CCT – CIMB

Decent start to the year

• 1Q07 within expectations. 1Q07 DPU of 2.1cts represents 22% of our full-year forecast of 9.5cts and 24% of consensus’s 8.9cts. We have assumed that CCT’s portfolio will grow by 15% this year, in line with the trust’s target to reach S$6bn by end-2009 from the current S$3.8bn. Assuming a constant portfolio size, 1Q07 gross rental revenue would have met 24% of our full-year forecast.

• Gross rental revenue surged 95%, largely because of the consolidation of the 60% stake in Raffles City that CCT acquired in Sep 06. Excluding Raffles City, gross rental revenue would still have climbed 13% yoy. This was chiefly on account of strong rental growth at Six Battery Road, higher occupancy at Bugis Village, and contributions from Golden Shoe Car Park and Market Street Car Park, following the completion of asset enhancement work there. Overall portfolio occupancy remained technically full at 99%.

• Strong office rental reversions to continue. Asking rents at Six Battery Road reached S$16 psf per month in April, a 23% jump from the start of this year. About 10% of the leases in the prime office building are up for renewal this year. Similarly at Raffles City, the asking rent is up 15% from the beginning of this year to S$11.50 psf per month and 29% of the leases are due for renewal this year.

• Asset enhancement at Raffles City kicks off. About 41,000 sf of retail NLA (+12%) will be added during the first phase. Construction is scheduled to start this quarter and end by year-end. It was announced previously that the entire asset enhancement package would include the addition of 150,000 sf in NLA and a direct link to the new Esplanade MRT station nearby, which should be ready by 2009/2010. We expect CCT to announce the remaining phases of Raffles City’s asset enhancement in the next 12-18 months.

• Maintain Outperform. Our DPU forecasts remain intact and there is no change to our DDM target price of S$3.00 (cost of equity 5%, implied CY07 yield of 3.2%). Potential catalysts in the next 12-18 months include the announcements of the remaining phases of Raffles City’s asset enhancement, CCT’s move into China and possibly the trust’s maiden development project. Based on CCT’s latest asset size of S$3.8bn, CCT can undertake up to S$380m worth of projects.