CGS International April 25, 2025

CapitaLand Integrated Commercial Trust (CICT) released its operating performance update for the first quarter of 2025 (1Q25), demonstrating results largely in line with expectations despite minor headwinds from portfolio adjustments. CGS International maintains its positive outlook on the trust.

1Q25 Operational Highlights: Steady Performance Post-Divestment

CICT reported revenue of S$395.3 million and Net Property Income (NPI) of S$291.5 million for 1Q25. These figures represent a slight decrease of 0.8% year-on-year (yoy), primarily attributed to the divestment of the 21 Collyer Quay property. However, on a like-for-like basis, excluding the impact of the divestment, CICT’s revenue and NPI saw healthy growth of 1.1% and 1.4% yoy, respectively. The reported figures align with CGS International’s forecasts, both standing at 24% of the full-year FY25 forecast (FY25F).
Key financial health indicators remained solid. Aggregate leverage stood at 38.7% at the end of 1Q25. The trust managed to reduce its all-in debt cost, which averaged 3.6% at end-1Q25, down 0.2 percentage points quarter-on-quarter (qoq).

Portfolio Occupancy Remains High

The overall committed occupancy across CICT’s portfolio was 96.4% as of end-1Q25, showing a marginal dip of 0.3 percentage points qoq. Segment-wise performance showed:

• Retail: 98.8% occupancy (-0.5% pt qoq)
• Office: 94.7% occupancy (-0.1% pt qoq)
• Integrated Development: 98.6% occupancy (-0.3% pt qoq)

Retail Segment: Robust Rental Reversions and Strong Downtown Performance

CICT’s retail segment delivered a particularly strong performance in terms of rental reversions.

• Overall Retail Reversion: +10.4% achieved in 1Q25.
• Downtown Malls: Led the growth with +11.2% reversion.
• Suburban Malls: Achieved a healthy +9.5% reversion.
• Leasing Activity: 209.5k sq ft of retail space was renewed during the quarter. Notably, 21% of this space constituted new leases, primarily in the Food & Beverage (F&B), Fashion & Accessories, and Digital & Appliance segments.
• FY25 Guidance: Management maintains its guidance for retail rental reversions to remain positive in the mid-single-digit range for the full year FY25F.

Tenant sales showed significant yoy growth, increasing by 17.5% in 1Q25. This was heavily driven by downtown malls (+39.3% yoy), while suburban malls saw a slight increase of 0.3% yoy. It’s important to note the significant impact of ION Orchard; excluding its contribution, overall portfolio tenant sales would have decreased by 0.5% yoy, and downtown mall sales would have dipped by 0.4% yoy.
Shopper traffic followed a similar pattern, growing 23% yoy overall. Downtown malls saw a substantial 49.7% yoy increase in traffic, whereas suburban malls experienced a slight dip of 0.8% yoy. Excluding the ION Orchard impact, retail shopper traffic across the portfolio would still show a positive growth of 2.7% yoy.
Future contributions from the retail segment are expected to be bolstered by the progressive completion of the Asset Enhancement Initiative (AEI) at IMM Building, scheduled from 4Q24 through 3Q25F. Furthermore, CICT plans a new AEI at Tampines Mall starting in 4Q25, aligning with the government’s Tampines 5-year Masterplan launch.

Office Segment: Positive Reversions and Future AEI Uplift

The office segment also demonstrated positive momentum.

• Leasing Activity: Approximately 203.5k sq ft of office space was leased or renewed in 1Q25, with key demand coming from the financial services, IT & telecoms, and legal sectors.
• 1Q25 Rental Reversion: Achieved a positive reversion of +5.4%.
• FY25 Guidance: Management expects office rental reversions to remain positive, landing in the low to mid-single-digit territory for FY25F.
• Gallileo AEI: Contributions from the Gallileo property in Germany, currently undergoing AEI, are expected to become more significant from FY26F onwards. The handover of space is scheduled to commence progressively from the second half of 2025 (2H25F).

