Month: February 2009
CDL H-Trust – BT
(SINGAPORE) CDL Hospitality Trusts, the hotel operator partly owned by Singapore’s second-biggest property developer City Developments Ltd, is seeking more than $300 million of bank loans by July.
HWT – BT
Hyflux trust’s full-year distribution beats forecast
Second-half 2.79-cent DPU brings year’s distribution to 4.96 cents, against forecast of 4.88 cents
HYFLUX Water Trust yesterday reported distribution per unit (DPU) of 4.96 cents for its first full year of operations, 2 per cent above the forecast of 4.88 cents. This represents a yield of 17.1 per cent based on yesterday’s closing price of 29 cents a unit, or 14 per cent based on its Dec 31 close of 35.5 cents.
DPU for the second half ended Dec 31, after waiver of distributions in respect of sponsor units, was 2.79 cents. Total distributable cash was $10.2 million, among 205.5 million units, excluding sponsor units held by Hyflux Ltd, a Singapore-listed water treatment company that had divested water treatment plants in China to set up the trust.
Without the waiver from Hyflux, full-year distribution would have been 3.4 cents, or 1.56 cents less. Distribution is expected to hit 5.42 cents in 2009, the company said.
Hyflux Water Trust recorded a profit after tax of $10.3 million for the full year, or $3.8 million for the fourth quarter, while revenue hit $54 million, or $9 million for the fourth quarter. Revenue came in 5 per cent above estimates.
The trust holds cash and cash equivalents of $35.6 million.
No comparative results for the previous year were provided as the trust was set up only in November 2007.
Hyflux Trust said bank credit was tightening, which made new acquisitions through debt ‘a major challenge’. Equity financing was ‘currently not attractive’.
China is also likely to be hard hit by the current crisis, the trust noted, but said that guaranteed tariffs and a tariff adjustment mechanism would help to maintain margins.
By the end of last year, the trust’s initial portfolio of water treatment plants had a total designed capacity of 380,000 cubic metres a day, with utilisation volume of 177,000 cubic metres a day.
Adding newly acquired plants, the total design capacity as at end-2008 was 520,000 cubic metres a day, while it currently has right of first refusal on plants from its parent Hyflux with capacity of 945,000 cubic metres a day.
Hyflux said the overall medium to long-term outlook for the global water sector, and China in particular, would be strong.
‘Investment opportunities in the water sector are driven by increasing industrialisation, urbanisation and the (China) government’s policy directives to address the country’s critical water pollution and water shortage issues. With improvement in the global credit and capital markets in the future, HWT will be better positioned to deliver on growth,’ it said.
MapleTree – OCBC
Relative stability
Relative stability. Deteriorating macroeconomic conditions have dampened the outlook for the industrial REIT/property sector. This, combined with rising supply, is likely to exert pressure on industrial rents. Compared to the office sector however – which saw a huge spike in rental and capital values over the past couple of years – we expect less downside here. Instead, we believe occupancy will be the key performance driver in the industrial space. We estimate that Mapletree Logistics Trust (MLT) can maintain a dividend yield of about 10% even with a bear case 80% portfoliowide occupancy scenario (versus 99.6% today). MLT’s suite of sale-andleaseback properties should partially shelter the REIT from lease renewals and occupancy worries. However, about half of the portfolio consists of multi-tenanted buildings that are more exposed to the vagaries of the market. We like MLT’s diversified (81 properties in six countries) and high quality (we expect occupancy to remain higher than average) portfolio.
Equity issue done and dusted. Unlike some other S-REITs who chose to wait and ‘ride out’ the market, MLT went through the pain of raising fresh equity in August 2008. The 3-for-4 rights issue at an issue price of S$0.73, versus current share price of S$0.39, brought in some S$606.7m in proceeds. MLT’s debt-to-asset ratio now stands at 0.385x as of 31 Dec 2008. About S$217m of debt is up for refinancing in 2009 (18.8% of total debt). Of this amount, about S$83m are term facilities maturing this year. The remaining S$135m are working capital lines which are reviewed annually. The manager said that while it expects the working capital lines to be renewed, MLT has sufficient committed lines to meet its entire FY09 debt obligations.
BUY with fair value of 45 cents. We expect cap rates to widen in line with weaker fundamentals. Our SOTP valuation of MLT is S$0.50 – this is equivalent to a 30% fall in capital values against most recent valuations. As we outlined in our Dec 2008 strategy report, we are selective buyers of industrial S-REITs. We expect news flow to be primarily negative over the next few months as the ‘real economy’ – as well as MLT’s tenants and endusers – start feeling the full impact of the global recession. However, we believe MLT can deliver reasonably stable income to unitholders over the next two years. On this basis, we ascribe a 10% discount to our SOTP value to reach a fair value estimate of S$0.45. We restart coverage of MLT with a BUY rating.
CitySpring – DBS
Lack of visible growth pipeline
CitySpring maintained its DPU payout of 1.75 Scts per share in 3Q09, and remains on track to meet its 7 Scts DPU guidance for FY09. While cash earnings of S$20.3m for the quarter, versus S$1.1m in 2Q09 and S$17.7m in 1Q09, was encouraging, non-cash fair value losses of S$22.3m on over-hedged portion of an interest rate hedge led to a net accounting loss of S$21.1m. To protect any future cash downside from this over-hedged portion, management had to purchase an interest rate floor in Nov’08. Given the lack of a visible acquisition pipeline, continuing accounting losses and declining NAVs, investor sentiment is likely to be stymied in the near to medium term. As such, we downgrade the counter to HOLD at a lower target price of S$0.57.
Over-recovering the fuel costs. The time lag between fuel price movements and tariff revisions led to strong cash earnings of S$20.5m at City Gas in 3Q09. Fuel costs retreated about 35% q-o-q while tariffs held steady in 3Q09. Gas tariffs have since been reduced by about 29% with effect from 1st Feb’09 and cash earnings from CityGas should normalise hereon.
No near term DPU concerns. Net cash earnings YTD amount to S$39.1m, and YTD DPU payout ratio is about 66%. We expect steady DPU can be sustained in FY10, and refinancing needs only crop up in mid-2011, when the S$370m term loan from DBS has to be repaid.
But cash call may be dilutive. While the Basslink acquisition was intended to be 25% equity-financed, delays in equity cash call has made any fund-raising prohibitively expensive amidst deteriorating equity markets. However, an equity issue is inevitable for future growth as well. While management feels current asset valuations are not low enough to justify acquisitions, we think that the absence of a visible growth pipeline and lack of financial flexibility may trap CitySpring in a vicious circle. Downgrade to HOLD, target price S$0.57.