• Maintain BUY and TP of SGD2.30, 19% upside with 6% FY25F yield. CapitaLand Integrated Commercial Trust's 2H24 and FY24 results are in line. 4Q24 was a strong quarter, with occupancy rates improving across segments along with strong positive rent reversions - the latter is expected to continue at a moderated pace in FY25. Its balance sheet is sturdy, with a comfortable gearing level giving it room to engage in tactical acquisitions. CICT, the largest S-REIT and a direct proxy to Singapore's economic growth, is one of our sector Top Picks. The stock is trading at a 10% discount to book value.
• Key share price catalysts for FY25: i) Continued positive rental growth, as we expect rent reversions to be in the mid-to-high single digits for both the office and retail segments in Singapore; ii) income contributions from Gallileo (expected to commence in 2H25), IMM Building and CQ @ Clake Quay post asset enhancements (high single-digit ROI), as well as ION Orchard; and iii) potential acquisition of a remaining stake in CapitaSpring while potentially divesting Citadines Raffles Place at a premium over valuation.
• Financing costs have stabilised QoQ at 3.6% pa and we expect this to likely peak at 3.7% levels in 1H25, before tapering off in 2H25. 81% of its debt are on fixed interest rates, with only 10% of its debt due for refinancing later this year. CICT completed the divestment of 21 Collyer Quay for SGD688m in Nov 2024, ie at a 6% premium over its FY23 valuation. The proceeds have been used to repay debt, bringing its gearing down to 38.5% (9M:39.4%).
• Portfolio valuations rose 1.4% YoY on a same-store basis, aided by higher valuations for Singapore assets (from improved performance) more than offsetting declines in its Australia asset valuations as a result of an ~100bps increase in cap rates as FX impact. The REIT's overall portfolio occupancy rate rose to 97.7% (+0.3ppt QoQ), with all segments (office retail and integrated developments) registering increases. Office rent reversion (FY24) stood at 11.1% while the retail portfolio saw a healthy 8.8% rent reversion.
• FY24 DPU rose 1.2% YoY, while 2H DPU was flat YoY. CICT noted that, excluding the impact of the timing of its equity fundraising, 2H DPU would have been slightly higher YoY. CICT also recently appointed Tan Choon Siang as Deputy CEO of the REIT. He was formerly the CEO of CapitaLand Malaysia Trust (CLMT MK, NR).
• No major earnings estimate changes and we have reclassified ION Orchard's income contribution as JV income. We introduce FY27 forecasts and roll forward our DDM valuations. Our DPU forecast is based on 50% of management fees in units. As CICT's ESG score is 3.4, our TP includes a 6% ESG premium.

Source: RHB Research - 6 Feb 2025