UOB Kay Hian Private Limited Monday, 28 April 2025
CapitaLand Integrated Commercial Trust (CICT SP): Strong Start to 2025 with Positive Reversions and Strategic Growth
Overview: CICT Kicks Off 2025 with Solid Performance
CapitaLand Integrated Commercial Trust (CICT), the largest S-REIT listed on the SGX, reported a strong start to the year in its 1Q25 business update. The Trust achieved impressive positive rental reversions of 10.4% for its retail segment and 5.4% for its office portfolio. While overall portfolio occupancy saw a slight dip of 0.3 percentage points quarter-on-quarter (qoq) to 96.4%, CICT’s diversified asset base, robust aggregate leverage at 38.7%, and a low average cost of debt of 3.4% continue to attract investors seeking stability.
Key developments include the ongoing Asset Enhancement Initiative (AEI) at IMM Building, expected to complete Phases 3 and 4 in 3Q25, and the handover of the Gallileo property in Frankfurt to the European Central Bank (ECB) starting in 2H25. Furthermore, the full-year contribution from ION Orchard is anticipated in 2025. The outlook remains positive, maintaining a BUY recommendation with a target price of S$2.37.
1Q25 Financial Highlights
CICT provided the following business update for the first quarter of 2025:
1Q25 RESULTS SUMMARY
Year to 31 Dec (S$m) 1Q25 yoy % chg Remarks
Gross Revenue
Retail 153.3 +3.5 Consistently clocked high single-digit positive rental reversion.
Office 119.0 -9.0 Office occupancy was stable at 94.7% in 1Q25.
Integrated Developments 123.0 +2.7 Occupancy stable at 98.6% in 1Q25.
Total 395.3 -0.8
Net Property Income (NPI)
Retail 110.9 +3.4
Office 90.9 -9.1 Divestment of 21 Collyer Quay.
Integrated Developments 89.7 +3.8
Total 291.5 -0.8 Prudent management of operating expenses.
Portfolio Reconstitution Impact: Gross revenue and NPI experienced a slight decrease of 0.8% year-on-year (yoy) in 1Q25. This was primarily due to the divestment of 21 Collyer Quay, which completed on 11 November 2024.
Same-Store Growth: Excluding the impact of the 21 Collyer Quay divestment, CICT demonstrated organic growth. On a same-store basis, gross revenue and NPI increased by 1.1% and 1.4% yoy, respectively.
Stable NPI Margin: The NPI margin remained stable at 73.7% in 1Q25, consistent with the 73.7% margin reported in 1H24, reflecting prudent operating expense management.
ION Orchard Contribution: Note that the contribution from CICT’s 50% stake in ION Orchard is accounted for at the distributable income level.
Retail Segment: Double-Digit Reversions Drive Growth
Strong Rental Reversion: The retail portfolio delivered a robust positive rental reversion of 10.4% in 1Q25 (calculated on an average incoming vs. average outgoing basis). Downtown malls achieved 11.2% reversion, while suburban malls recorded 9.5%.
Tenant Sales Performance: Tenant sales per square foot (psf) surged by 39.3% for downtown malls, largely boosted by ION Orchard. Excluding ION Orchard, downtown mall tenant sales psf would have seen a minor decline of 0.4%. Suburban malls saw a modest tenant sales psf growth of 0.3%.
Occupancy and Retention: Retail occupancy slightly eased by 0.5 percentage points qoq to 98.8%, mainly due to non-renewals at Clarke Quay. Tenant retention remained healthy at 79.2%.
Office Segment: Stability Amidst Geographic Variations
Overall Occupancy: Occupancy for the office portfolio held steady at 94.7% overall.
Singapore Performance: The Singapore office portfolio saw occupancy improve by 0.3 percentage points qoq to 97.9%.
Australia Performance: Occupancy in Australia eased by 2 percentage points qoq to 87.6%, attributed to an absence of renewals at 55 Goulburn Street.
Rental Reversion and Rent Growth: The office portfolio achieved a positive rental reversion of 5.4% in 1Q25. The average portfolio rent increased by 1.2% yoy to S$10.76 psf per month.
