Should You Invest In CapitaLand Integrated Commercial Trust [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of CapitaLand Integrated Commercial Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To March 24

Business Description

CapitaLand Integrated Commercial Trust (CICT) is an Office & Commercial REIT that was incepted in 2020 via a merger between CapitaLand Commercial Trust and CapitaLand Mall Trust and owns 26 properties which include retail, office and integrated developments.  

What I Like About CICT:

• Solid and strong sponsor which should provide strong support in times of distress and also yield accretive acquisition opportunity.
  

• The majority of CICT portfolio are located in Singapore and is of significantly high quality which provides both a stable rental income and minimal exposure to foreign exchange rate risk.
  

• High and stable occupancy rates as well as weighted average lease expiry which reinforce the stability of rental income and hence stability in distribution per unit.

What I Do Not Like About CICT:

• Their overseas exposure, while limited, is a bit questionable in my opinion. On a personal note, I would prefer CICT to focus their operations solely in the Singapore market but there might be a good to fair chance for them to venture overseas given the limitations in the local market.

Updates From Recent Performance (FY 2023)

General Comments:

• Distribution per unit increased by 1.6% at the back of a higher portfolio occupancy rate, and positive rental reversion which offsets the impact of the higher borrowing cost.
  

• CICT Aggregate portfolio property increased by 1.2%. This is largely as a result of the positive valuation gain in Singapore properties which is offset by the decline in property valuation of their overseas’ properties.
  

• To combat the headwinds in their overseas’ properties, CICT has decided to embark on upgrading and asset enhancement initiates

Positive Headwinds:

• Limited new supply of retail and office space in Singapore over the medium term will contribute to the sustained demand for CICT properties.

Negative Headwinds:

• Asset initiatives, both local (IMM) and overseas (Gallileo) are expected to commence in 1st quarter of 2024 and are expected to last for around 18 months. This will affect the top-line performances in the coming year due to the absence of rental income from the tenants affected during the upgrade.

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Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore