CapitaLand Integrated Commercial Trust Reports a 1.7% Increase in FY2022’s DPU: 5 Things to Note About its Latest Earnings


The earnings reporting season is now in full swing and REITs have been the first in line to report their latest financial results.

Investors will no doubt be closely scrutinising their financial and operating numbers to look for signs of stress as the sector grapples with high inflation and surging interest rates.

Despite these headwinds, several REITs have reported healthy year on year distribution per unit (DPU) rises.

CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT, is the latest addition to this crop of resilient REITs.

The retail and commercial REIT posted an encouraging set of numbers for its fiscal 2022 (FY2022) that should reassure investors who were worried about whether it could grow its DPU.

Here are five things that you should note about CICT’s latest results.

1. A commendable financial performance

CICT reported a continued rise in revenue and net property income (NPI) for the second half of FY2022 (2H2022).

Gross revenue rose 14.4% year on year to S$754.1 million while NPI improved by 13.1% year on year to S$541.7 million.

The better performance came about from contributions by new acquisitions and higher gross rental income from all three of CICT’s property categories.

For FY2022, gross revenue climbed 10.5% year on year to S$1.4 billion with NPI increasing by 9.7% year on year to S$1 billion.

For 2H2022, DPU inched up 2.7% year on year to S$0.0536.

Coupled with 1H2022’s DPU of S$0.0522, FY2022’s DPU totalled S$0.1058, up 1.7% year on year.

Units of CICT provide a trailing distribution yield of 5%.

2. Improved portfolio occupancy

CICT’s portfolio occupancy saw further improvements, rising to 95.8% as of 31 December 2022.

Three months ago, the occupancy level stood slightly lower at 95.1%.

The main increase came from CICT’s retail portfolio which saw occupancy rise from 96.8% as of 30 September to 98.3% in the latest quarter.

This rise was slightly offset by a small dip in the occupancy rate of the integrated developments division from 97.5% to 97.1%.

The REIT’s tenant mix remains well spread, with no single tenant contributing more than 5% of gross rental income (GRI).

Some big names among its top 10 tenants include Temasek Holdings, BreadTalk Group, and NTUC Enterprise Co-operating Ltd.

3. Majority of loans are on fixed rates

The REIT’s debt metrics remained healthy despite a slight uptick in its average cost of debt.

Aggregate leverage stood at 40.4% with interest coverage at 3.7 times as of 31 December 2022.

The average cost of debt inched up from 2.5% in the previous quarter to 2.7%, but CICT has 81% of its loans on fixed rates, thereby mitigating a sharp increase in borrowing costs.

CICT has also quantified the effects of a 1% rise in interest rates.

The REIT manager estimates that the increase will lower DPU by S$0.0028, or around 2.6% of FY2022’s DPU.

Therefore, a 4% rise in interest rates will crimp DPU by around 10.4%.

4. A strong rebound for the retail division

Investors need not be overly worried, though.

CICT’s retail division is enjoying a strong rebound as borders reopen and people start travelling and spending again.

Shopper traffic jumped 25% year on year in FY2022 while tenant sales improved by 22.5% year on year.

Tenant retention rate based on net lettable area stood at an impressive 89.1% for the fiscal year.

Elsewhere, the division also recorded a positive rental reversion of 1.2%.

Suburban malls saw a slightly higher reversion of positive 2.3% while downtown malls posted a smaller rise of 0.2%.

With more tourists anticipated to arrive in Singapore as China reopens its borders, CICT’s downtown malls could see higher tenant sales and record better rental reversions in the quarters to come.

Meanwhile, its asset enhancement initiative at CQ @ Clarke Quay is on track for completion by 3Q2023 where the REIT is working on upgrading a refreshment area and restoring the façade for select blocks.

5. Healthy rent reversion and retention for the office division

As for CICT’s office portfolio, it is enjoying high overall occupancy of 94.4% with over 1.5 million square feet of new and renewed leases in FY2022.

For Singapore, rent reversion stood at a positive 7.6% with a tenant retention rate of 81.1%.

New office tenants signed last year include ServCrop Singapore, Warren Smith, and Royal Caribbean Cruises (NYSE: RCL).

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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