Brokers’ take: DBS lowers Clint target to S$1.35 on forex headwinds
Michelle Zhu
A WEAKER rupee-to-Singapore-dollar exchange rate has prompted DBS Group Research to lower its price target on CapitaLand India Trust (Clint) to S$1.35 from S$1.45.
DBS on Friday (Oct 27) noted that the less-favourable spot rates also crimped the trust’s Q3 operating performance for underlying revenue in Singapore dollar terms, despite the portfolio’s strong performance for the quarter.
Its analysts said they have cut their estimates by 2 per cent to 5 per cent on the back of the continued rupee-Singapore dollar weakness, noting that the rupee had wilted by another 5 per cent against the Singapore dollar since the start of the year.
They have also priced in an interest-rate increase of about 50 basis points to 6.7 per cent for their FY2024 estimates, as the manager looks to term-out its debt on a longer-term basis to result in higher debt costs.
Clint’s current unit price level nonetheless remains an attractive opportunity for investors, in DBS’ view, as it trades at a price-to-book ratio of about 0.9 times to offer “good value” and a forward yield of close to 9 per cent.
The research house maintained its “buy” rating on the counter, and highlighted it as one of the fastest-growing S-Reits, with a projected three-year distribution per unit (DPU) compound annual growth rate (CAGR) of about 7 per cent.
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“Despite a slight downward revision to our forecasts due to revised currency assumptions, Clint still offers a robust 10 per cent CAGR in DPU over FY2024 to FY2025,” said the analysts.
They expect such growth to be driven by organic growth improvements, such as positive reversions and higher occupancy, as well as gradual bolt-on acquisitions from the trust’s pipeline.
The analysts also believe Clint could realise value by selling its stake in certain data centres into a CapitaLand-led private fund sometime in 2024.
“We remain excited about the prospects for the trust with the myriad growth initiatives in place. Over time, we see Clint emerging as a diversified new-economy play, offering exposure to IT parks, industrial property, warehouses and data centres.”
Units of Clint were trading S$0.005 or 0.5 per cent higher at S$0.975 as at 11.04am on Friday.
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