CapitaLand Integrated Commercial Trust: FY24 Results: A bed of roses
- FY24 distributable income rose 5.1% y/y to SGD752.2m; FY24 DPU of 10.88 scts (+1.2% y/y) ahead of estimates and in line with consensus
- Retail and Office reversions strong at +9% and +11% respectively, with occupancy cost improving to a post-pandemic high of 17%; Portfolio valuations up 6.2% with inclusion of Ion Orchard (+1.4% on same store basis) to offset a 100 bps increase in cap rate amongst Australia assets
- Strong SG reversions guided at mid-single digit levels, AEI completion at IMM mall to support DPU growth; Management fees in units to maintain at 50% cash 50% fees as a base case
- Maintain BUY; Estimates and TP under review
FY24 Results – Ahead of DBS estimates. CICT reported 1.7% and 3.4% higher y/y gross revenue and NPI at SGD1,586m and SGD1,154m respectively for FY24, led by maiden contributions from ION Orchard, strong reversionary rents, which off-set loss of income from 21 Collyer Quay divestment. Full year distributable income increased by 5.1% y/y to SGD752.2 m with a 1.2% increase in DPU to 10.88 Scts (DPU for 2H flat at 5.45 Scts) – which is ahead of our estimates and in line with consensus estimates. High occupancy rates across retail (99.3%), office (94.8%), and integrated development (98.9%) was maintained for the quarter, with overall portfolio occupancy stable at 96.7%. Reversions across all sub-asset classes remained robust and exceeded estimates, with office reversions at +11% and retail at +9%. Occupancy costs within the retail portfolio improved to a post-pandemic high of 17%, narrowing the gap with pre-pandemic levels (FY19: 18.2%). While portfolio retail sales declined by approximately 1% YoY, traffic increased by 4% due to stronger tourist footfall in downtown malls (same-store basis), signaling healthy tenant performance.
Our thoughts. The DPU increase was a positive surprise, considering the enlarged unit base following the equity fundraising for the ION Orchard acquisition. Maintaining the 50/50 management fee structure (in contrast to the potential increase to approximately 70% mentioned in the ION Orchard announcement) reinforces that DPU growth is operationally driven and sustainable. ION Orchard also performed ahead of expectations, with a 2-percentage-point increase in occupancy to 98% since the deal was announced in 2024. Management intends to maintain the current 50/50 management fee structure. CICT maintained low aggregate leverage (38.5%) and a stable average borrowing cost (3.6%) at the end of the quarter. This was facilitated by using divestment proceeds from 21 Collyer Quay to reduce higher-cost short-term debt. With a high fixed-interest hedge ratio (81%) and only approximately 10% of the loan book due for refinancing in FY25, management anticipates a marginal increase in the average cost of debt from the current 3.6%.The portfolio property value increased by 6.2% y/y to SGD 26b following year-end valuations (including ION Orchard). On a same-store basis, the increase would have been 1.4% y/y, driven by Singapore and Germany assets (with AEI-driven valuation uplift at Galileo of +13% YoY). This offset some weakness in Australia valuations (-15% y/y), where valuers factored in a 100 basis point increase in capitalization rates to reflect market transactions and foreign exchange translation losses due to a relatively weak Australian dollar (AUD). CICT confirmed that cinema operators in its retail portfolio (including Shaw Theatres and Golden Village) are current on their rent payments. This contrasts with media reports regarding Cathay Cineplexes' rental arrears, reflecting a challenging landscape for cinema operators. Overall exposure to cinema tenants is less than 1% of CICT's portfolio. Recent note on news flow: Distress cry from cinema operator Cathay
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR.