Capitaland India Trust: Time to fly
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- Steady operational performance and strategic development completions drove a 6% y/y rise in FY24 DPU , in line with estimates.
- Robust cashflow-backed uplfit in book values to SGD 1.38/share, stock trades at an undemanding 25% discount to book
- Possible further crystalising of book values through the sale of its stake in datacenters and IT parks could re-rate the stock, close the P/B gap
- BUY call maintained, TP and estimates under review
Robust operational performance. CapitaLand India Trust (“CLINT”) reported robust FY24 results which were generally in line with expectations. For FY24, total property income and net property income in in INR terms rose by 21% y/y and 19% y/y to INR17,378mn and INR 12,859mn, respectively. This came on the back of (i) higher rental income from existing properties, (ii) contributions from new developments and past acquisitions namely Building 2, Aurum Q Parc, aVance II, Pune, ITPP-H and ITPH Block A and ITPP-H. Given the 2% dip in SGD-INR exchange rate, in SGD terms, revenues and net property income rose by 19% and 14% respectively to SGD 277.9mn and SGD 205.6mn respectively, in line with our estimates. Distributable income rose by a lower c.7% y/y in SGD terms to SGD 101.5mn on the back of higher current income taxes and net finance costs due to an expanded portfolio. After accounting for 10% of income retained, CLINT’s income to be distributed rose by c.7% y/y to SGD 91.3mn, translating to a DPU of 6.84 Scts (+6% y/y), in line with full year estimates
Our view.
CLINT’s solid 18% uplift in NAVs remains a positive surprise to investors and at a price of SGD 1.04, the stock trades at an undemanding c.25% discount to book values. With possible upside to book values upon (i) stake sale of its data-centers and (ii) sale of selected non-core assets in its portfolio. We see multiple catalysts at play to drive a compression in P/B multiples over time. At current price, CLINT is trading at a FY25F yield of c.7.2%, with a earnings CAGR of c.8.0%.
Solid valuation uplift. CLINT reported fair value gains of c.SGD 304.6mn, driving its net asset value (“NAV”) to rise 18% y/y to SGD 1.38/unit. This mainly was cashflow driven for its IT parks while we saw a slight compression for its data-center portfolio with cap rates compressing from 9.0% to 8.0%. This resulted in a dip in gearing levels to c.38.5% (vs 40.1% a quarter ago), highlighting the step c.30% discount to realisable value that the stock is currently trading at. We note that overall financial metrics have remained stable with (i) interest coverage ratio of 2.6x (stable q/q), (ii) interest rates at 6.0% (despite the ongoing shift towards more INR debt, which costs higher than SGD), supported by high fixed ratio of c.73.3%.
Operating statistics steady with q/q improvements in occupancy rates hitting a high of c.95% (vs 94% a quarter ago) while rental reversions were generally positive in the 8% to 9% range. We not that the manager has backed filled spaces at ITPC (occupancy back to 91% from 85% a quarter ago) and the properties across its portfolio generally maintained higher occupancy rates in the range of 85% - 100%. Regarding the lease termination at its Arshiya warehouses, the manager has backfilled c.35% of the space and is hoping to regain the master-lease rent level by the middle of 2025. In our estimates, we have conservatively assumed nil contribution for the year in FY25F to 1H26F.
Datacenters – on track to drive upside to NAVs and earnings from FY25 onwards. The manager shared that progress for its data-center developments is ongoing as planned with 4 data-centers expected to achieve operational status from 2Q25 and beyond, with close to 244 gross load (MW) to be delivered by then. With a total estimated capex of SGD 1.3bn, the manager expects to achieve 10.5%-11.0% stabilised yields on costs, with possible upside upon completion. The manager is also possibly looking at a stake sale of up to c.33% in the data-centers, with potential to raise SGD 130mn – SGD 150mn as a result, although the final figures is still subject to changes.
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