CapitaLand Integrated Commercial Trust (Merger CMT & CCT)

[ishak]

CMT's CEO resigns
BT, 17 Sep 2008

CapitaMall Trust (CMT) has announced the resignation of Pua Seck Guan as CEO, director and member of the executive committee of CapitaMall Trust Management Ltd, the manager of CMT.

Mr Pua resigned to 'pursue his personal interests' it said.

With effect from Nov 1, Lim Beng Chee will assume Mr Pua's duties.

Mr Lim is currently the CEO of CapitaRetail China Trust Management Limited. He will relinquish this position on 1 October.

He is also presently the deputy CEO of CapitaLand Retail Ltd and will be appointed its CEO with effect from Nov 1 in succession to Mr Pua.

[ishak]

CapitaMall down on CEO change, market woes
Reuters, 18 Sep 2008

CapitaMall Trust, Singapore's biggest real estate investment trust, fell 13 per cent to a two-year low on Thursday, as news of its CEO's departure combined with wider market fears weigh on its shares.

CapitaMall announced on Wednesday that Pua Seck Guan is resigning as CEO 'to pursue his personal interests', and will be replaced by Lim Beng Chee. The trust's parent CapitaLand said Mr Pua will also step down as CEO of its retail arm.

'CapitaMall Trust has historically traded at a valuation premium to peers, largely attributable to Mr Pua's strong track record of delivering shareholder returns,' said Merrill Lynch analyst Melinda Baxter in a note to clients.

'We expect the market to react negatively to this news,' said Ms Baxter, cutting the bank's target price for the stock to $3.00 (US$2.09) per share from $3.66, but maintained a 'buy' recommendation.

A dealer with a local brokerage said CapitaMall shares were also being beatened down as widespread fears stemming from the US financial turmoil led investors to sell shares.

'This is market-driven. Investors on the whole are selling off shares on the market today,' the dealer said.

At 0200 GMT, CapitaMall Trust was trading at $2.43 with 4.6 million shares changing hands, underperforming the Singapore Reit index which was down 6.1 per cent.

CapitaLand lost 7 per cent with 5.5 million shares traded.

The Straits Times Index was down 3.5 per cent.

[ishak]

Retail unit management changes
HOLD S$2.68
Downgrade
Price Target : 12-Month S$ 2.85 (Prev S$ 2.96)
Reason for Report : Company update
Potential Catalyst: Management changes
18 sep 2008

Story: In a round of management changes at both CMT and CRCT, Mr Pua Seck Guan has resigned as CEO of
CapitaMall Trust Management Ltd (CMTML), citing pursuit of personal interests as the reason. The leadership of CMTML will be transferred to Mr Lim Beng Chee, who will in turn relinquish his position as CEO of CapitaRetail China Trust Management Ltd (CRCTML) to Mr Wee Hui Kan, currently the Deputy CEO of CRCTML. Mr Lim who is currently the Deputy CEO of Capitaland Retail (CRTL), will also assume the role of CEO of CRTL from 1 Nov 2008.

Point: We expect the change in management to be effected smoothly given that Mr Lim has been with Capitaland since 1999 and was instrumental, together with Mr Pua, as key drivers of Capitaland’s growth as a leading retail mall manager and owner in Asia. In addition, Mr Lim was also involved in the formation and growth of the two retail reits, CMT and CRCT. We believe CMT would continue to enjoy its pole position as the largest retail S-reit with an ability to execute its asset enhancement activities.

Relevance: Share price of CMT had held up well in the recent market rout. Current valuation of 5.4-5.5% FY08 and FY09 yield appears relatively expensive in view of the hefty 200-300bps premium over its comparable peers’ yields of 7.4-8.4%. We downgrade the stock to Hold largely on valuation grounds, given the small 6% upside to our target price of $2.85. The significant trading yield spread premium over other retail S-reits and current volatile market conditions may likely cap the short-term performance of the stock. Catalyst for share price performance of the stock could likely depend on newsflow on potential acquisition of new properties in the pipeline.

[ishak]

$2.51 | Hold

UOB KayHian cuts target price to $3.16 from $3.42 but maintains its rating. UOB says the resignation of CEO Pua Seck Guan makes the trust vulnerable as it credits him for building up the trust’s retail management and pioneering the Reit market in Singapore. CapitaMall says Mr Pua is leaving to pursue personal interests.

[ishak]

Sailing through choppy waters
25 Sep 2008
Maintain BUY
Previous Rating: BUY
Fair Value: S$3.05

Strong REIT managers will shine in difficult times. The completion of 651,000 sqm of retail space between 3Q08 and 2011 would inevitably put downward pressure on rental rates. But during the slump in retail rental rates in 2001-2003, CMT had been able to raise its rental rates through asset enhancement initiatives (AEIs) and space reconfiguration despite challenging operating condition. As such, we think strong retail mall managers can still ride out the tough period through well-executed asset management and enhancement.

