DBS Group Research analysts Rachel Tan and Derek Tan have kept “buy” on CapitaLand Integrated Commercial Trust (CICT) as they see the REIT benefitting from the reopening of domestic and international borders.
The REIT is also seen as a key proxy of the reopening play.
“We estimate CICT could deliver a 6% two-year distribution per unit (DPU) compound annual growth rate (CAGR), one of the stronger growth rates among its peers,” the analysts write.
Given the strong upward trajectory in the Singapore office market, the analysts also believe that CICT is well positioned to ride on the office upcycle due to its being the largest Singapore REIT (S-REIT) with a Singapore-central commercial portfolio.
In addition, CICT is one of the few S-REITs that has the opportunity to acquire newly completed prime Singapore office assets such as the remaining 50% stake in CapitaSpring, as well as potentially more commercial Singapore assets in the sponsor pipeline.
On the Mercatus portfolio, the analysts see CICT being the “strongest contender” among local retailers.
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“[The] Mercatus portfolio would potentially benefit CICT with a longer runway of assets as it builds a bigger base of resilient suburban malls in Singapore,” they write.
In their report, the analysts have kept their target price of $2.70, which implies a P/NAV of 1.3x at +1 standard deviation (s.d.) of CICT’s historical range.
“Despite near-term potential headwinds, we are one of the first to look forward on its growth potential following from its portfolio optimisation and asset recycling efforts,” the analysts write.
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“The key risks to our view are an economic downturn, as well as a prolonged recovery and weak sentiment. Setbacks from new waves of the pandemic could delay CICT’s recovery,” they add.
Units in CICT closed 1 cent lower or 0.47% down at $2.11 on Aug 15.
