Published January 21, 2009

CCT has no plans in pipeline to raise equity

By UMA SHANKARI

	Email this article
	Print article
	Feedback

CAPITACOMMERCIAL Trust (CCT), Singapore's largest office trust, has no immediate plans to raise equity.

Market uncertainty: CCT also recently abandoned a plan to redevelop the Market Street Car Park

'We don't intend to increase debt in any significant way,' said Lynette Leong, chief executive of CCT's manager, at the trust's Q4 results briefing yesterday. 'If we are not making any acquisitions, we have no need to do that (raise equity).'

CCT shares gained 1.5 cents, or 1.7 per cent, on the news to close at 87.5 cents yesterday, even as the benchmark Straits Times Index fell. Some industry players have said that CCT could issue equity to reduce its gearing ahead of expected falls in asset values during upcoming revaluation exercises.

'CCT has unequivocally stated that it is not planning to raise equity. That provides a lot of differentiation with the other Reits (real estate investment trusts) in the market,' said UOB- Kay Hian analyst Jonathan Koh.

The trust's gearing now stands at 37.6 per cent, and will be maintained at around that level, Ms Leong said. Total debt as at end-December 2008 was about $2.6 billion. By contrast, gearing was 23.9 per cent as at end-December 2007, while total debt then stood at about $1.26 billion.

For the short-term, CCT has some $116 million of debt due in June 2009, but the trust remains confident that it will be able to secure refinancing as it has some eight unencumbered assets worth $2.7 billion in its portfolio. The Reit on Jan 6 announced that it had secured refinancing for $580 million of loans due in March 2009.

CCT also recently abandoned a plan to redevelop the Market Street Car Park, citing the uncertain market outlook and tight credit conditions.

In Q4 2008, CCT saw its distributable income rise 17.4 per cent to $38 million - from $32.3 million a year ago - on higher rental income.

Distribution per unit (DPU) for the three months ended Dec 31, 2008 rose to 2.71 cents, from 2.33 cents for the same three months in 2007. Net property income also rose 47.8 per cent to $65.6 million, from $44.4 million previously.

Revenue in Q4 2008 was boosted by the acquisition of 1 George Street, a 23-storey office block, as well as higher rental income from other properties.

For the full 2008 financial year, CCT's distributable income rose 27.1 per cent to $153 million, from $120.4 million in 2007. DPU climbed from 8.7 cents to 11 cents, while net property income rose 34.2 per cent to $233.5 million.

CCT also wrote down about 3 per cent of its portfolio value to $6.7 billion, from June 2008's $6.9 billion. This translated into a 1.3 percentage point increase in gearing. The lower valuation assumes a fall of about 10 per cent in rentals this year, CCT said.

Analysts said that the results were within expectations and reiterated their positive calls on the stock. ABN Amro and Citigroup issued fresh 'buy' calls, while Macquarie Research rated the stock as an 'outperform'. 'We believe CCT remains a deep value play on the office sector,' said Macquarie analysts Tuck Yin Soong and Elaine Cheong.

Looking ahead, CCT expects to face challenging times due to the adverse economic climate, said Richard Hale, chairman of the trust's manager. 'Our focus continues to be on retaining our tenants and on being proactive in cost containment,' he said.

CCT is forecasting a DPU of 12.34 cents for 2009. The trust's manager is actively engaging tenants for forward lease planning and 79 per cent of the 2009 forecast gross rental income has been locked in with committed leases.