Expecting a smooth transition in stewardship. Last week, Mr Pua Seck Guan, the CEO of CMT, announced his resignation with effect from 1st November 2008 and Mr Lim Beng Chee will take over Mr Pua’s role as the new CEO. Transition in stewardship should be smooth as Mr Pua had already made known to CapitaLand of his intention to pursue personal interest since last year and this would have given CapitaLand ample time to prepare for the transition.

Growth unlikely to be derailed with management change. Mr Pua had been instrumental in the growth of CMT since its IPO. With his departure, concerns have been raised on the outlook of CMT, which was evidenced in the sharp decline in CMT’s share price after the announcement. We think such concerns have been overdone. With plans for future AEIs in place, we do not think the change in management will derail the progress of AEIs going forward.

Yield discount attributable to size difference. While CMT is still trading at FY08 yield discounts of 1.3% to 2.0% to other retail REITs, we note that this yield discount correlates to the size of the REIT and this is also prevalent in office and industrial REIT sectors. For CMT, this yield discount is expected to narrow in FY09 with the increase in DPU.

Fair value lowered to S$3.05. We do not see significant change in the fundamentals of CMT’s retail malls, but we are lowering our fair value to S$3.05 (previously S$3.21) after raising our office cap rate from 4.5% to 5% and lowering our office rental forecasts, in line with our cautious stance for the sector. Share price could stay depressed for a while as the market awaits further clarity on the direction of CMT under the new CEO and yield spread over 10-year bond could stay wide under the tight credit market condition. We are keeping our BUY rating.

[winston]

Not vested.

Singapore Hot Stocks-CCT, Suntec fall on downgrades

SINGAPORE, Sept 29 (Reuters) - CapitaCommercial Trust (CCT) and Suntec Real Estate Investment Trust fell on Monday after Credit Suisse downgraded them to "underperform" due to the weaker outlook for Singapore's office market.

"We now expect rentals to peak earlier in 2008, and fall 50 percent to S$9.18 per square foot per month in 2011, prompted by peak vacancy of 16.5 percent in 2010," Credit Suisse analyst Shirley Wong wrote in a report.

Wong estimated that capital values could fall 40 percent, which could be even more detrimental, triggering provisions for developers and the risk of exceeding gearing limits for real estate investment trusts.

Credit Suisse, which previously had a neutral call on Suntec and an outperform recommendation on CCT, had earlier this year predicted a 30 percent fall in office rentals.

At 0310 GMT, Suntec was down 5.6 percent at S$1.18 while CCT was 4.6 percent lower at S$1.26.

[financecaptain]

Credit Suisse ("CS") just released research on Singapore property sector today. It is severely downgrading the office sector to underweight.

CS expects office rentals to fall by 50% :-"Back in November last year, we forecast Grade A rents to peak at S$18.32/sq ft pm in 2009E (refer to our last office sector report “Prime numbers” dated 15 November 2007 for previous rental forecasts), after which it should fall 30% to mid-cycle rents of S$12.98/sq ft pm in 2012E.

We now expect rentals to peak earlier in 2008E given:
1) office landlords are already experiencing greater resistance from tenants to further rents increases,
2) capital values of office buildings already plateaued three quarters ago (refer to the next section on “40% drop in cap values could be more detrimental”), and
3) vacancies have already risen for two quarters.

While we believe the market has already priced in our previous assumption of a 30% decline in rentals from 2008-11E, we now believe rentals could fall 50% from the S$18.35/sq ft pm peak in 2008E, and the share price could undershoot our
assumptions further. In the past two cycles, rentals have fallen more than 40% over a three-year span as vacancies increase to levels of 13-19%."

Its Impact on REITs ?
"While rental declines affect REITs earnings, given their reliance on rental income cash flows, contracting asset values could lead to a further de-rating of the sector, as it has the impact of raising REITs’ gearing, triggering risks of breaching gearing limits. This leads to a deterioration of credit profile, which will result in an increased risk premium and higher required yields.

Once the gearing limit (60% for REITs with credit rating, and 35% otherwise) is breached, further borrowings are prohibited, and an equity-raising may be unavoidable for any acquisitive growth.

We believe this is untimely as it exacerbates the already high funding costs, given the prolonged and deteriorated credit crunch situation, a double whammy in our view. Over the past two weeks, credit almost froze and spreads have gone vertical, while 3M SIBOR has risen 38 bp to 1.6%. A gearing sensitivity to a decline in asset values conducted for SREITs
suggests that ALLC is the most sensitive to declining asset values, given highest gearing amongst S-REITs."

