CapitaLand Integrated Commercial Trust target price trimmed by Daiwa despite Australia acquisition

CapitaLand Integrated Commercial Trust building in Singapore’s Bugis neighborhood.CapitaLand Integrated Commercial Trust building in Singapore’s Bugis neighborhood.

Daiwa advised not reading too much into CapitaLand Integrated Commercial Trust‘s (CICT) foray into Sydney, calling the move only “neutral to mildly positive” in a note Friday.

On Friday, CapitaLand Integrated Commercial Trust (CICT) said it had entered a deal to acquire two Grade-A office buildings in Sydney, Australia, from CapitaLand Real Estate Holdings (CLA) for A$330.7 million (S$330.7 million).

The acquisitions mark CICT’s first foray into Australia, and only its second overseas developed market after Germany, the REIT said, adding its is is targeting having up to 20 percent of its property portfolio value in overseas developed markets, while keeping its main focus on Singapore.

Daiwa raised its forecasts for CICT’s distribution per unit (DPU) for 2022 and 2023 by 0.7 percent to 0.8 percent on the deal, but not that was compared with the estimate before the trust divested the One George Street property.

But the investment bank didn’t expect the acquisition to be a major driver of unit’s performance.

“We believe CICT’s performance vs. peers will still be determined by how management can add value to its predominant Singapore exposure,” Daiwa said.

Daiwa lowered its target price to S$2.28 from S$2.40 previously, citing a higher 10-year Singapore bond yield and ongoing uncertainty in the office and retail segments.

The rating was kept at Outperform, or a two on Daiwa’s scale of one to five, where one is the highest rating.

CapitaLand Integrated Commercial Trust’s units were up 0.49 percent at S$2.07 at 10:02 a.m. SGT Monday.