Analyst Outlook: Maintaining ‘Add’ Rating and Target Price

CGS International reiterates its Add rating for CICT, maintaining an unchanged Dividend Discount Model (DDM)-based Target Price (TP) of S$2.45. This target price is based on a cost of equity assumption of 7.5%.
The positive stance is underpinned by CICT’s diversified portfolio, particularly its exposure to the resilient suburban retail segment, and its sturdy balance sheet.
Potential factors that could lead to a re-rating (catalysts) include:

• Clear prospects for inorganic growth (acquisitions).
• Maintaining robust occupancy levels and positive rental reversions.

Conversely, potential downside risks include:

• A slower-than-anticipated recovery in rental rates.
• Escalating operating expenses (opex).
• Cost overruns associated with AEIs, which could affect projected returns.

Financial Summary and Forecasts

The following table provides a snapshot of CICT’s historical and forecasted financial performance:

Source: CGSI RESEARCH, COMPANY REPORTS

ESG Profile: Commitment to Sustainability

CICT demonstrates a clear commitment to Environmental, Social, and Governance (ESG) principles, as reflected in its LSEG ESG score of ‘B’ for 2023.

• Pillar Scores: Environmental (B+), Social (C), Governance (B+), ESG Controversies (A+).
• Alignment: CICT’s ESG focus aligns with CapitaLand Investment’s commitment to achieve Net Zero by 2050 and an enhanced carbon emissions reduction target aligned with a 1.5°C scenario.
• 2030 Targets (vs. 2019 baseline):
  • Carbon Emission Intensity Reduction: 72%
  • Energy Intensity Reduction: 15%
  • Water Intensity Reduction: 15%
  • Recycling Rate: 25%
  • Renewable Energy Usage: 45% of total electricity consumption

  (Note: Separate targets exist vs. a 2008 baseline for Carbon/Energy/Water intensity reductions of 78%/35%/45% respectively by 2030).

• FY23 Highlights & Achievements:
  • Maintained a 5-star rating in GRESB 2023 and scored ‘A’ for public disclosure.
  • Achieved BCA Green Mark certification (or equivalent) for 99% of its portfolio by Gross Floor Area (GFA).
  • Reduced absolute scope 1 & 2 GHG emissions by 10% (vs. 2019 baseline).
  • Reduced carbon emissions intensity by 19% (vs. 2019 baseline).
  • Reduced energy and water consumption intensity by 15% each (vs. 2019 baseline).
  • Generated 2,094 MWh of renewable energy (1.3% of total energy consumption).
  • Adopted green leases for over 90% of Singapore properties by Net Leasable Area (NLA).
  • Provides a green fit-out guide to new tenants to encourage sustainable practices.
• LSEG Sub-Scores of Note: Shareholder score (D), CSR Strategy score (C), Emissions score (B+).
• Strongest ESG Areas (LSEG): Workforce (A), Product Responsibility (A), Resource Use (A-), Environmental Innovation (A-), Management (A-).
• Valuation Impact: While ESG progress is not currently assigned a premium or discount in the fundamental valuation, CGS International believes it will become a key differentiating factor for discerning investors over time.

Singapore REIT Peer Comparison

The following table provides a comparative overview of CICT against its peers in the Singapore REIT (SREIT) market across various sectors, based on data as of April 24, 2025, and Bloomberg consensus forecasts (NR estimates).

Source: CGSI RESEARCH, BLOOMBERG, COMPANY REPORTS

Conclusion

CICT’s 1Q25 results demonstrate the resilience of its diversified portfolio, with particularly strong performance in retail rental reversions offsetting the impact of a recent divestment. With occupancy remaining high, positive rental reversion guidance across key segments, and contributions expected from ongoing AEIs, CICT appears well-positioned. The ‘Add’ rating reflects confidence in its stable operations, growth initiatives, and strong financial footing within the Singapore REIT landscape.