Capital Integrated Commercial Trust (CICT: C38U) released its latest quarterly net property income of S$273.3 million in October 2022, up 12.7% year-on-year. CICT will profit from the recovery of Singapore’s office and retail property market, especially from 2023.
The real estate investment trust capitalizes on the strong demand for its quality assets in the central business district and other areas due to the office workers’ return and investments brought by border relaxation measures.
CapitaLand sees increases in net property income for 2023 brought by rent inflation and higher occupancy. However, rises in borrowing interest and operating costs may pressure business profits.
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Is CICT Worth Buying?
Yes, CICT is a viable candidate for long-term income-producing investment. Firstly, it provides a regular and steady income stream. Second, the trust predicts an increase in net property income for 2023 due to solid demand and increased rents for its quality properties due to border relaxation and economic recovery.
About CICT
Listed on Singapore Exchange, regulated by the Monetary Authority, in 2002 and initiated as a CapitaLand Mall Trust, the trust renamed itself CICT in 2020 after a merger with CapitaLand Commercial Trust. CapitaLand is the first and largest public-listed real estate investment trust in Singapore, with a market capitalisation of S$13.5 billion (December 31, 2021.)
CICT owns and invests in quality income-producing retail and office properties, mainly in Singapore and other countries, such as Germany and Australia. The combined value of all properties owned is S$24.2 billion (December 31, 2021.)
Share Price of CICT (C38U)
| Capital Integrated Commercial Trust (C38U)* | Stock Prices |
|---|---|
| November 8, 2021 | S$2.17 |
| November 8, 2022 | S$1.89 |
| Loss | 23% |
*The market data about the stock quotes are attributable to Yahoo Finance.
Dividends
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Dividends per share** | S$0.11 | S$0.13 | S$0.10 | S$0.12 | S$0.06 |
| Trailing dividend yield% | 5.23% | 5.68% | 4.24% | 4.61% | 5.77% |
Dividends Payout Schedule
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Payable dates** |
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**The dividend information above is attributable to Morningstar.
What do Analysts say?
From the latest earnings release for the 3rd quarter of 2022, CICT reports positive results in line with the market beats. Several trends favor CapitaLand.
- Year-to-date tenant sales per square foot exceed 2019’s in September 2022.
- Portfolio’s committed occupancy rise 1.3% quarter-on-quarter.
- Till September, the rent keeps rising for its office and retail portfolio.
- CapitaLand forecasts higher arrivals from abroad, and accelerating tourism industry recovery helps increase its revenue.
- More cash flow will take place by the committed office leases from 2023 onwards.
- AEIs (Asset Enhancements and Innovations) for committed leases will bring cash flows from 2023 onwards.
- Downturn portfolios see more business revenues due to border relaxation and business back to offices.
- CapitaLand expects to partially offset rising costs by increasing service charges from 2023.
Here are analysts’ opinions from the above market data:
CGS-CIMB
The brokerage remains positive on CICT. Still, it predicts a rising interest rate environment will affect the estate trust’s performance and reduce DPU (distributions per unit) in the future. CapitaLand’s management estimates a 1% rise in interest costs decreases DPU by 0.3 cents.
CICT will be more cautious in investing in projects with inorganic growth. CGS-CIMB lowers DPUs for 22-23 by 0.78-3.36% as higher interest costs eat into profits.
Besides, the brokerage reduces the target price to S$2.35 due to possible reduced earnings and a higher equity cost of 7.5%.
DBS
The brokerage maintains a “buy” rating on CICT as it is currently trading at 0.85 x P/NAV and a yield of 6.4%.
However, it lowers its target price to S$2.2 from S$2.7 and DPUs growth by 3-6% for 22-23 due to higher interest costs and refinancing costs of existing debt incurring in 2023.
But DBS remains optimistic about more cash flows due to rental income from new projects and a potential acquisition of Mercatus portfolio.
Bottom Up
CapitaLand Integrated Commercial Trust (CICT) is the first public-listed real estate investment trust with the largest market cap in Singapore. It provides attractive and steady dividend income streams to long-term investors. Like other SG stocks to invest in, buyers should consider the impact of rising interest costs while determining the trust’s fair value.
Key takeaways
- CapitaLand is suitable for long-term investors with regular dividend payment streams.
- Rising interest rates reduce DPUs for unitholders.
- Analysts predict CICT’s share price may increase due to more rental income from AEIs and future projects.
- CapitaLand forecasts a 1% increase in interest rate reduces the distributions per unit by 0.3 cents.
- CapitaLand’s price is trading at 0.85xP/NAV and a yield of 6.4%.
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