CCT

CCT: 1Q14 DPU increased 7.2% to 2.08¢ while distributable income rose 7.6% to $59.9m. NPI came in at $50.7m (+1.5%), while gross revenue was 64 (+3.2%). The increase was due to higher revenue contribution from all properties except One George Street, as the latter’s yield protection income had ceased on 10 Jul’13. Portfolio occupancy was a strong 99.4% (+0.7% q/q). Portfolio WALE was 7.9 years. Aggregate leverage was 30% (+0.7ppt) due to ongoing AEIs for Capital Tower and Raffles City, as well as the development of CapitaGreen. Assuming aggregate leverage ratio of 40%, CCT still has debtroom of $1.2b. CapitaGreen has secured a pre-commitment for 12% of its NLA of 700,000 sf from Cargill (51,000 sf), Bordier & Cie (12,000 sf), and an international gym operator (18,000 sf). These first mover tenants are likely loss leaders, possibly paying a monthly rental of $9-11 psf, lower than CCT’s target of $12-14 psf for subsequent smaller floor-plate tenants. Maybank KE expects challenges ahead as CCT’s pre-leasing activities will coincide with those of the 782,000 sf Asia Square Tower 2 (TOP, 3Q13; 60% pre-committed) and 527,000 sf South Beach Development, and expects next significant increase in DPU to occur only in FY14 after the completion of CapitaGreen. CIMB reckons its $190m convertible bonds due in FY15 (conversion price at $1.23) is likely to be converted, which will cause dilution of ~3.3%. That said, total debt hedged as fixed rate debt, the house believes CCT is fairly immune to interest rate hikes. NAV at end Mar was $1.68 translates to ~1x P/B, while annualized 1Q14 yield is 5.1%. Maybank KE maintains Hold on CCT with TP of $1.64. CIMB maintains Hold with slightly increased TP of $1.55 from $1.51.