Wednesday, January 20, 2016

CapitaCommercial Trust (CCT) - FY15 Results Review

This is my second consecutive coverage for the quarter for CCT which I am vested in. For the previous quarter, you can find them here.

The trust reported their full year earnings this morning.

CCT managed to record a 2.1% increase year on year on their distributable income, which translates into a 1.9% increase in DPU for the shareholders. The full year DPU came in at 8.62 cents (2H: 4.31 cents), which represents a yield of about 6.3% based on current price. Again, it is important to note that they have a CB outstanding maturity due in 2017 at $1.53 but so far they have been under the money.

Portfolio occupancy remains strong at 97.1% (96.8% last year) this year which represents a strong foothold of the overall economy we have in Singapore.  If we take reference from past bear market scenario, we can see that the trust operated well even in poor market conditions - still registering 94.8% during gfc and 95.8% during the euro crisis.

The monthly average rent has also increased at $8.90/psf ($8.61/psf last year) this year so obviously the slowdown effect has not yet taken place. I am expecting the average rent to revert back to the low $8+ in FY2016 so there could be impact to the distribution for shareholders, which I think has been somewhat priced in by the market. A lot would depend on their latest acquisition, Capitagreen, which has one of the highest capitalization rate in the CCT portfolio.

In terms of DPU, I think this is a company that shareholders can be proud of. The management has proven their capability of rewarding the shareholders and from the past 10 years data, we can see how DPU has risen steadily over the years.

The trust has a couple of lease expiry coming up in 2017 and 2018 but the percentage is small and they are spread out evenly. I don't think there's any major of concern for this.

Final Thoughts

There's no major surprise coming from this stock at the moment.

I think a lot of the supply effect has been priced by the market in the share price but will continue to fall under pressure given the weak sentiments of the STI.

I won't be looking to add into the counter anytime soon as I find many other attractive counters which I wanted to get in since sentiments are weak. I'll keep this for now in the portfolio and will remain so for as long as the company is delivering results.

*vested with 8,000 shares of CCT

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