Management also gave more colour on the use of the rights proceeds. Around S$664mn of the rights proceeds have been used to repay the S$650mn two-year secured term loan maturing in June next year and a bridge loan facility that is due in August. We have assumed S$735mn out of the net proceeds of S$803.5mn will be used to repay the two-year secured term loan of S$650mn due in the middle of next year and the two-year fixed rate notes of S$85mn due in August next year in our model. Assuming the S$85mn two-year fixed rate notes maturing next August will still be repaid with the remaining rights proceeds, CCT still has the following outstanding borrowings to refinance before end-FY11F: the S$150mn two-year fixed rate notes due in March next year and S$1.012bn of borrowings due in FY11F, assuming the S$370mn convertible bonds are put back to FY11F. With the financial flexibility of around S$3.05bn worth of unencumbered assets (as end-May valuation, includes One George Street, which will be unencumbered once the S$650mn secured term loan is paid down next year, but excludes the Raffles City asset, in which CCT owns a 60% stake), we believe CCT will be able to address these debt maturities in the event the unsecured debt market remains closed.
The Singapore office market remains a challenging one, based on conversations with management today, but we believe the stock, which is currently trading at what looks an undemanding implied enterprise value of around S$1,200psf for its good quality prime office assets, has more than reflected the downside risks. We maintain our BUY rating with a price target of S$1.07/unit, pegged to our intrinsic NAV estimate. Our price target implies a potential total return of 39.5%, including our projected FY10F DPU yield of 7.4%, at the current share price.
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