MIT Q3 distributable income up 29%

Gross revenue also increased 25% year-on-year to $65.7 million

MAPLETREE Industrial Trust (MIT), which was listed in October 2010, saw its distributable income rise 29.3 per cent to $35.2 million for its third quarter ended Dec 31, 2011, as compared to the previous year’s proforma results of $27.2 million.

The distributable income was also 28.1 per cent ahead of the forecast $27.5 million.

This led to MIT offering a distribution per unit (DPU) of 2.16 cents for the period – 14.9 per cent higher than the forecast of 1.88 cents. This translates to an annualised yield of 8.15 per cent as of yesterday’s closing price of $1.06.

Gross revenue also grew 25.3 per cent year-on-year to $65.7 million during Q3, due mainly to improved occupancy rates and positive rental revisions for assets such as flatted factories, stack-up/ramp-up buildings, and warehouses.

Net property income (NPI) for the period also climbed 24.6 per cent to $45.6 million from its proforma result of $36.6 million a year back.

Year-to-date, distributable income also rose 24.4 per cent to $95.9 million year-on-year, while NPI climbed to $125.3 million, up 20.5 per cent over the same period.

Average portfolio occupancy also remained healthy, rising to 95.1 per cent from 94.5 per cent in the previous quarter.

MIT’s manager has two asset enhancement initiatives planned.

One will involve the development of a new high- tech industrial building and an amenity block in Toa Payoh North 1 Cluster, while the other would comprise an extension wing, a multi-storey car park, and a canteen in the Woodlands Central Cluster.

The two initiatives are expected to add about 200,000 square feet of gross floor area to MIT’s portfolio, said Tham Kuo Wei, chief executive officer of MIT’s manager.

Yesterday, the counter rose half a cent or 0.5 per cent to $1.06.

First Reit Q4 DPU doubles on divestment

It’ll pay 1.93 cents per unit; gross revenue up 82%

FIRST Real Estate Investment Trust (First Reit) saw its distribution per unit (DPU) for the fourth quarter ended Dec 31, rise to 1.93 Singapore cents, up 121.8 per cent in the previous corresponding quarter.

This was helped by other gains relating to the distribution of a portion of the total gain on divestment of its Adam Road property of about $8.7 million, which was sold in Q1 last year to Fortis Global Healthcare.

The DPU is payable Feb 29.

The amount distributable rose 122.9 per cent to $12.12 million for the fourth quarter. Meanwhile, gross revenue rose 82 per cent to $13.93 million while net property income also rose 82.2 per cent to $13.77 million.

Results were lifted partly by maiden contributions from its three new properties: Mochtar Riady Comprehensive Cancer Centre and Siloam Hospitals Lippo Cikarang in Indonesia, and South Korea’s Sarang Hospital.

On a full-year basis, the Trust posted a DPU of 7.01 Singapore cents, as compared to 6.63 cents a year ago. Due to the effect of the rights issue and acquisitions made in Dec 2010, full-year 2011 DPU is not comparable to 2010 DPU.

For the full fiscal year, the amount distributable gained 105.8 per cent to $43.93 million.

Gross revenue rose 78.4 per cent to $54.01 million while net property income also rose 78.9 per cent to $53.44 million for the full year.

Earnings per unit were 3.39 cents for 4QFY11 and 8.15 cents for FY11.

As at Dec 28 last year, the total value of First Reit’s investment properties rose from $612.8 million to $618 million, following the acquisition of Sarang Hospital and the divestment of the Adam Road property.

Going forward, manager of First Reit, Bowsprit Capital Corporation, said it expects Indonesia to remain a key focus, and it sees strong potential as Indonesia’s consumption growth continues to grow, which invariably will increase the demand for quality healthcare services.

‘We have been in discussions with our sponsor PT Lippo Karawaci Tbk to acquire some of its upcoming properties on which we have a right of first refusal,’ said Bowsprit’s CEO Ronnie Tan.

On the Singapore front, Bowsprit said the nation’s ageing population and current ‘bed shortage’ will continue to drive the demand for more nursing homes and community hospitals.

