt headroom of SGD1.3b. This would enable it to acquire the remaining 60% of CapitaGreen without fund-raising. 
  • Depending on the final price, its option to acquire the remaining 60% of this brand-new office building may provide upside to our DPU.



Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-01-13
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.25 Same 1.25


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