CapitaLand Commercial Trust | Buy
Sept 13 close: $1.74 Target price: $2.12 Broker: DBS Group Research, Sept 13
CapitaLand Commercial Trust (CCT) announced it has signed a one-year lease extension with HSBC for the whole of 21 Collyer Quay. The original lease with HSBC was scheduled to expire next April. The news is a disappointment as we had originally assumed HSBC would extend its lease for a longer period... Nevertheless, should CCT decide to continue owning the building, it has another two years to find a replacement tenant, which is ample time.
Alternatively, given the higher demand for office buildings in Singapore with recent transactions at “tight” yields, there is potential for CCT to sell the building above book value to demonstrate the conservative valuation of its buildings and why it deserves to trade at a premium to book as implied by our target price.