Leasing Activity: Major new leases and renewals included Jera Asia at CapitaSpring and National Australia Bank at Asia Square Tower 2.
Tenant Retention: Office tenant retention was healthy at 75.7%.
Financial Position: Prudent Debt Management
Stable Leverage: Aggregate leverage remained stable at 38.7% as of March 2025.
Lower Cost of Debt: The average cost of debt decreased by 0.2 percentage points qoq to 3.4% in 1Q25. CICT benefited from the decline in the three-month compounded SORA (Singapore Overnight Rate Average), which fell 64 basis points (bp) in 2024 and a further 51 bp in 1Q25 to 2.56%.
Recent Debt Issuance: CICT successfully issued S$150 million in seven-year fixed-rate notes due 29 March 2032, securing a low interest rate of 3.088%.
Fixed Rate Profile: Approximately 78% of CICT’s borrowings are currently at fixed interest rates.
Outlook: Management anticipates the cost of debt to remain stable at around 3.4% throughout 2025.
KEY OPERATING METRICS
Metric 1Q24 2Q24 3Q24 4Q24 1Q25 yoy % change qoq % change*
DPU (S cents) n.a. 5.43 n.a. 5.45 n.a. n.a. n.a.
NAV per unit (S$) n.a. 2.13 n.a. 2.13 n.a. n.a. n.a.
Occupancy 97.0% 96.8% 96.4% 96.7% 96.4% -0.6ppt -0.3ppt
Aggregate Leverage 40.0% 39.8% 39.4% 38.5% 38.7% -1.3ppt 0.2ppt
All-in-Financing Cost 3.5% 3.5% 3.6% 3.6% 3.40% -0.1ppt -0.2ppt
% Borrowing in Fixed Rates 76% 76% 76% 81% 78.0% 2ppt -3ppt
WALE by Gross Rental 3.6yrs 3.6yrs 3.5yrs 3.3yrs 3.2yrs -0.4yrs -0.1yrs
Debt Maturity 3.8yrs 3.5yrs 3.8yrs 3.9yrs 4.2yrs 0.4yrs 0.3yrs
hoh % chg for DPU and NAV per unit.
Strategic Direction and Growth Initiatives
Singapore Focus: CICT remains anchored in Singapore, aiming to strengthen its portfolio through strategic acquisitions and AEIs to enhance overall resiliency. Management shows keen interest in expanding its integrated developments, valued for their resilience across economic cycles due to the symbiotic relationship between office, residential, and retail components.
Overseas Strategy: For its international assets, CICT intends to concentrate on growth within its existing markets of Australia and Germany, rather than expanding into a third overseas market.
Global Trade Impact: While 94.7% of CICT’s portfolio value is in Singapore (which faces a relatively low 10% reciprocal tariff for US imports), the Trust acknowledges potential second-order impacts from broader global trade uncertainties affecting Singapore’s open economy. Management guides for positive rental reversion of 5-7% for retail and low-to-mid single-digit reversion for the office portfolio in 2025. The full-year contribution from ION Orchard is expected to bolster distributions.
AEI Progress – IMM Building: The repositioning of IMM Building into Singapore’s largest outlet mall (featuring 110 outlet stores) is progressing well. Phases 1 and 2 of the AEI are complete, with retail spaces handed over to new tenants in 4Q24. Committed occupancy reached 100%, welcoming tenants like Birkenstock outlet, Le Creuset outlet, and a new food court, Makan Street. Phases 3 and 4 are on track for completion in 3Q25.
AEI Progress – Gallileo (Frankfurt): Upgrades to the mechanical, electrical & plumbing (MEP) systems and office lobbies at Gallileo in Frankfurt, Germany are underway. The property will be progressively handed over to the tenant, the European Central Bank (ECB), starting from 2H25. More meaningful contributions from this office building in Frankfurt’s financial district are expected in 2026.
