CapitaCommercial Trust

CapitaCommercial Trust: CapitaCommercial Trust (CCT) 4Q14 results beat estimates, with distributable income and DPU up 5.7% y/y and 2.9% to $63.6m and 2.15¢, respectively, bringing FY14 DPU to 8.46¢ (+3.9%) and distributable income to $249.2m (+6.4%). The outperformance was driven by higher rents (+5.9%) across its portfolio and lower interest expense for the quarter, despite an enlarged unit base from a partial conversion of convertible bonds and absence of yield protection income for One George Street. Meanwhile, gross revenue grew 3.1% to $66.4m, while NPI improved 3% to $50.6m. CCT's portfolio occupancy stood at 99.5%, excluding the recently-TOP CapitaGreen, with weighted average lease to expiry of 8.1 years. Including that, portfolio occupancy stands at 96.8%, or 125k sf of available net lettable area (NLA) for lease in 2015. Leases for 69.3% of NLA at CapitaGreen has been secured till-date, exceeding the 50% target. Management now targets 100% committed occupancy for the building by end-2015. Aggregate leverage lowered 0.9 ppt q/q to 29.3%, with average debt cost of 2.3% (-0.3 ppt) and debt tenor of 3.9 years. Assuming a 40% leverage ratio, CCT has ample debt headroom of $1.3b. However, CCT is still the most expensive office REIT in terms of valuation, (P/B 1.07x vs peers average 0.92x), due to its stronger operational capabilities, room for organic growth from its relatively lower occupancy rate and lowest gearing. At the current price, CCT has an indicative forward yield of 4.7%, below peers'average of 5.6%.