CICT Earnings: Driving Growth Through Asset-Enhancement Initiatives

Narrow-moat CapitaLand Integrated Commercial Trust’s second-half 2023 net property income improved 4% year on year, driven by higher contributions from its office assets and organic rental growth across its properties. Overall, the results were in line with our expectations, and we retain our SGD 2.32 fair value estimate after rolling our model and updating our assumptions. We think the trust is currently undervalued and continue to like it for its diversified portfolio of high-quality office and retail assets. The trust lowered its gearing to 39.9% at the end of 2023 after staying above 40% for the last few quarters. CICT intends to bring the gearing down further to save on interest expenses. We think the trust’s pipeline of asset-enhancement initiatives, or AEIs, at the IMM and Gallileo buildings may push its gearing back above 40% in the near term. We believe this could be offset by potential asset divestment.