Tampines Town Central Rejuvenation: Following the launch of the URA’s five-year Tampines Master Plan in Feb 25, which includes pedestrianising part of Tampines Central 5, CICT is planning an AEI for Tampines Mall scheduled for 4Q25. Furthermore, potential collaboration exists with sister REIT CapitaLand Ascendas REIT (CLAR) regarding the nearby Telepark property (a data centre with underlying commercial land use) whose lease expires in 2025, potentially leading to a joint rejuvenation effort for Tampines Mall and Telepark.
Earnings Outlook and Valuation
Forecasts Maintained: Existing Distribution Per Unit (DPU) forecasts remain unchanged.
Valuation: The BUY rating is maintained with a target price of S$2.37. This valuation is derived using the dividend discount model (DDM), assuming a cost of equity of 6.75% and a terminal growth rate of 2.2%.
KEY FINANCIALS
Year to 31 Dec (S$m) 2023 2024 2025F 2026F 2027F
Net turnover 1,560 1,586 1,607 1,639 1,652
EBITDA 1,014 1,039 1,055 1,077 1,086
Operating profit 1,014 1,039 1,055 1,077 1,086
Net profit (rep./act.) 863 934 835 858 867
Net profit (adj.) 749 748 835 858 867
EPU (S$ cents) 11.3 10.8 11.4 11.7 11.8
DPU (S$ cents) 10.8 10.9 10.9 11.2 11.3
PE (x) 19.0 19.8 18.7 18.3 18.2
P/B (x) 1.0 1.0 1.0 1.0 1.0
DPU Yld (%) 5.0 5.1 5.1 5.2 5.3
Net margin (%) 55.3 58.9 52.0 52.3 52.5
Net debt/(cash) to equity (%) 65.8 56.6 57.1 56.8 56.6
Interest cover (x) 3.8 3.2 3.4 3.5 3.5
ROE (%) 6.1 6.3 5.4 5.5 5.6
Consensus DPU (S$ cent) – – 11.1 11.7 12.0
UOBKH/Consensus (x) – – 0.98 0.96 0.94
Potential Share Price Catalysts
Continued recovery in shopper traffic and tenant sales at CICT’s downtown malls, supported by increasing tourist arrivals and the return-to-office trend.
Successful execution and contribution from asset enhancement and redevelopment projects within the existing portfolio.
Portfolio Diversification
CICT’s gross revenue is diversified across asset types and geographies (based on 1Q25 data):
Singapore – Suburban Retail: 27.9%
Singapore – Downtown Retail: 25.9%
Singapore – CBD Office: 28.5%
Singapore – Other Office: 5.8%
Singapore – Hotel & Convention: 6.6%
Germany – Office: 1.9%
Australia – Office: 3.4%
Detailed Financial Statements Forecast
PROFIT & LOSS
Year to 31 Dec (S$m) 2024 2025F 2026F 2027F
Net turnover 1,586.3 1,607.2 1,639.2 1,651.8
EBITDA 1,038.9 1,055.2 1,077.3 1,086.0
Deprec. & amort. 0.0 0.0 0.0 0.0
EBIT 1,038.9 1,055.2 1,077.3 1,086.0
Total other non-operating income 185.9 0.0 0.0 0.0
Associate contributions 33.8 103.1 103.1 103.1
Net interest income/(expense) (323.2) (309.3) (308.9) (308.2)
Pre-tax profit 935.3 849.1 871.6 881.0
Tax 6.5 (10.0) (10.0) (10.0)
Minorities (8.1) (4.0) (4.0) (4.0)
Perpetual Securities 0.0 0.0 0.0 0.0
Net profit 933.7 835.1 857.6 867.0
Net profit (adj.) 747.8 835.1 857.6 867.0
BALANCE SHEET
Year to 31 Dec (S$m) 2024 2025F 2026F 2027F
Fixed assets 23,706.9 23,851.9 23,881.9 23,911.9
Other LT assets 1,563.0 1,563.0 1,563.0 1,563.0
Cash/ST investment 156.4 154.3 153.8 145.3
Other current assets 86.7 71.8 73.1 73.7
Total assets 25,513.0 25,641.1 25,671.9 25,693.9
ST debt 1,035.2 1,035.2 1,035.2 1,035.2
Other current liabilities 508.2 515.0 525.1 529.0
LT debt 7,910.0 8,000.0 7,980.0 7,960.0
