Amid the rally in the S-REIT sector, CapitaLand Commercial Trust share price is also enjoying a bullish run. The counter surged from $1.80 in January 2019 to a high of $2.30 in July 2019. Since then, CCT share price had cooled off a bit and maintained around the $2.00 level. Is the run of CCT share price sustainable?
Hands down, I like this counter and could not find any fault with the management. However, certain aspect of the Group’s financial cashflow made me wonder if the bullish run of CCT share price is sustainable in the long run.
Being Singapore’s first and largest listed commercial REIT, CCT is considered a blue chip among the S-REITs. Currently, the market capitalization stands at $7.8 billion. The portfolio consists of eight prime commercial properties in Singapore and two properties in Frankfurt, Germany. The assets are valued about $11.6 billion as of $11.6 billion. In addition to this, CCT also owns approximately 10.9% of MRCB-Quill REIT, a commercial real estate investment trust listed in Malaysia.
Despite the quality assets of CCT, the biggest concern of investors must be the seven-year lease, commencing in early 2Q 2021 with WeWork Singapore for the entire building of 21 Collyer Quay. As we all know, WeWork had become a fallen angel and collapsed into the abyss. It is unknown if its Singapore unit is affected or WeWork Singapore will cancel the lease agreement in light of the troubles faced by its parent company. But the uncertainty will surely weigh on investors’ mind. 21 Collyer Quay contributed 6% to the net property income for September 2019.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in CCT before. Whether CCT share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
CCT share price in golden form
It appears to me that CCT had managed to emerge from the downturn in the office rental market relatively well for the past two years. Singapore’s average monthly Grade A office rent has risen by 14.9% from $9.40 per sq ft as at end 2017 to $10.80 per sq ft as at end 2018. In 2019, the rental market continued its momentum, with average $11.45 per square foot as at 30 September 2019 (according to CBRE).
Accordingly, CCT share price had [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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