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Capitaland Commercial Trust (SGX:C61U)'s Q2 DPU Dropped By 23%

Image Source: Capita Commercial Trust's Website

Capitaland Commercial Trust (SGX:C61U)'s 1st half DPU was down 24.1% to 3.34¢. It is currently trading at 3.9% yield based on the last traded share price of $1.71 on 15 Sep.

Key Highlights:

  • Distribution per unit (DPU) and Dividend Yield (3.9%)

  • Price to book ratio (0.95)

  • Gearing (36.4%)

  • Interest coverage ratio (5.3x)

  • Portfolio occupancy rate (95.2%)

  • Growth catalyst

Background of Capitaland Commercial Trust

CapitaLand Commercial Trust is the largest listed commercial REIT in Singapore. It manages a portfolio of around S$11 billion, consist of eight prime commercial properties in Singapore and two properties in Frankfurt, Germany. CapitaLand Commercial Trust’s Singapore properties are strategically located within the Central Business District, and this makes its portfolio attractive and resilience.

1. Distribution per unit and dividend yield

In its second quarter 2020 result, Capitaland Commercial Trust's net property income dropped 9.7% to S$70.8m. The contribution from its new asset, Main Airport Centre and higher income from Gallileo were eroded by lower occupancies and rental waivers to its tenants. Based on its latest price, the REIT is currently trading at about 3.9% dividend yield. Before the recent drop in DPU due to Covid-19, the REIT has been maintaining very consistent DPU over the years.

REIT's Deepdive - DPU Trend

2. Price to book ratio

The REIT is currently trading at a price to book ratio of 0.95, which is slightly above its 3-year average of 0.92. However, the current valuation still indicates a 5% discount on its net asset value.

3. Gearing

Portfolio leverage increased to 36.4%. The average debt tenor maintained at 3.4 years. The REIT will have no refinancing required until Q4 2021. It has no refinancing required in 2020 and its debt maturity is well spread over the years.

4. Interest coverage ratio

The REIT has a healthy interest coverage ratio of 5.3 times, which is above our preference of 4 times. Besides, the REIT maintains a low overall interest cost of 2.2%.

5. Portfolio occupancy rate

Portfolio occupancy remains at a high occupancy rate of 95.2%. The REIT has built a resilient portfolio with a focus on prime location within the central business district.

Portfolio Occupancy (Source: Capitaland Commercial Trust's Presentation Slide)

6. Growth Catalyst

Moving forward, the REIT manager will focus on retaining and supporting existing tenants through the Covid-19 pandemic. It is also completing the AEIs of Six Battery Road, 21 Collyer Quay and CapitaSpring by 2021.

Besides, Capitaland Commercial Trust is going to hold an extraordinary general meeting with its unit holders to seek approval for the proposed merger deal with Capitaland Mall Trust.


Overall, we expect office leasing momentum to pick up following the Phase 2 reopening.

The potential merger with Capitaland Mall Trust will form the largest REIT listed in Singapore, and the second largest REIT in Asia Pacific, which could help both REITs to seize more sizeable acquisitions and redevelopment opportunities.

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