CCT – DBSV

Divests Starhub Centre

• Sells Starhub Centre for $380m or $1357psf of NLA

• Locks in $109m gain, lifts book NAV to $1.41

• Maintain Hold, TP raised to $1.30

Sells Starhub Centre. CCT has announced it has entered into an agreement to sell Starhub Centre to Frasers Centrepoint Ltd for $380m or $1357psf of NLA. This is slightly ahead of our earlier expectation of $320-350m. URA has approved the change of use at Starhub Centre into a commercial-residential development where 20-40% of its 330000sf GFA must be retained for commercial use. Plot ratio remains unchanged at 4.9x. The Singapore Land Authority has also given an in-principle lease upgrade approval for an extension of the lease to a fresh 99-year lease.

Locks in $109m gain. The sale was expected and conducted as part of CCT’s portfolio evaluation strategy. The sale price is 42.5% above the latest valuation of $266.7m as at June 2010. CCT is expected to recognise a gain of $109.1m from the sale and boost book NAV to $1.41. The sale will give the group greater financial flexibility to pursue acquisitions or repay debt. Net proceeds of $375.8m would expand the group’s gross cash position to $548.5m and lowers gearing to an estimated 19.3%. Starhub Centre contributed about 4% to net property income in 1Q10 based on its current occupancy level of 68.2%.

Maintain Hold, TP raised to 1.30. In terms of earnings impact, FY11 DPU is lowered by 3% to 6.5cts taking into account earnings vacuum from the sale, offset by interest savings. However, DCF is raised to $1.30 with the additional cashflow from the divestment. Maintain Hold with a revised DCF-backed TP of $1.30. Catalysts, in our view, for the stock remains its ability to pursue yield accretive acquisitions to replenish its portfolio or potential redevelopment of some of its older properties.