CCT – CIMB

Concerns remain

• Met expectations. 3Q08 results were in line with Street and our expectations. DPU of 3.1cts grew 45.1% yoy to form 29% of our forecast of 10.55cts for FY08. Gross revenue of S$92.5m was up 52.6% yoy primarily on maiden contributions from One George Street and strong rental reversions. YTD DPU forms 78.4% of our full-year estimate, in line.

• One George Street diversified earnings. One George Street has diluted the concentration of revenue from Raffles City. In order of significance, the top three revenue contributors were: Raffles City (31.2%), 6 Battery Road (22.1%) and One George Street (15.5%). Together, they contributed 69% to CCT’s gross revenue in the quarter.

• Occupancy at 99%. Committed occupancy on a portfolio basis remained high at 99%, above islandwide office occupancy of 92.2% as at 2Q08. Average monthly rents for CCT’s office properties were S$7.20 psf in the quarter.

• Our key concerns for CCT are: 1) downward asset revaluation which would decrease its debt headroom and increase asset leverage; and 2) 57% of its debt (S$1,456m) is due over 2009-10. The pressure to refinance significant debt at a reduced credit rating of Baa1 (from an earlier A3) is likely to increase its cost of debt. A saving grace is CCT’s resilient income from a 5-year minimum income support for One George Street, long leases for HSBC Building and a stable retail segment in Raffles City.

• Maintain Underperform and target price of S$1.17. Our target remains based on DDM valuation with a discount rate of 10.4%.