CCT – BT

CCT posts 14.5% rise in Q4 distributable income

CapitaCommercial Trust (CCT) posted distributable income of $32.3 million in last year’s final quarter, an increase of 14.5 per cent from a year previously.

Full-year 2007 distributable income rose 52.7 per cent to $120.4 million on the back of a 54.2 per cent jump in gross revenue to $240.1 million – due mainly to the consolidation of CCT’s 60 per cent interest in the Raffles City complex which was acquired in September 2006. Higher rental income, car park income and other income from the trust’s properties also boosted the bottom line for the year.

The trust reported $1.3 billion fair value gain on revaluation of its investment properties, boosting its total asset size to $5.3 billion as at the end of December.

Currently less than 5 per cent of CCT’s assets are overseas, but in the medium term the overseas share could grow to 20-30 per cent, CapitaCommercial Trust Management Ltd (CCTML) chief executive Lynette Leong said yesterday.

Vietnam is among the promising markets where CCT sees a lot of growth, Ms Leong said.
The trust said that its interest-rate exposure is small, as 86 per cent of total borrowings are on fixed rates and no major refinancing is required until March 2009.

In addition, its low gearing of 23.9 per cent gives it sizeable debt headroom to support any new asset growth strategy.

Assuming the trust decides to gear up to 40 per cent, it could take additional debt of about $800 million, analysts observed. This should come in handy for CCT when competing for acquisitions with some other Reits with much less room for taking further debt.

The stock market slump has raised the distribution yields at which Singapore Reits are trading. That means equity cost has gone up and Reits will need to acquire assets at much higher property yields if they are going to finance them by issuing new equity rather than using debt.

Riding on the spike in office rents, CCT achieved significantly higher rent reversions for offices leases that were renewed as well as new leases signed during 2007. Rents committed for renewals were on average 36.8 per cent higher than preceding rents, while new leases were committed at 130.8 per cent above preceding rents.

And with about 57 per cent of CCT’s office portfolio (by gross rental income) up for renewal and rent review in 2008 or 2009, the trust can look forward to further positive rent reversion given the shortage of offices.

This factor, coupled with limited exposure to interest rate risk, led CCTML to say it expects to perform better than its forecast distribution per unit (DPU) of 10.04 cents for the current financial year. The forecast was made in a circular in November last year.

CCT unitholders will receive a DPU of 4.47 cents for the July 1 to Dec 31, 2007 period.

This works out to 8.87 cents on an annualised basis, reflecting a distribution yield of 4.6 per cent based on CCT’s closing price of $1.91 yesterday. The counter ended four cents lower yesterday.

CCT’s adjusted net asset value (excluding distributable income to unitholders) rose from $1.86 as at Dec 31, 2006 to $2.80 as at Dec 31, 2007.

The trust has secured commitments for more than half of the 9,600-sq-m office space at Wilkie Edge in the Selegie area, ahead of the development’s completion expected in Q4 this year.