CCT – MayBank Kim Eng

In-line results; eyes on CapitaGreen

• FY13 results are in line with our and market expectations. Reiterate HOLD and TP of SGD1.50.
  
• No pre-commitments signed to-date for CapitaGreen. CCT still in active talks to lease ~350k sq ft of space (50% of total NLA).
  
• FY14E NPI decline for One George Street estimated to be no more than SGD4.5m vs FY13’s.
  

Results in line with expectations

CCT saw a 3% YoY rise in FY13 revenue to SGD387m, bolstered by higher income from most properties and full-period contribution from Twenty Anson, which was acquired in Mar 2012. Though full-year revenue formed 101% of our and 102% of consensus estimates, it was dented by lower revenue from Capital Tower and the loss of yield protection from One George Street since Jul 2013. Full-year DPU grew 1.3% to 8.14 SGD cts, in line with our expectations. Balance sheet remains strong with a low gearing of 29.3% and 80% of borrowings on fixed rates. CCT has debt headroom of SGD1.2b, assuming a gearing of 40%. Portfolio occupancy edged up to 98.7% from 97.2% thanks to a mix of new and renewed leases (tenants include CapitaLand/CMA, JPMorgan and Royal Bank of Scotland).

All eyes on CapitaGreen

CapitaGreen, with 700,000 sq ft of net lettable area, is on track to complete by 4Q14. CCT has a 40% stake in this development but has yet to announce any pre-commitments. It is in active talks with prospective tenants to lease ~350,000 sq ft of space, with asking rents of SGD12-14 psf per month for smaller tenants and below that for the first few large floor-plate anchor tenants (loss-leader strategy). We see CCT’s pre-leasing activities coinciding with those of the 782,000-sq-ft Asia Square Tower 2 (TOP 3Q13; 60% pre-committed) and 527,000-sq-ft South Beach Development. We expect the next significant uplift in DPU to occur only in FY15 after the completion of CapitaGreen. Reiterate HOLD with an unchanged DDM-derived TP of SGD1.50 (discount rate of 8.5%).