On 6 February 2024, CapitaLand Integrated Commercial Trust (“CICT”) have announced their 2023 full year result. The results have shown that CICT continues to remain stable, and their investment properties overall received an increase in valuation which in turn helped to lower their gearing. This is a good sign of the resilience of their portfolio which should give investors a peace of mind when investing in this REIT.
Website: Financial Statements And Related Announcement::Full Yearly Results
Photo source: https://fifthperson.com/cmt-cct-merger-pros-cons/
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.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | +1.6% | No Info |
DPU increased by 1.6% for FY2023 to SGD0.1075 per share from SGD0.1058 in the previous financial year. This is well supported by operations as noted that net income has increased as well. This metric is Favorable.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 97.3% | 97.3% |
Occupancy rate remains unchanged as at 31 December 2023 stands at 97.3%. This is Favorable as it is above my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 39.9% | 40.8% |
Gearing ratio decreased to 39.9% as at 31 December 2023. This is contributed by the overall decrease in loans and borrowings as well as increase in the valuations of investment properties. This is Neutral, as it is still relatively high and close to the MAS limit of 50% when compared to other REITs.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.1x | 3.1x |
The interest coverage remains unchanged at 3.1 times as at 31 December 2023. The metric is Favorable as the interest coverage is above my preference of 3.0 times. It remains to be seen however if they are able to remain the coverage over the next few quarters as their loans continued to be refinanced in the current high interest rate environment.
The Federal Reserve on 13 February 2024 have indicated that interest rates may need to stay high for a longer period as they are waiting for more evidence of easing price pressures before they cut interest rates, after a government report on Tuesday showed consumer inflation stayed elevated last month. This was after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Fed seen waiting longer to cut rates as inflation stays elevated
As the interest rate may potentially increase further, CICT may be subjected to significant change in their cost of debt in the near future. In their presentation they have mentioned that 78% of their debt is also on fixed rates.
I have thus performed a sensitivity analysis using the information as at 31 December 2023:
| Description | Amount (SGD’000) |
|---|---|
| Total Debt | $9,500,000 |
| Debt Not Hedged (%) | 22.0% |
| Debt at Floating Rate Exposed | $2,090,000 |
| Distributable Income FY2023 | $715,700 |
Interest rate sensitivity analysis as below:
| Change in Interest Rates | Decrease in Distributable Income (SGD’000) | Change as % of FY2023 Distribution |
|---|---|---|
| + 50 bps | -$10,450 | -1.5% |
| + 100 bps | -$20,900 | -2.9% |
| + 150 bps | -$31,350 | -4.4% |
| + 200 bps | -$41,800 | -5.8% |
| + 250 bps | -$52,250 | -7.3% |
| + 300 bps | -$62,700 | -8.8% |
Do note the above is my estimation which may be different from management’s estimation. Nonetheless, if the interest rates were to increase by the basis points above, CICT may experience a fall in DPU accordingly.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.9 years | 4.1 years |
Weighted average term to maturity of their debt stands at 3.9 years as at 31 December 2023. This is 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 | 0.90 |
The Price to Book (“P/B”) ratio currently stands at 0.92. This is computed using the closing share price of SGD1.96 on 29 February 2024 and the net asset value per share of SGD2.13 as at 31 December 2023. The metric is Favorable as investors will not be paying a significant premium for a REIT with a strong sponsor.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 2.78% | SGD 0.055 |
| 2023 | 5.44% | SGD 0.107 |
| 2022 | 2.85% | SGD 0.056 |
| 2021 | 6.01% | SGD 0.118 |
| 2020 | 3.11% | SGD 0.061 |
At 29 February 2024, with a closing share price of SGD1.96 and dividend payout of SGD0.107 for the full calendar year 2023, this translates to a dividend yield of 5.44%. For my benchmark, a general reasonable range would be around an average of 5.25% to 6.25% in the current environment. CICT’s dividend yield is within my benchmark and the expected annualised dividend for 2024 is likely to be higher than 2023. The dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q1
Other metrics
Tenant profile
CICT has a well-diversified tenant profile with the top 10 tenants contributing to 19.5% of their total gross rent with no single tenant accounting for more than 5.1% during the period, providing income diversity to the portfolio.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | +1.6% | Favorable |
| Occupancy | 97.3% | Favorable |
| Gearing Ratio | 39.9% | Neutral |
| Interest Coverage | 3.1x | Favorable |
| Debt Maturity Profile | 3.9 years | Favorable |
| Price to Book Ratio | 0.92 | Favorable |
| Overall | | Favorable |
Overall, the metrics indicate that it is favorable to invest in CICT. With the lowered gearing ratio it has made the REIT more favorable than the previous quarter, and CICT continues to trade at a discount from its book value. The stability is something that may give investors assurance in this current uncertain environment.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: CapitaLand Integrated Commercial Trust (SGX: C38U): 2023 Third Quarter Business Update
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