CapitaLand Commercial Trust (S$1.27): HSBC upgraded to Buy from Hold on valuation grounds with an unchanged TP of $1.65.
The house’s view on office market remains unchanged, expecting office rental to be compressed by 10% over the next two years, due to lower demand and oversupply.
Meanwhile, office prices were expected to be more resilient, largely due to robust investment demand.
HSBC perceives that recent share price pull-back is overdone and implied asset prices are at substantial discount to physical market.
At current price, CCT is trading at a 34% discount to RNAV, steepest discount since 2010 and offers FY15E DPU yield of 6.6%, highest distribution yield over the past three years.
With a potential upside of 29.9%, HSBC upgrades the REIT to Buy from Hold.
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