OCBC maintains ‘Hold’ rating on CapitaLand’s office REIT after bonds cancellation

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OCBC Investment Research has reiterated its call to neither buy nor sell units of CapitaLand Commercial Trust after the Singapore-listed office REIT announced on 12 June that a portion of its bonds has been cancelled.

The portion, which amounts to SGD21,750,000 in aggregate principal amount, have been converted or cancelled due to an exercise of conversion rights by the holders of the bonds.

Prior to the cancellation, the portion was originally from CapitaLand Commercial Trust’s tranche of SGD175,000,000 2.5% convertible bonds that was due on 12 September 2017.

As a result of the conversion, 15.3 million new units have been issued at the conversion price of SGD1.4265 per unit.

To date, the total principal amount of convertible bonds converted and cancelled is SGD38.75 million, with the amount remaining being SGD136.25 million, said OCBC.

“As at end 1Q17, [CapitaLand Commercial Trust] continues to enjoy a strong balance sheet with a healthy gearing of 38.1%, and an average cost of debt of 2.6%”, said OCBC noting that 80% of the REIT’s gross borrowings are also on fixed rates.

OCBC has also maintained its fair value estimate of SGD1.69 on the REIT.

Units of CapitaLand Commercial Trust are currently listed on the Singapore Exchange at SGD1.64.

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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