CCT

CCT: 2Q12 results out Friday before market open, ahead of expectations. DPU of 2.1cts, +8.4% qoq, +7.3% yoy, with the positive variance mainly due to better than expected NPI (partially helped by property tax savings) and lower than expected cash interest expenses. Revenue was $95.8m, +5.2% yoy, net property income at $75.2m, +7.8% yoy. Overall committed occupancy remained largely unchg at 96%, though the avg office rent registered a smaller sequential decline of 0.8% to $7.39 psfpm. Going into FY13, Nomura believes market focus will turn to Capital Tower where there are chunky lease expiries to be addressed. The avg rent of these leases is low at just $7.14 psfpm, and the successful renewal of these leases could be a key positive catalyst for CCT in the coming mths. Mgt intends to continue to scour the Spore mkt for acquisition opportunities, with key focus on the city-area focus; does not discount possibility of investing in decentralised areas if good-grade assets are available and if economics makes sense. CCT has no outstanding debt maturing this yr and low 30.1% gearing provides it with ample debt capacity and financial flexibility, for future acquisitions and funding of ongoing asset-enhancement works and its CapitaGreen devt. Nomura raises TP to $1.55 from $1.49, keeps at Buy. Daiwa raises TP to $1.56 from $1.47. Maybank-Kim Eng upgrades to Hold from sell, raises TP to $1.24 from $1.06. HSBC raises TP to $1.17 from $1.10, but maintains Underweight rating, on view that office sector fundamentals remain weak.