Brokers' take

CapitaLand Commercial Trust | Buy Target price: S$1.69 Jan 19 close: S$1.565 DBS Group Research, Jan 19

DESPITE the expected decline in the office market, we believe the timely acquisition of the remaining 60 per cent in CapitaGreen not only helps to offset potential negative rental reversions and lower occupancies for the rest of CapitaLand Commercial Trust (CCT)'s portfolio, but will allow CCT to deliver 2 per cent growth in distribution per unit (DPU) this year (excluding the impact from redevelopment of Golden Shoe and potential sale of Wilkie Edge).

CCT's Singapore Grade A office portfolio trades at an implied value of about S$2,000 per square foot (psf) compared to recent sales of between S$2,700 and S$3,500 psf. While CCT's Grade A portfolio is unlikely to trade higher at about S$2,700 given the older profile of some of its properties, we believe the current strength of the physical market and 999-year leasehold status of some of its buildings warrants CCT to trade close to its book value of S$1.73 per unit or an implied valuation of S$2,100 psf. The next catalyst would be the sale of Wilkie Edge above book value.