Other LT liabilities 337.5 331.5 335.4 337.0
Shareholders’ equity 15,524.5 15,561.7 15,598.5 15,635.0
Minority interest 197.7 197.7 197.7 197.7
Total liabilities & equity 25,513.0 25,641.1 25,671.9 25,693.9
CASH FLOW
Year to 31 Dec (S$m) 2024 2025F 2026F 2027F
Operating 1,044.2 1,116.0 1,135.2 1,136.2
Pre-tax profit 749.4 849.1 871.6 881.0
Tax 0.0 0.0 0.0 0.0
Deprec. & amort. 0.0 0.0 0.0 0.0
Associates (33.8) (103.1) (103.1) (103.1)
Working capital changes 1.8 1.6 6.6 2.6
Non-cash items 0.0 0.0 0.0 0.0
Other operating cashflows 326.7 368.5 360.2 355.7
Investing (520.6) (85.0) 30.0 30.0
Capex (growth) (1,079.3) 0.0 0.0 0.0
Capex (maintenance) (178.3) (145.0) (30.0) (30.0)
Proceeds from sale of assets 672.6 0.0 0.0 0.0
Others 64.4 60.0 60.0 60.0
Financing (508.0) (1,033.1) (1,165.7) (1,174.6)
Distribution to unitholders (758.5) (797.8) (820.8) (830.4)
Issue of shares 1,107.6 0.0 0.0 0.0
Proceeds from borrowings (480.9) 90.0 (20.0) (20.0)
Loan repayment 0.0 0.0 0.0 0.0
Others/interest paid (376.2) (325.3) (324.9) (324.2)
Net cash inflow (outflow) 15.7 (2.0) (0.5) (8.4)
Beginning cash & cash equivalent 140.7 156.4 154.3 153.8
Changes due to forex impact 0.0 0.0 0.0 0.0
Ending cash & cash equivalent 156.4 154.3 153.8 145.3
KEY METRICS
Year to 31 Dec (%) 2024 2025F 2026F 2027F
Profitability
EBITDA margin 65.5 65.7 65.7 65.7
Pre-tax margin 59.0 52.8 53.2 53.3
Net margin 58.9 52.0 52.3 52.5
ROA 3.7 3.3 3.3 3.4
ROE 6.3 5.4 5.5 5.6
Growth
Turnover 1.7 1.3 2.0 0.8
EBITDA 2.5 1.6 2.1 0.8
Pre-tax profit 6.4 (9.2) 2.6 1.1
Net profit 8.2 (10.6) 2.7 1.1
Net profit (adj.) (0.2) 11.7 2.7 1.1
EPU (4.0) 5.7 2.3 0.7
Leverage
Debt to total capital 36.3 36.4 36.3 36.2
Debt to equity 57.6 58.1 57.8 57.5
Net debt/(cash) to equity 56.6 57.1 56.8 56.6
Interest cover (x) 3.2 3.4 3.5 3.5
Disclosures/Disclaimers
This report is prepared by UOB Kay Hian Private Limited (“UOBKH”). This report is provided for information only and is not an offer or a solicitation to deal in securities or to enter into any legal relations, nor an advice or a recommendation with respect to such securities. It is prepared for general circulation and does not regard the specific investment objectives, financial situation or particular needs of any recipient. Advice should be sought from a financial adviser regarding suitability. This report is confidential and may not be published, circulated, reproduced or distributed without prior written consent of UOBKH. It is not intended for distribution where such distribution would be contrary to applicable law. Information has been obtained from sources believed reliable, but UOBKH makes no representation as to accuracy or completeness and accepts no liability for loss arising from its use. Views are subject to change without notice. UOBKH, its connected persons, officers, employees and representatives may, to the extent permitted by law, transact with, perform services for, solicit business from, serve in positions with, or have an interest in the subject corporation(s). As of the date of this report, no analyst responsible for its content has any proprietary position or material interest in the securities mentioned.
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