Wilkie Edge, a 12-storey integrated development comprising office space, retail units and a serviced residence. (Photo: REITsWeek)Wilkie Edge, a 12-storey integrated development comprising office space, retail units and a serviced residence. (Photo: REITsWeek)

Maybank Kim Eng has issued a ‘Buy’ rating on Singapore-listed office REIT, CapitaLand Commercial Trust, citing attractive valuation, and a forward yield of 5.9%.

The brokerage also highlighted the REIT’s strong weighted average lease expiry (WALE) of 6.8 years, with just 8% of office leases due for renewal in 2017.

“We think [CapitaLand Commercial Trust] is well-positioned to ride through near-term headwinds in the sector”, said Maybank Kim Eng in a research report issued for the start of 2017.

The firm also noted that CapitaLand Commercial Trust’s current price implies a market value of SGD1,800 (USD1,250) per square foot for its Singapore offices.

“This looks cheap compared to transactions in the physical market”, said Maybank Kim Eng, noting that Singapore’s high land prices puts replacement cost of a new office building at SGD2,800 per square foot.

In addition to these, incremental contributions from CapitaGreen should drive a 3-year DPU compound annual growth rate of 1.8% into 2018, said the brokerage firm, adding that the redevelopment of Golden Shoe Car Park will also bode well for the REIT.

Maybank Kim Eng has issued a target price of SGD1.81 on the REIT, based on a target yield of 5.0%.

Units of CapitaLand Commercial Trust finished the trading day unchanged from its previous close on the Singapore Exchange at SGD1.535.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.