Capitaland India Trust: Outperformance held back by weak SGDINR exchange rate
- FY23 DPU missed estimates on weaker SGDINR exchange rates and enlarged share base
- Operational metrics robust with organic growth from higher rents, and development and forward funding projects anchoring medium term growth prospects
- Stable financials with gearing down to a manageable c.36%; with ample debt-funded capacity to grow
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The drop in distribution per unit (DPU) of 21% to 6.45 Scts was due to an enlarged share base from the preferential offering, and excluding this, DPU would have been 7.21 Scts (-5% y-o-y)
(+) Financial metrics strengthened post fundraising.
Overall financial metrics remain stable with gearing dropping to 35.8% post preferential offering exercise, coupled with positive revaluation exercise at the year end, providing CLINT the financial flexibility to execute its development and acquisition activities. The interest coverage ratio was stable at 2.6x while overall interest costs was flat q-o-q at 6.3%, which the manager believes to have “peaked” and should remain stable / marginally lower during this year. This is a positive development, implying that any further improvement in operational results should flow straight to the bottom line. CLINT’s portfolio valuation on a like-for-like basis, removing impact of acquisitions, was up c.9.1% in INR terms to INR 164.1m or 8.6% rise in value in SGD terms.
(+) Operational outlook strong as reversions remain robust. We continue to see a stability in overall occupancy rates, with end-Dec committed occupancy rate at c.93% (stable q-o-q). We note that overall rental reversions ranged between -3% to -6% (mainly in ITPC and CyberValue) to as high as 11% to 19% (Hyderabad and Bangalore), implying that overall organic growth momentum is likely to continue in FY24. This is aided by contribution from revenue-generating spaces (due to tenant fit-outs through the year), which we understand is c.10%-15% lower than the committed occupancy rate of c.93%. In terms of denotification of SEZ space within its assets across Bangalore, Hyderabad, and Chennai given its high SEZ occupancy rates, comparable to its non-SEZ space, the manager expects to see no significant requests for denotification of space.
In addition, FY24F net property income projections of c.16% growth y-o-y is further underpinned by contribution from Block A, ITPB, which was substantially let in 4Q23, acquisition of ITPP in the middle of 2023 and its development projects (0.21m sqft at FTZ warehouse in Cybervalue), multi-tenanted building 6 in Bangalore and the progressive construction funding projects.
(-) Earnings cut to account for lower Rp rates.
We have cut our currency assumptions by c.7% to SGD-INR63 in our forward projections, assuming these levels to be flattish heading into the longer term. We have also pared down our occupancy assumptions portfolio-wide from 99% to 95%, which appears to be the expected run-rate going forward. This resulted in a c.15% to 20% cut to our DPU estimates. As such, our TP is cut to S$1.15, implying a total return of 15%.
FY Dec | 2H2022 | 1H2023 | 2H2023 | % chg yoy | % chg hoh |
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Gross revenue | 107 | 110 | 124 | 15.1 | 11.8 |
Property expenses | (23.9) | (24.9) | (29.5) | 23.6 | 18.8 |
Net Property Income | 83.4 | 85.6 | 94.0 | 12.6 | 9.8 |
Other Operating expenses | (11.1) | (11.7) | (13.7) | 22.6 | 17.2 |
Other Non Opg (Exp)/Inc | (38.4) | (12.5) | (11.2) | 70.9 | (10.7) |
Associates & JV Inc | 0.0 | 0.0 | 0.0 | - | - |
Net Interest (Exp)/Inc | (7.9) | (9.9) | (16.5) | (109.4) | (66.1) |
Exceptional Gain/(Loss) | 0.0 | 0.0 | 0.0 | - | - |
Net Income | 26.0 | 51.5 | 52.7 | 102.3 | 2.2 |
Tax | (52.7) | (23.1) | (63.9) | 21.2 | 176.7 |
Minority Interest | (4.4) | (3.1) | (6.9) | (58.4) | 120.8 |
Net Income after Tax | (31.1) | 25.3 | (18.2) | 41.4 | (172.0) |
Total Return | 90.1 | 25.3 | 122 | 35.5 | 382.7 |
Non-tax deductible Items | (11.6) | 1.73 | (6.2) | (46.5) | nm |
Net Inc available for Dist. | 50.6 | 48.9 | 45.7 | (9.6) | (6.6) |
Ratio (%) |
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Net Prop Inc Margin | 77.7 | 77.5 | 76.1 |
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Dist. Payout Ratio | 90.0 | 90.0 | 90.0 |
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