Month: March 2007
MapleTree – CIMB
Biggest acquisition to date
MLT has acquired five logistics facilities in Japan from Itochu Corp for ¥27.8bn S$350.8m). Four of the properties are located in the Greater Tokyo area and the fifth in the Kyoto (Kansai) area. All five properties are freehold and have a total GFA of 103,864 sq m. The multi-tenanted assets come with long lease tenures of 7-18 years. The acquisition is expected to be completed by mid-2007.
Second acquisition in Japan, following the completion of the purchase of Gyoda Distribution Centre (S$24.4m, floor area 17,094 sq m; also from Itochu) last month. This is also the largest acquisition by MLT since its listing two years ago, beating its S$211.1m acquisition of Hong Kong’s Shatin No. 4 (floor area 60,215 sf) in April last year.
Demand for quality logistics space in Japan is rising, according to Colliers International. There is now a shortage of large high-quality distribution centres in key areas and modern distribution facilities with floor areas of over 3,000 sq m make up less than 50% of the total stock in Japan. The five properties that MLT has acquired have floor areas of above 3,000 sq m, with the biggest measuring 41,171 sq m.
Initial yield lower than expected. The acquisition will be funded entirely by debt as MLT wishes to take advantage of the low cost of borrowing in Japanese yen. The resulting proforma accretion to MLT’s FY06 DPU is 0.56ct (+11%). Assuming a cost of debt of 1% and a weighted average management fee of 2%, we estimate the average initial yield of the assets at 4.3%. While this is lower than the weighted average yield of 4.9% that we had assumed for MLT’s acquisitions this year, we expect the impact to be offset by acquisitions of higher-yielding assets in other markets such as China later in the year.
Valuation and recommendation
Reaching our target price; downgrade to Neutral. With the acquisition of these five properties, MLT’s total assets now amount to just under S$2bn (including acquisitions that are pending completion). We had projected an increase of S$1bn in asset size to S$2.4bn by the end of this year. We believe MLT is on course to meet our target. As such, our DPU forecasts and DDM-target price of S$1.32 remain unchanged. With the REIT trading near our target price, we downgrade MLT to Neutral from Outperform. Above-average forward
ART – OCBC
Maintain HOLD
Cash call to raise S$199m. Ascott Residence Trust (ART) recently announced its intention to issue 105.3m new units to raise S$199m via an Equity Fund Raising exercise. The new units will increase ART’s existing number of units by about 21%. So far, the placement tranche, which makes up 47% of the new units, has had overwhelming response with demand exceeding supply by 15 times at S$1.90/unit. Similarly, the retail tranche (making up about 8% of new units) was fully taken up via ATM within a day of its launch. The only portion left is the amount allocated to existing unitholders. This portion makes up about 45% of the new units and unit-holders have until 20th Mar to accept the offer. We do not see demand from existing unit-holders as being any less enthusiastic. So the S$199m new equity is almost certainly in the bag.
We expected the cash call. In our Jan 07 report, we had articulated that a cash call from ART was imminent. This was because as of end Dec 06, ART’s gearing of 29% (and with no credit ratings) left not much headroom for more debt. Furthermore, it had already announced S$266m of acquisitions which had yet to be completed. With the expected new equity and the newly assigned credit rating, we estimate that ART could raise a further S$192m worth of debt and still maintain its gearing at a comfortable 45%. (Gearing of 60% is allowable for REIT with credit rating.)
ART targeting S$2.0bn size by end 08. With the announced acquisition so far, we expect ART to reach an asset size of S$1.2bn fairly soon. This is a rapid 32% rise in size since its IPO in 1Q06. Going forward, we do not anticipate this rapid growth rate to slowdown anytime soon. ART has guided for an asset size of S$2.0n by end 2008. There is a good possibility of ART exceeding this and we see a S$2.5bn size as easily achievable with the bulk of acquisitions coming from its parent The Ascott Group.
Revised up fair value to S$1.94 on lesser dilution. In our fair value estimate, we had allowed for ART target size of S$2.5bn. However, with the higher price of the new units, fewer units will be issued to finance its acquisition led growth strategy. This lower cost of equity in turn has a positive impact on our valuation. We have thus marginally adjusted up our fair value estimate from S$1.82 to S$1.94. We maintain our HOLD rating on ART.
ART – BT
ART’s ATM offering of 8m units fully subscribed
ASCOTT Residence Trust (ART), which is selling 105.3 million new units to raise $199 million, yesterday said that the ATM offering of 8 million units at $1.90 per unit was fully subscribed by retail investors yesterday.
The news follows Monday’s announcement that the 47.3 million new units offered to institutional and other investors on that day were more than 15 times subscribed. Another 49.9 million units are being offered to existing stockholders at $1.88 apiece. The stock offered to existing stakeholders is based on one new share for every 10 they own, ART said. ART is raising the $199 million to finance the acquisition of five properties in Australia, Japan, the Philippines and Vietnam.
‘We are pleased that the ATM offering of 8 million new units was fully taken up, as this demonstrates that retail investors have endorsed our latest acquisitions and equity fund raising exercise,’ said Chong Kee Hiong, chief executive of the trust’s management team. ‘ART will continue to pursue its proven acquisition strategy of acquiring yield-accretive assets in the pan-Asian region to achieve our target portfolio value of about $2 billion by end-2008.’
ART owns some of the properties managed by The Ascott Group, which is the biggest operator of serviced residences in Asia and Europe. Ascott is also expanding to increase the number of apartment units to 25,000 by 2010, from more than 19,000 at present.
Once the acquisitions and the fund raising are complete, unitholders of ART can expect a higher annualised distribution per unit (DPU) of 7.28 cents in 2007. This is an 11.5 per cent increase over the annualised forecast DPU of 6.53 cents in 2007 for the 14 properties in ART’s portfolio before the acquisition.
ART’s shares closed 8 cents down at $2.00 yesterday. The new units are expected to begin trading on March 26.
ART – BT
CapitaLand cuts Ascott trust stake to 37%
SINGAPORE – South-east Asia’s largest property developer CapitaLand said on Wednesday it would sell 100 million units in Ascott Residence Trust, reducing its interest to 37.3 per cent from 53.8 per cent. The property developer said in a statement that it would place out 100 million Ascott trust units at $1.90 each to JP Morgan (S.E.A.) Ltd, which would in turn get buyers for the units. CapitaLand said the sale would result in $30.3 million profit after tax and minority interests.
Ascott trust, a property trust spun off by serviced apartment firm Ascott, said on Monday that it will raise about $199 million for acquisitions by selling new units. The placement includes a non-renounceable preferential 1-for-10 rights offering of 49.94 million new units at an issue price of between $1.83 and $1.88 a unit. The trust will also offer up to 50.17 million new units to institutional investors and 8 million new shares to retail investors, in both cases priced at between $1.85 and $1.90 a unit. JP Morgan is managing the deal. — REUTERS