As part of its asset enhancement strategy for its properties, the Trust is adding a new five-storey extension block at The Lentor Residence, which is slated for completion in the second half of 2012.

First Reit shares closed at 77 cents yesterday, up half a cent.

Ascendas India Trust posts 13% drop in Q3 DPU

Earnings hit as Sing dollar appreciates against Indian rupee

ASCENDAS India Trust (a-iTrust) said yesterday that its distribution per unit (DPU) for the third quarter ended Dec 31, 2011, fell 13 per cent to 1.50 cents from 1.72 cents a year ago.

Unitholders’ distribution fell 12 per cent year on year to $11.61 million from $13.16 million due to a stronger Singapore dollar, which appreciated 16 per cent against the Indian rupee in the period.

Total property income for the quarter rose 2.4 per cent year on year to $30.63 million from $29.91 million.

However, in Indian rupee terms, total property income grew 19 per cent to 1.225 billion rupees, boosted by income contributions from three new buildings.

Net property income rose 2.7 per cent to $17.46 million from $17 million a year ago, while in rupee terms, it surged 19 per cent to 698.4 million rupees over the corresponding period.

Year-to-date total property income rose 3 per cent to $93.25 million from $90.40 million a year ago. However, net property income fell one per cent to $53.64 million from $54.14 million the previous year.

Unitholders’ distribution for the three quarters slipped 10 per cent year on year to $34.85 million.

Total DPU for the first nine months was 4.54 cents, representing a yield of 8.8 per cent on an annualised basis over the closing price of 69 cents on Dec 31, 2011.

a-iTrust said its portfolio occupancy as at Dec 31, 2011, compares favourably with that at surrounding micro-markets, at 96 per cent, excluding its new buildings.

The three new buildings – Zenith, Park Square and Voyager – continued to see strong take-up with tenancy commitment levels hitting 98 per cent, 87 per cent and 82 per cent, respectively.

In addition to income contribution from the healthy demand for its new buildings, a-iTrust said it was working to complete the acquisition of aVance Business Hub in Hyderabad.

Industrial properties run into headwinds

Large supply of factory space is expected to depress rents at facilities

Singapore’s industrial properties seem to be nearing the end of their strong run with growth in rents and capital values starting to taper off as worries over a supply glut grow.

Back in 2011, industrial rents and capital values produced a stellar report card, with the URA (Urban Redevelopment Authority) reporting a 16 per cent to 22 per cent jump in multi-user and warehouse price and rental indices, respectively, as rents and prices reached multi-year highs.

However, going into the Dragon Year, consultants and analysts predict softer or flat rental growth for factories, warehouses, high-specifications industrial buildings and business park properties due to oncoming supply pressure.

In fact, there is a net floor area of 9.59 million square feet (sq ft) of industrial space in the pipeline for 2012, with around 66 per cent expected to be factory space, said Colliers International Singapore Research.

The large supply of factory space, in particular, is expected to depress rents at facilities island-wide after a steady climb to recent highs on the back of robust manufacturing growth.

That said, with the dimmer outlook for the manufacturing sector now, Colliers director Chia Siew Chuin expects overall demand for space to fall.

Said Ms Chia: ‘Given the intrinsic link between the performance of Singapore’s industrial property market and that of the manufacturing sector, the weakening manufacturing sector (excluding biomedical) would likely have a bearing on Singapore’s industrial property market growth’.

Echoing the same tune, Derek Tan from DBS Vickers Research said: ‘While the industrial segment has benefited from the strong rebound in economic activity and manufacturing growth especially post-GFC (great financial crisis), the deteriorating global growth outlook in 2012, arising from the weakening economies in Europe and supply chain disruption in Thailand, is likely to dampen demand for industrial space given its close correlation with industrial output.’

Credo Real Estate executive director Ong Teck Hui agreed that the sector’s rents could face downward pressure and slide by an average of 15 per cent in 2012 as demand softens for both existing industrial space and new completions.

Cracks are also starting to show, with increasingly subdued bid prices and participation levels at industrial tenders and other sales events, suggesting growing caution among developers.

