CCT – BT

Distributable income up 16% for CapitaCommercial

Money from StarHub Centre sale to be kept for acquisitions or to repay debt

CAPITACOMMERCIAL Trust (CCT) unitholders will not receive any special payout as a result of the trust’s recently announced $380 million sale of StarHub Centre. Instead, CCT will keep the sale proceeds as dry powder for acquisitions or to repay debt.

CCT will generally be looking at Grade A office assets in Singapore, which tend to be ‘quite sizeable’, Lynette Leong, CEO of CapitaCommercial Trust Management Ltd, said during the trust’s second quarter results briefing yesterday.

The trust has $85 million of debt due to expire this year and a further $841 million in 2011. As at June 30, its cash and cash equivalents totalled $464 million.

CCT posted distributable income of $55.67 million for Q2 ended June 30, up 15.9 per cent from a year back. The improvement was due mainly to lower interest expenses on the back of lower borrowings.

Net property income edged up 1.3 per cent year on year to $74.23 million and gross revenue rose 0.2 per cent to $100.2 million.

CCT booked a $19.6 million gain on the sale of investment property from divesting Robinson Point, which was completed on April 19. It also booked a $12.94 million premium on the repurchase and cancellation of $175 million of convertible bonds due 2013 in Q2 this year.

An independent valuation of the trust’s portfolio of investment properties was conducted as at June 30, which showed a marginal 0.5 per cent or $25.7 million drop in its market value since the previous valuation at end-2009. However, these three items do not affect distributable income.

CCT’s distributable income for the first half of this year was $110.02 million, up 17.8 per cent from a year earlier, on a 2.3 per cent rise in gross revenue to $202.04 million.

Net asset value per unit – after adjusting for H1 distributable income to unitholders – came to $1.36 as at June 30, down one cent from the end-2009 figure.

Distribution per unit for Q2 2010 works out to 1.97 cents. The trust, which pays distributions semi-annually, will make a DPU payout of 3.9 cents for H1. The books closure date is July 30 and unitholders can expect to receive their distribution on or around Aug 27.

DMG & Partners Securities said that the Q2 DPU was ‘about 8 per cent above our and the street’s forecast . . . (but) we maintain our FY2010 DPU forecast of 7.2 cents, in view (of the likelihood) that the sale of Robinson Point and StarHub Centre may reduce overall distributable income in H2 2010’.

‘Management reiterated that they will use proceeds from the asset divestment to retire some of its short-term debt, thereby boosting its credit metrics. CCT trades at 5.4 per cent FY10 yield, and will trade ex-2Q10 distribution on July 30. Maintain ‘neutral’,’ DMG said in a report yesterday.

CCT’s gearing ratio – borrowings over total deposited properties – stood at 32.8 per cent as at June 30, down from 33.2 per cent as at Dec 31, 2009.

In Q2 this year, CCT signed new leases and renewals of 277,000 square feet, taking the total for the first half to 422,000 sq ft. Tenants include Accenture at Raffles City Tower; Credit Agricole Corporate and Investment Bank at Capital Tower; financial research outfit EDHEC Risk Institute-Asia and law firm Watson, Farley and Williams at Six Battery Road; and Northern Trust at One George Street.

Ms Leong said that CCT was seeing growing expansion needs among its tenants. She also remains upbeat on the recovery of Singapore’s office market, after Prime and Grade A average office rental values bottomed out in Q1 this year.

‘We are positive that the continued growth in office demand in tandem with Singapore’s economic development will further strengthen absorption rates and augur well for the office market,’ she said.