CapitaLand Commercial Trust’s sale of Twenty Anson a positive: Maybank KimEng

Singapore two-dollar bills

CapitaLand Commercial Trust’s divestment of Twenty Anson is a positive, Maybank KimEng said, citing the pricing and the use of proceeds.

“We view this deal positively as it allows the REIT to cash out of a mature property at an attractive premium. The deleveraged balance sheet also leaves more capacity to fund overseas expansion,” it said in a note this week.

CapitaLand Commercial Trust’s manager said last week that it entered a deal to sell Twenty Anson, a 20-storey office building in Singapore’s central business district, to an unrelated third party for S$516.0 million.

The sale price is “attractive” as it was a 19 percent premium over the latest carrying value of S$433 million, Maybank KimEng said.

“While the divestment will lead to lower property income, it is largely offset by interest savings from debt repayment and lower asset management fees,” it said.

The brokerage lowered its 2019-20 distribution per unit (DPU) forecast by only 1 percent on the divestment and trimmed its target price to S$1.80 from S$1.82. It kept a Hold call.

It added that the divestment will lower the REIT’s leverage to 35.7 percent from 39 percent, and it estimated “decent” debt headroom of S$750 million to S$1.8 billion.

“The reduced gearing offers significant flexibility in funding its overseas expansion. CCT plans to allocate 10-20 percent of its assets into overseas investments from 5 percent currently,” it said.

The unit ended Wednesday flat at S$1.66.