Brokers’ take: Analysts mixed on CICT’s outlook despite higher DPU
Add BT as a preferred sourceJanice Tan
CAPITALAND Integrated Commercial Trust’s (CICT) recent H2 FY2022 earnings drew mixed reactions from analysts despite the trust recording a 2.7 per cent increase in distribution per unit (DPU) to S$0.0536.
RHB Research downgraded its call to “neutral” from “buy” with an unchanged target price of S$2, noting that the trust’s growth is comparatively lower than its peers even though it reported improving operating portfolio metrics in Q4 and FY2022.
In a report on Thursday (Feb 2), analyst Vijay Natarajan said he deemed valuations fair as the trust is currently trading at its book value, and offers 5 per cent dividend yields.
Natarajan estimated CICT’s positive momentum to sustain in H1 FY2023 before slowing down in the second half of the year, with operational gains being offset by higher interest and inflationary pressures.
The research house trimmed FY2023 and FY2024 DPU forecasts for CICT by 2-3 per cent, while estimating overall interest cost for borrowings in FY2023 to be in the mid-3 per cent levels, up from 2.7 per cent.
On the other hand, DBS Group Research raised its target price to S$2.40 from $2.20 while reiterating its “buy” call on CICT, as it said the trust will benefit from a broad recovery trajectory.
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Unlike RHB, DBS said CICT is currently trading at a “very attractive level to ride on the growth trajectory”.
Due to expectations of more rental income contributions from FY2023 onwards, the brokerage is positive on CICT’s DPU growth prospects, which it said will be further boosted by operational normalisation once ongoing asset enhancement initiatives are completed.
It liked CICT for its ability to deliver a two-year DPU compound annual growth rate of about 4 per cent “despite the cloudy macroeconomic conditions”.
It also highlighted the trust as one of the few Singapore real estate investment trusts with an opportunity to acquire newly completed prime commercial assets in Singapore, potentially from its sponsor pipeline.
The return of Chinese tourists could further provide upside to its unit price as CICT’s retail portfolio would stand to see a stronger recovery, according to DBS.
Meanwhile, CGS-CIMB tweaked its FY2023 to FY2024 earnings estimates marginally downwards, following the release of CICT’s latest results.
The brokerage nonetheless maintained “add” on the trust with an unchanged target price of S$2.35, noting improving rental reversions along with the continued trend of rising average funding costs.
Units of CapitaLand Integrated Commercial Trust traded 1.4 per cent or S$0.03 higher at S$2.14 as at 12.17 pm.
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