THE SINGAPOREAN INVESTOR

A Review of CapitaLand Integrated Commercial Trust's Q3 and 9M FY2024 Business Update

ljunyuan
Publish date: Tue, 05 Nov 2024, 10:37 AM
ljunyuan
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My name is Jun Yuan, and I am the owner of The Singaporean Investor. I am a full-time retail investor and trader since April 2017, and in this website, I'd be sharing with you my personal analyses of Singapore-listed companies, along with advices relating to investing, as well as trading. You can find out more about me here, and check out my long-term portfolio here.
A Review of CapitaLand Integrated Commercial Trust's Q3 and 9M FY2024 Business Update

Among the 5 CapitaLand REITs and business trusts listed on the Singapore Exchange, I am a unitholder in 3. Out of which, 2 of them have already released their business updates for the 3rd quarter of the financial year 2024 ended 30 September, and you can find them via the respective links below (in case you've missed it):

This morning (05 November), it was CapitaLand Integrated Commercial Trust's (SGX: C38U) turn to do so.

For the uninitiated, CapitaLand Integrated Commercial Trust, or CICT for short, invests in real estate assets used for retail or office purposes, and as of 30 June 2024, its portfolio comprises 21 properties in Singapore, 2 in Germany, and 3 in Australia, valued at S$24.5 billion.

As the REIT has switched to half-yearly reporting of its full financial statements, it only provided updates of some of the key financial figures – to which we will be looking at in this post, together with its latest portfolio occupancy and debt profile.

Let's begin:

Key Financial Figures (Q3 FY2023 vs. Q3 FY2024, and 9M FY2023 vs. 9M FY2024)

In this section, you will find a review of some of the key financial figures reported by CICT for the 3rd quarter, as well as for the first 9 months of FY2024 ended 30 September, compared against the figures reported in the respective time periods a year ago:

Q3 FY2023 vs. Q3 FY2024:

Q3 FY2023Q3 FY2024% Variance
Gross Revenue
(S$’mil)
$391.3m$397.9m+1.7%
Property Operating
Expenses (S$’mil)
$116.3m$108.1m-7.1%
Net Property
Income (S$’mil)
$275.0m$289.8m+5.4%

My Observations: It was a stable set of results reported by CICT for the 3rd quarter despite the absence of income from Gallileo in Frankfurt, Germany (which is currently undergoing asset enhancement works), with gross revenue and net property income up by 1.7% and 5.4% to S$397.9 million and S$289.8 million respectively from a higher gross rental income.

All 3 properties types (i.e., retail, office, and integrated development) also saw improvements in its gross revenue and net property income for the quarter.

9M FY2023 vs. 9M FY2024:

9M FY20239M FY2024% Variance
Gross Revenue
(S$’mil)
$1,166.1m$1,189.9m+2.0%
Property Operating
Expenses (S$’mil)
$338.7m$317.7m-6.2%
Net Property
Income (S$’mil)
$827.3m$872.2m+5.4%

My Observations: Similar to its financial performance for the 3rd quarter, CICT's gross revenue and net property income improved by around the same percentage, as a result of higher gross rental income from existing properties.

Its retail, office, and integrated development assets all saw increases in their gross revenue and net property income in the same time period as well.

Portfolio Occupancy Profile (Q2 FY2024 vs. Q3 FY2024)

Moving on, let us take a look at CICT's portfolio occupancy profile – where you'll find the statistics reported for the current quarter under review (i.e., Q3 FY2024 ended 30 September) compared against that reported in the previous quarter 3 months ago (i.e., Q2 FY2024 ended 30 June) in the table below to find out if it has continued to remain at a high level (for information, the occupancy rates of its retail, office, and integrated development properties are above 95% in the previous quarter):

Q2 FY2024Q3 FY2024
Portfolio Occupancy (Retail)
(%)
99.0%99.0%
Portfolio WALE (Retail)
(by GRI – years)
2.0 years2.0 years
Portfolio Occupancy (Office)
(%)
95.3%94.6%
Portfolio WALE (Office)
(by GRI – years)
3.8 years3.8 years
Portfolio Occupancy (Integrated
Development) (%)
98.8%98.2%
Portfolio WALE (Integrated
Development) (by GRI – years)
4.6 years4.6 years

My Observations: Despite a slight dip in the occupancy rates of its office and integrated development properties (by 0.7 percentage points [pp] and 0.6pp respectively), but in my opinion, its not too much of a concern, as occupancy rates are still at a high of above 90%.

