Brokers' take: CGS-CIMB raises TP for Elite Commercial Reit to 83 pence

CGS-CIMB has raised the target price for Elite Commercial Real Estate Investment Trust (Reit) to 83 pence (S$1.55) from 79 pence previously, after the Reit on Friday announced a proposed listing of its wholly-owned subsidiary on The International Stock Exchange (TISE).

Elite UK Commercial Holdings Limited (ECHL) is expected to be listed on the TISE as a UK Reit by the third quarter of FY2021. Elite Commercial Reit will continue to hold all shares in ECHL.

The listing, if successful, will mean that its principal tax rate will be reduced from 19 per cent to 15 per cent, pursuant to the Double Listing Treaty between the UK and Singapore. The listing will also eliminate any capital gains tax and its corresponding deferred tax liabilities arising from its properties.

CGS-CIMB analyst Lock Mun Yee in a Monday report: "We expect the potential reduction of income tax by 4 percentage points and elimination of capital gains tax from the listing of ECHL to enhance cash flows and increase Elite Commercial Reit's distributable income."

She added that Elite Commercial Reit maintains a strong balance sheet, with a healthy debt maturity profile. She does not expect major refinancing risks until FY2023.

The Reit's manager also said that it has a 100 per cent occupancy rate and had received 99.9 per cent of its Q2 FY2021 rent in advance as at end-Q1 FY2021, she noted.

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CGS-CIMB has raised its distribution per unit estimate for Elite Commercial Reit, in consideration of the lower income tax rate.

"We like Elite Commercial Reit's stable income profile, with built-in growth through its inflation-linked rental structure and inorganic growth potential," said Ms Lock.

On Monday, units of Elite Commercial Reit were trading at 67 pence, up 0.5 pence or 0.8 per cent as at 3.32pm.