BROKERAGES have largely lifted their price target estimates for CapitaLand Integrated Commercial Trust (CICT), while reiterating their “buy” calls after the real estate investment trust (Reit) reported a 1.7 per cent rise in distribution per unit (DPU) for the second half ended December.
On Wednesday (Feb 7), Maybank Securities and RHB Research hiked their price targets significantly by S$0.20 each.
Maybank now has a higher target price of S$2.10 compared with S$1.90 previously, after raising its FY2025 estimates by 1.8 per cent and introducing a lower discount rate.
While the Reit’s 5.6 per cent yield stood at the midpoint of its historical range, analyst Krishna Guha said he liked CICT’s Singapore-centric, resilient income profile and strong credit standing.
Maybank’s FY2024 DPU estimates were left unchanged upon factoring in lost income from asset enhancement initiative (AEI) works at the Reit’s Gallileo asset, mitigated by better portfolio performance and AEI completions.
Meanwhile, RHB’s price target is now a loftier S$2.20 compared with S$2 previously, translating to a yield of about 6 per cent.
RHB analyst Vijay Natarajan said he believes CICT’s portfolio metrics are expected to “stay firm this year after a strong FY2023”.
The research house raised its FY2024 to FY2025 DPU estimates by 1 to 2 per cent after tweaking its interest cost assumptions, and accounting for higher occupancy and downtime adjustments.
While Natarajan acknowledged that the Reit’s planned AEIs for three of its properties could drag on near-term earnings, he nonetheless highlighted the Reit as “the best proxy for Singapore’s economic recovery, with a high-quality commercial portfolio”.
Divesting its Singapore assets could further strengthen the Reit’s balance sheet and position it to acquire higher-quality assets from its sponsor, added the analyst.
UOB Kay Hian (UOBKH) analyst Jonathan Koh said potential candidates for divestment would include Bukit Panjang Plaza and 21 Collyer Quay.
Like RHB’s Natarajan, he expects the Reit to recycle its assets in Singapore, but he cautioned that acquiring partial stakes and collaborating with like-minded investors “could tone down the scale of acquisition”.
UOBKH raised its price target on CICT to S$2.34 from S$2.24 after lowering its cost of equity assumptions, though FY2024 DPU forecasts remain unchanged.
Meanwhile, CGS-CIMB’s price target on the Reit was raised slightly to S$2.18 from S$2.17 upon rolling forward its assumptions and raising FY2026 estimates. Its FY2024 to FY2025 DPU projections were however lowered by 1.2 to 3.6 per cent as it tweaked assumptions for AEI works.
Though its analysts noted there would be “income downtime” for Galileo during ongoing AEI, they believe the impact would be “muted” given the asset’s relatively small proportion of less than 2 per cent in terms of FY2023 portfolio value.
DBS Group Research’s price target on CICT remained unchanged at S$2.30, though it highlighted that the return of Chinese tourists to Singapore could mean another boost to the city-state’s growth.
This could potentially drive the trust’s unit price performance in future, said its analysts.
“While overall growth could moderate with the AEI plans at Galileo, recent reports of a potential asset recycling by CICT to pare down gearing levels could bode well for investors, in our view.”
DBS also sees the trust as a proxy to a “relatively more stable Singapore economy” – and one of the few Singapore Reits with the opportunity to acquire newly completed prime commercial assets within the city-state, potentially from its sponsor’s pipeline.
Units of CICT were trading S$0.01 or 0.5 per cent lower at S$1.98 as at 10.23 am on Thursday.
