CICT Earnings: Travel Recovery Boosts Retail Assets; Australia Office Shows Signs of Recovery

CapitaLand Integrated Commercial Trust first-half 2023 results were largely in line with our expectations. Gross revenue and net property income improved 12.7% and 10.1% year on year to SGD 775 million and SGD 552 million, respectively, making up 50% and 49% of our full-year estimates. However, distribution per unit grew only 1.5% year on year to SGD 0.053 as a result of higher-than-expected borrowing costs. We adjusted our near-term cost of debt assumptions, raising it slightly for 2023, but we assume that interest rates will pivot from 2024. Our fair value estimate of SGD 2.32 remains unchanged. We think the trust is undervalued at the current price, trading at a 2023 dividend yield of 5.3%. We continue to like it for its portfolio of high-quality office and retail assets that have proved to be resilient through economic cycles.