• 3Q23 revenue and NPI grew 5% y-o-y and 1% y-o-y, in line with our estimates. 
• Key Positives: i) portfolio occupancy inch up mainly from Singapore assets especially office properties; ii) estimated 3Q23 reversions remained healthy mainly led by retail, iii) downtown tenant sales saw better improvements; iv) Clarke Quay committed occupancy >85%
• Key factors to watch: i) Gallileo AEI for 18 months post tenant vacating; ii) higher interest cost
• Maintain BUY; TP of S$2.30. 

What Happened

3Q2023 performance were relatively stable, in line with our estimates; reversions remained positive in high single digit; Clarke Quay achieved committed occupancy >85%. On q-o-q. CICT’s 3Q23 revenue and NPI grew 5% y-o-y and 1% y-o-y respectively, in line with our estimates. Portfolio NPI were held up mainly by integrated development (+6% y-o-y) while retail (-1% y-o-y) and office (-2% y-o-y) saw slight decline. On q-o-q, 3Q23 revenue and NPI +1% and -0.4% respectively. Gearing and average cost of debt inched up marginally q-o-q to 40.8% (vs 40.4% in 2Q23) and 3.3% (vs 3.2% in 2Q23). ICR fell to 3.1x from 3.3x in 2Q23. Key highlights from operations: i) portfolio occupancy inched up marginally by 0.6ppt q-o-q to 97.3% from all segments with office showed highest occupancy increase of 1ppt q-o-q to 96.4% mainly from Capital Tower, Asia Square T2 and 6 Battery Rd. Australia portfolio saw slight decline to 87.7% from 88.6% in 2Q23; ii) estimated retail reversions trended higher in 3Q23 mainly from downtown portfolio (+12%) while estimated 3Q23 office reversions remained healthy (+6%); iii) tenant sales +4% y-o-y mainly led by downtown mall (+6% y-o-y), iv) AEI at Clarke Quay is targeted to complete by year-end, committed occupancy (including advanced negotiations) is >85%; v) average office signing rents inched higher to S$10.45psf.

Our View

Expect relatively stable FY23 performance though growth to moderate with the departure of tenant and AEI plans at Gallileo, and higher interest costs. CICT performance remains stable. Singapore assets continue to show improvements while Australia portfolio occupancy saw slight decline in 3Q23. We believe FY23 performance will remain relatively stable with potential uptick boosted by tourism spending in year-end. However, growth could moderate with the AEI plans at Gallileo and interest costs staying higher for longer. We maintain our BUY rating and TP of S$2.30. With more than 90% of its portfolio comprises of Singapore assets, we believe CICT is a close proxy if Singapore economy remains to be more resilient compared to other developed market.

ANALYST CERTIFICATION

The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate[1] does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests[2] in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary position in CapitaLand Integrated Commercial Trust recommended in this report as of 30 Sep 2023.

Compensation for investment banking services:

2. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from CapitaLand Integrated Commercial Trust as of 30 Sep 2023.

3. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA, within the next 3 months, will receive or intend to seek compensation for investment banking services from CapitaLand Integrated Commercial Trust as of 30 Sep 2023.

4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for CapitaLand Integrated Commercial Trust in the past 12 months, as of 30 Sep 2023.

5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced:

6. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed on page 1 of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

[1] An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 

[2] Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis.  This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.