CapitaLand Integrated Commercial Trust

Price targets:

CGS International ‘add’ $2.18

Citi Research ‘buy’ $2.20 Maybank Securities ‘buy’ $2.05 OCBC Investment Research ‘buy’ $2.14 RHB Bank Singapore ‘buy’ $2.20

Resilient operating performance

Analysts are staying positive about CapitaLand Integrated Commercial Trust (CICT) prospects after the REIT announced a “resilient” operational performance for the 1QFY2024 ended March 31.

On April 19, CICT reported a net property income (NPI) of $293.7 million for the quarter, 6.3% higher y-o-y, due to higher rental income and lower operating costs.

CGS International analysts Lock Mun Yee and Natalie Ong have kept their “add” call and target price of $2.18 as they note CICT’s “robust” portfolio performance in 1QFY2024. The REIT’s portfolio occupancy remained high at 97% with positive rental reversions across its property segments.

Lock and Ong have also kept their distribution per unit (DPU) estimates for FY2024 to FY2026 unchanged.

Citi Research analyst Brandon Lee also kept his “buy” call and target price unchanged at $2.20 after CICT’s 1QFY2024 business update revealed largely positive operational metrics.

In their report, CGS’s Lock and Ong also point out that the REIT’s manager indicated that its average funding cost for FY2024 could range from mid-to-high 3% compared to its previous guidance of mid-3% in a higher-for-longer interest rate environment.

RHB Bank Singapore analyst Vijay Natarajan has kept his “buy” call and target price of $2.20 after CICT’s “resilient” quarter.

Like Citi’s Lee, Natarajan also sees asset recycling as a “likely catalyst” with the REIT trading at below book level. The securing of the European Central Bank (ECB) as an anchor tenant for its 38-storey Grade A office building, Gallileo, should result in a “good valuation uplift” during CICT’s year-end revaluation, he adds.

Meanwhile, the analysts at Maybank Securities and OCBC Investment Research (OIR) have kept their “buy” calls although they have lowered their target prices.

Maybank Securities analyst Krishna Guha still likes the REIT for its Singapore-centric “resilient earnings profile”, strong credit and estimated yield of 5.9% for FY2024. He is also positive about CICT’s strong reversions in its 1QFY2024 update.

Calling CICT’s update a “mixed bag”, Guha also notes the lower occupancy and higher funding cost guide. As such, he has lowered his target price estimate to $2.05 from $2.10. The lower target price comes as Guha tweaks his DPU estimates after factoring in slightly higher margin and borrowing costs.

OIR’s research team lowered its fair value estimate to $2.14 from $2.18 after also trimming its DPU estimates by 0.3% and 1.1% for the FY2024 and FY2025 respectively. The lower DPUs come after weaker Australian dollar (AUD) assumptions and after factoring in the ECB lease.

That said, the OIR team remains positive on CICT with its “stable operational performance” and continued positive leasing momentum for its retail operations.