CICT: Raising SGD 1.1 Billion to Acquire 50% of ION Orchard From CapitaLand Investment

CapitaLand Integrated Commercial Trust has proposed to acquire CapitaLand Investment’s 50% interest in ION Orchard for SGD 1.1 billion. The remaining 50% interest is held by Sun Hung Kai Properties. The acquisition is to be fully funded by an equity fundraising that will raise SGD 350 million via private placement and SGD 747.2 million via preferential offering at discounts between 2.0% and 5.9 % of the volume-weighted average price on Sept. 2, 2024. We retain our fair value estimate of SGD 2.32 per unit and expect minimum change in distribution per unit, or DPU, for 2024, as the acquisition is estimated to complete in the fourth quarter of 2024. We project a 1% accretion in DPUs for 2025-26. The trust is working to achieve tax transparency for ION Orchard, and it expects a further 0.9% accretion to DPU when approved by the relevant authorities (and subject to the agreement of Sun Hung Kai Properties). Overall, we are positive about this move, which helps the trust to diversify its portfolio trade mix and exposes it to the luxury retail segment in Singapore. We think the trust is currently undervalued and encourage existing unitholders to subscribe for the units under the preferential offering.