CCT – DBS

Acquisition ahead of time

1H07 results in line. CCT reported 1H07 results with DPU registering y-o-y growth of 21.2% to 4.23 cents. This translates to annualised DPU of 8.53 cents, in line with expectations.

Rising capital values. On the back of rising capital values, CCT’s portfolio has been revalued upwards by S$730m (+19%). This raises NAV by 28.5% to S$2.39, which in turn raises debt headroom with gearing lowered from 30% to 25%. Notably, as evident of strong reversions experienced for assets along fringe locations in CBD, Capital Towers and Robinson Point enjoyed highest revaluations with +35% and +36% respectively.

Wilkie Edge acquisition. Along with the results, CCT announced an acquisition from Sponsor, Capitaland, marching towards AUM target of S$5bn-S$6bn by FY09. The asset is named “Wilkie Edge”, a 12-storey mixed development consisting of office, retail and service apartments currently under construction and targeted for completion by 4Q08. This asset was acquired at S$262m based on market cap rates. There is, however, an option by Capitaland to withhold the service apartment portion, which would bring down the value of acquisition to S$182.7m. After missing out on the Temasek Towers acquisition understandably due to aggressive bidding by private property funds, this piece of acquisition reaffirms the developer’s sponsor tieup relationship with Capitaland and commitment to grow CCT.

Hold recommendation and TPS$ 2.97 maintained. With results and acquisitions momentum on track, we are maintaining our Hold recommendation and target price unchanged at S$ 2.97.