CapitaCommercial Trust’s First Quarter Results

CapitaCommercial Trust (SGX: C61U) released its first quarter results earlier today before the market opened. The trust, managed by Capitaland (SGX: C31), saw a 3.3% increase in quarterly distributable income from S$53.9m to S$55.7m. Consequently, distribution per unit (DPU) grew by 3.2% from S$0.019 to S$0.0196. Its shares opened 0.6% lower at $1.70 after its earnings release.

The trust’s gross revenue for the quarter grew by 9.7% from S$87.4m to S$95.9 and can be attributed to positive rental reversion from HSBC Building and higher contribution from Twenty Anson. But, net property income grew at a slower pace of 7.1% from S$69.9m to S$74.9m as the properties’ operating expenses increased by 20% from S$17.5m to S$21m.

CCT’s occupancy rate of 95.3% for its property-portfolio is once again higher than the market average occupancy of 93.2% in the Core Central Business District area – the trust has done better than the Core CBD occupancy rate ever since 2005’s third quarter. Unit holders will also be happy to know that the trust’s monthly average office rent has been trending upwards to $7.83 per-square-foot (psf) since bottoming at $7.39 psf on June 2012.

Turning to its balance sheet, the trust has emphasized on its ‘robust capital structure’. CCT’s gearing ratio has increased slightly from 30.1% in 2012’s first quarter to 30.4% but the average cost of its debt has decreased from 3.1% to 3%. The trust has S$50m of debt that’s due in 2013 but refinancing it will not be an issue for CCT as the trust has sufficient loan facilities.

Mr. Kee Teck Koon, Chairman of CCT’s Manager, commented that “CCT has a strong balance sheet given the low gearing at 30.4%, and 78% of the debt being fixed rate borrowings. The 69% of assets being unsecured also affords CCT greater flexibility in capital management”. CCT currently has S$2.11b of debt on its balance sheet.

For some growth drivers in 2013, CCT is expecting full-year income contribution from Twenty Anson and HSBC Building and positive rental reversions from its entire portfolio. In addition, upgrading works on Six Battery Road will be completed in 2013 and can then “command premium rental rates”.

However, CCT’s Manager also stressed some risks it will be facing and commented that “CCT’s performance in the later half of 2013 will be affected by One George Street, the yield protection for which will expire on 10 July 2013”. The trust’s Manager is already on the case, looking to increase occupancy rates and property income across its entire portfolio to minimise negative impacts from One George Street.

At today’s opening price of $1.70, units of CCT are selling for 1.04 times its net-assets and sport a distribution yield of 4.7% based on last year’s full-year payout.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.