CapitaLand Integrated Commercial Trust DPU rises by 2.5% - Our Quick Take

Summary of CapitaLand Integrated Commercial Trust's 1H24 results

CapitaLand Integrated Commercial Trust (CICT) reported its earnings and dividends for the first half of 2024 (1H24).

• CapitaLand Integrated Commercial Trust 1H24 DPU rose 2.5% year-on-year to 5.43 cents

• This translates to an annualised dividend yield of 5.2%.

CICT recorded higher revenue and net property income (NPI) in 2Q24 year-on-year across all its asset classes. 

NPI grew 6.6%, 3.0% and 4.2% for retail, office and integrated development respectively, from higher rents and lower operating expenses. CQ@Clarke Quay contributed to the higher NPI growth for retail. NPI margin improved across all asset class.

Overall occupancy rate dipped slightly by 0.2%-point to 96.8% from 1Q24. This excludes IMM Building in Singapore and Galileo in Frankfurt which are undergoing AEI work. 

The decline is mainly due to lower occupancy the overseas assets. Occupancy at Main Airport Centre in Frankfurt fell 2.7%-point to 89.4%, and 100 Arthur Street in Sydney slipped 5.1%-point to 74.8% during the quarter. 

On a positive note, Galileo in Frankfurt has achieved committed occupancy of 96.7%, and will be operational from 4Q24 after asset enhancement initiative (AEI) work. However, it may only contribute from FY25 after leasing downtime and incentives.

Singapore office, which accounts for 28.7% of total revenue, remains resilient with average rent edging up by 0.3% to S$10.66 psf per month from end-March. Management expects narrowing rent reversions in 2H24. 

Retail portfolio stays resilient. Rent reversions in 1H24 was positive 9.3%, with downtown malls recorded higher reversion (+9.5%). Retail portfolio account for 53.4% of revenue, with a high occupancy of 99.0%. 

Higher asset value helped to bring aggregate leverage down to 39.8%. Average cost of debt, at 3.5%, could be higher in 2H24, as CICT has refinanced about 80% of debt expiring in 2H24. In July 2024, it issued S$300m 10-year fixed rate green notes at 3.75%.

Beansprout's take on CapitaLand Integrated Commercial Trust's 1H24 results

CapitaLand Integrated Commercial Trust's net property income in the second half of 2024 may be supported by a ramping up of occupancy at CQ@Clarke Quay, which had an occupancy of 92.7% as at June 2024. This may help to offset the higher interest expense expected in 2H24. 

At the same time, Galileo in Frankfurt and IMM in Singapore may contribute positively from FY25 after the completion of AEI. 

Its office portfolio is also expected to remain resilient. Potential new office supply from the completion of IOI Central Boulevard Towers in 2024 may lead to more supply in the secondary market, and limit further rental uplift. However, occupancy is likely to remain stable given the limited new supply for CBD office space in the medium term. 

Overall, CICT's dividend per unit is likely to remain resilient in 2H24. 

CICT currently trades at a price-to-book valuation of 0.98x. It is expected to offer a dividend yield of 5.2%. 

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Dive deeper into the CapitaLand Integrated Commercial Trust with our checklist and find out if it may be worthwhile adding the REIT to your watchlist. 

To learn more about our outlook on Singapore REITs, read our detailed report on "Singapore REITs - Distributions may remain under pressure"

Related links:

• CapitaLand Integrated Commercial Trust share price and share price target
• CapitaLand Integrated Commercial Trust dividend forecast and dividend history

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