Looking at the lease expiries ahead, they are pretty well-spread out – apart from 1.3% of retail leases and 0.5% of office leases due for renewal in the final quarter of FY2024, between FY2025 and FY2027 (a period of 3 financial years), it has an average of 14.9% of retail leases and 6.9% of office leases due for renewal each year. The remaining 5.7% of retail leases, 22.2% of office leases, and 5% of hospitality leases will only be due for renewal in 2028 or later.

Top 10 tenants contributed to 18.9% towards CICT's total gross rental income – apart from RC Hotels (Pte) Ltd, which contributed 5.2%, and WeWork Singapore Pte Ltd, which contributed 2.4%, the remaining tenants contribute no more than 2% – hence, there are no single tenant concentration.

Debt Profile (Q2 FY2024 vs. Q3 FY2024)

Just like how I have reviewed CICT's portfolio occupancy profile in the previous section, I will also be doing a review of the REIT's debt profile by comparing the stats reported in the current quarter under review (i.e., Q3 FY2024) against that reported in the previous quarter (i.e., Q2 FY2024), as follows, to find out if it has continued to remain at healthy levels:

Q2 FY2024Q3 FY2024
Aggregate Leverage
(%)
39.8%39.4%
Interest Coverage
Ratio (times)
3.0x3.0x
Average Term to
Debt Maturity (years)
3.5 years3.8 years
Average Cost of
Debt (%)
3.5%3.6%
% of Borrowings Hedged
to Fixed Rates (%)
76%76%

My Observations: CICT's debt profile is more or less the same compared to the previous quarter – the only noticeable difference was the slight 0.4pp improvement in its aggregate leverage to 39.4%.

In terms of its debt maturity, the REIT does not have any refinancing obligations for the remaining quarter of FY2024. Between FY2025 and FY2028 (a period of 4 financial years), it has an average of about 15% of borrowings due for refinancing each year, with the remaining 40% of borrowings due for refinancing only in FY2029 or later.

Closing Thoughts

On the whole, it was a pretty decent set of results reported by the commercial REIT – with its financial performance both for the 3rd quarter, as well as for the 1st 9 months of FY2024 recording a stable low- to mid-single digit percentage improvement contributed by existing properties.

Despite a slight dip in the occupancy rates in its office and integrated development properties, they are still at a high of above 90%. The occupancy rate of its retail properties remains stable at 99%.

Debt profile is also a healthy one, with its current aggregate leverage leverage at 39.4% a safe distance to the regulatory limit of 50%. In terms of debt maturity over the years, it is pretty evenly spread out as well.

Finally, as CICT has a semi-annual distribution payout frequency (once when it releases its results for the 2nd quarter, and once when it releases its results for the 4th quarter), no distribution payouts are declared this time round.

With that, I have come to the end of my review of CapitaLand Integrated Commercial Trust's business update for the 3rd quarter, as well as for the first 9 months of FY2024. I hope the contents above have given you a good understanding of the REIT's latest update. However, do take note that all the opinions are mine, which I'm sharing for educational purposes only. They do not constitute any buy or sell calls for the REIT. You should always do your own due diligence before you make any investment decisions.

Related Documents

Disclaimer: At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust.

The post A Review of CapitaLand Integrated Commercial Trust's Q3 and 9M FY2024 Business Update first appeared on The Singaporean Investor.

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