These are their ratings on each REIT covered :-

CapitaCommercial Trust (CCT SP, UNDERPERFORM, TP S$1.26)We are downgrading CCT to UNDERPERFORM from Outperform, given its highest exposure to the prime office sector. We believe CCT is highly vulnerable to an economic slowdown, and will be most susceptible to declines in prime rents. In addition, CCT has also enjoyed one of the highest revaluation gains (+57%) since IPO, and we believe the reverse could happen if asset prices fall. Our target price is revised down to S$1.26 from S$2.79 (-54.8%), as we cut our 2009-10E DPU by 5.8-17.0% and increase our cost of equity from 6.7% to 10.9%.

[b]Above Source :-
Credit Suisse Asia Pacific/Singaopore Equity Research
29 September 2008
"Singapore Office Sector" - "REITs/Underweight"[/b]

[winston]

Not vested. from Financecaptain:-

Credit Suisse:-

CapitaMall Trust (CT SP, NEUTRAL, TP S$2.58)

We are downgrading CMT to NEUTRAL from Outperform in view of its increasing exposure to office risks with the injection of Atrium and potential office developments to Tampines Mall and Funan DigitaMall, as well as the potential early injection of ION
Orchard, which could strain its gearing and also result in equity raisings amidst a bear market.

In addition, its CEO, Mr Pua Seck Guan, who is a key contributor to CMT’s success, has recently announcement his retirement from the post with effect from 1 November 2008. We believe this could be untimely given a difficult time for the REITs
market. Nevertheless, CMT’s large portfolio of retail malls and mainly suburban regional malls are also more defensive in our view, while active involvement in AEIs also provides an alternative avenue to enhance yields, apart from acquisitions.

We have revised our target price to S$2.58 from S$3.50 (-26.3%), as our 2009-10E DPU is cut by 0.7-1.8% and
cost of equity is revised up from 6.9% to 8.9%.

[winston]

Not vested. From Kim Eng:-

CapitaCommercial Trust – Company Update (Wilson LIEW: 64321454)
Previous day closing price: $1.28
Recommendation: BUY (maintained)
Target Price: $1.93 (reduced from $2.46)

Investors rushing out of office landlords
The tumultuous events emanating from Wall Street over the last couple of weeks have led to a massive sell-down of shares related to Singapore office landlords. Investors are worried that the consolidation of large financial institutions in the US and Europe will lead to a decline in the demand for office space here.

Rents will inevitably fall
Due to the massive upheaval in the banking system, large investment banks are unlikely to continue with any expansion plans. Likewise, due to the credit crunch, other businesses will have reduced access to bank borrowings and similarly scale-back their expansion plans on more negative 12-24 month outlook. However, we believe rentals are in for a soft landing rather than a hard one, over the next 12-18 months.

Visible earnings for CCT
CCT’s earnings growth is quite visible up till end-2009, due to the nature of the rental reversion cycle and the low current average rents for the respective buildings. In addition, One George Street will continue to benefit from a 5-year yield protection clause, while HSBC has locked-in a 7-year forward lease w.e.f. 2012 for HSBC Building.

Refinancing concerns
CCT has to refinance $656m of debt expiring next year, and another $800m in 2010. We estimate CCT’s estimated end-2009 deposited property value to be $5.7bn, and the gearing ratio would increase to about 0.46x from the current 0.36x, which is still manageable. Backed by high-quality properties, we do not think refinancing would be a major issue for CCT.

Safer haven than feared
We have lowered our DDM target price to $1.93, factoring in a higher cost of equity of 10.0% and a lower terminal growth rate of 2.0%. With 10-year Government bonds yielding an average of 3.5% recently, CCT’s forecasted FY09 DPU of 12.3 cents translates to a yield of 9.4% (a 590 bp spread), which is very attractive. The recent sell-down is perhaps overdone and CCT looks undervalued at current levels. Reiterating our BUY recommendation.

[iam802]

First chart formation.

Triangle forming. Downward trend, so, high chance further downside.




Now, for some quick facts which I found on their site.

http://www.capitacommercial.com/desktop ... ights.aspx

If you visit the link above, you will see they have a chart showing the percentage of lease expiring. 2008 has 32.2% and 2009 has 22.2%

Under existing conditions, I think it is fair to say that business outlook is weak; hence rental will drop. And 2008 + 2009 amount to more than 50% of the total lease.

The other point, I look at is the purchase price on acquisition which is at $3.472 million .

Current valuation as of Dec 2007 is $5.11 million

I think, the valuation should come down as well.

The above is just my superficial glance at the figures. Perhaps, those more who are into FA can provide further insights.

Thanks