CCT – CIMB

Stable with slow growth

CCT posted flattish 4Q13 results, with revenue and DPU growing at 1.5% and 2.0% yoy respectively. We deem the full-year results largely in line as they are only 2% and 1% short respectively of our FY13 revenue and DPU estimates. The next phase of growth is expected to be driven by the upcoming CapitaGreen that is scheduled for completion in 4Q14. We maintain our Hold rating, but trim our FY14-15 EPS for the slower commitment rates, resulting in a lower target price of S$1.51

Stable set of results

4Q13’s results came in flattish, with a topline of S$98.6m (+1.5% yoy) and DPU of 2.1Scts (+2.0% yoy). The growth in revenue was due mainly to higher revenue contribution from most properties, in particular Six Battery Road, Raffles City Singapore, HSBC Building and the full-year contribution from Twenty Anson. During the period, c.S$4m worth of savings as a result of lower interest cost raised CCT’s distributable income to S$234.2m (+2.5% yoy) while portfolio occupancy continued to creep up to 98.7% (vs 97.6% a quarter ago).

Strong balance sheet

Gearing stayed stable at 29.3% (29.5% in 3Q13), while the average cost of debt dipped slightly to 2.6% (2.7% in 3Q13). Having completed all its FY14 financing needs, we believe management will continue to look at its refinancing needs for 2015 in the coming quarters. Currently, with 80% of its total debt hedged as a fixed-rate debt, we believe CCT is fairly immune to any rate hikes.

Maintain Hold

During the briefing, management highlighted that it aims to achieve a rental rate of S$12-14 psf/mth when CapitaGreen stabilises. Given the average spot rent of c.S$9.75 psf/mth for Grade A offices at the moment, we believe it will be sometime before this level can be achieved. With a slightly slower than expected progress in the commitment rates (no pre-commitments currently), we have fine-tuned our model and lowered our earnings by c.1% for FY14 and FY15. We maintain Hold with a slightly lower target price of S$1.51 as we await more impactful catalysts.