For instance, an industrial government land parcel located in Woodlands drew only four bidders and a top bid of $72 million or $142 per square foot per plot ratio (psf ppr) back in September, which was lower than the $152 psf ppr for a nearby site that attracted nine contenders a few months earlier.

Among industrial properties, the worst hit by the weakening sentiment appear to be high-specs buildings and business parks, because of their greater international exposure and worries of a vacancy overhang.

The Ministry of Trade and Industry’s (MTI) latest Industrial Government Land Sales Programme (IGLS) is also expected to further depress sentiment in the sector.

The IGLS will release more sites to meet future demand as well as pull the brakes on the industrial market. In particular, smaller configuration sites with shorter tenures have been released for the first half of the year.

In addition to all that, to better cater to industrialists’ needs for ready built industrial space, MTI also introduced a new set of conditions on all B1 and B2 IGLS parcels, which came into force on Jan 1, 2012.

One of the new conditions include developers not being allowed to strata sub-divide the development on selected sites in the first 10 years after completing the project.

Lee Sze Teck, senior manager of research and consultancy at DWG, said: ‘ The flip side of this policy is that it favours developers who build and hold industrial developments for recurring income but disadvantages those who build and sell. This will put a cap on the final tender price for such developments as the developer is bearing more risk for ten years. But in doing so, the government is hoping that rental costs will be lowered for industrialists.’

In terms of capital values, at least three consultants expect the recently imposed additional buyer’s stamp duty for the residential sector to be a boon to industrial properties. Funds may be diverted away from residential to industrial assets, providing support for the capital values of multi-user factory space and high-specs buildings in particular.

Jones Lang LaSalle noted: ‘High-tech properties with good-quality building specifications and tenants with good covenant strength are likely to continue to attract investors, creating opportunities for industrial investments beyond the current period of economic uncertainty.’

Having said that, most analysts and consultants concur that there is no escaping the effect of weaker Western economies going forward.

Said DBS Vicker’s Mr Tan: ‘Looking ahead, moderating global PMI (Purchasing Managers Index) figures and slowing manufacturing growth are expected to put a cap on further rental growth, as tenants rationalise their space requirements as production levels fall to below optimal capacity.’

Full Year Results

Company Overview

Sabana REIT is a Singapore-based REIT with a mandate to invest in income-producing industrial real estate and real estate-related assets in Singapore and Asia with compliance to Shari’ah investment principles.

• 4Q11 (FY11) revenue $18.1m ($76.9m), NPI $17.0m ($73.1m), distributable income $13.8m ($60.6m)

• 4Q11 (FY11) DPU of 2.17 cents (9.53 cents)

• Maintain Buy recommendation with target price revised up to $1.05

What is the news?

Gross revenue and net property income rose 3.8% and 2.6% q-q to $18.1mn and $17.0mn in 4Q11 respectively. Distributable income was $13.8mn, 1.4% q-q higher than preceding quarter. The increase in top- and bottom-lines was due to the contribution from the new properties. The interest cost for the credit facilities used to fund the new purchases was financed at 3.4%-3.9%, lower than the 4.8% of IPO tranche. DPU for the reported quarter was 2.17 cents, bringing DPU for FY11 to 9.53 cents. This constitutes c.94% of our FY11 DPU estimates.

How do we view this?

Having the average all-in financing cost moderated down to 4.4%, this would translate to additional cost savings and would further boost the DPU. FY11 DPU of 9.53 cents was much in-line with our expectation. As the transactions of the new properties were completed in the middle and end of 4Q11, we would expect full quarter contribution in 1Q12.

Investment Actions?

To reiterate, we assume occupancy to drop in 2013 as the head tenant may not renew the contract when the bulk of the master leases expired. Hence, FY13 DPU will slide down but recover in FY14 and FY15. As Sabana REIT’s FY ended in Dec, we rollover and include FY16 estimates to our forecasts. With impending leases only to expire in 2013, we maintain our BUY recommendation with the target price revised up a clip to $1.05.