Month: May 2011
CMT – DMG
Successful joint tender for Jurong Gateway site
Successful joint bid at S$969m. CapitaMall Trust (CMT), CapitaMall Asia (CMA) and CapitaLand have successfully beaten four other bidders for the 18,159.1 sqm site at Jurong Gateway (JG). Under the joint tender agreement, CMT/CMA/ CapitaLand will hold 30%/50%/20% stake in the two entities (JG Trustee and JG2 Trustee) which emerged as the winners of JG site bid. At least 40% of the GFA of JG site under development will have to be used for office purpose. Given that this is a Greenfield site, there will be no DPU accretion to CMT in the next two years. Maintain NEUTRAL with unchanged TP of S$2.00.
Strategic location comes at dearer price. The latest site to be awarded sits conveniently beside Jurong East MRT interchange station. Due to the popularity of this location, there were five bidders for the JG site, with the winning bid beating the second highest by 5.7%. Other key bidders were United Engineer, Singapore Press Holdings, Fast East Civil Engineering etc. According to CBRE, the retail/commercial assets at JG site can garner S$15/S$6 psf pm respectively. Based on JG site’s winning bid of S$1,012psf ppr, and recent JG site transaction, JG and JG2 Trustees paid 56% premium on psf ppr to the URA land sale at Jurong Gateway Road successfully won by Lend Lease Retail Investments 3, and Lend Lease Commercial Investments in Jun 2010.
We value CMT at S$2.00 based on DDM (COE: 8.0%; TGR: 2.0%). At its current trading level, CMT’s 12-month forward dividend yield is 5.4% while its spread is 3.1%. Considering that its pre-crisis mean spread was 3.0%, and there is a lack of growth catalysts in the next 12 months, we believe CMT is trading at fair valuation.
MCT – Lim and Tan
• Citigroup Global has, after buying 6.228 mln units on Friday (68% of total trades on the day) under the stabilizing action program, ceased such action with the expiry of the option period.
• Citigroup has bought a total of 37.669 mln units, representing 31% of the total granted.
• We do not expect MCT’s unit price to come under undue stress just because the stabilizing action has ceased. Fact is MCT’s unit price has been rather resilient without need for stepped-up buying by Citigroup, ever since it fell below the IPO price of 88 cents on May 4th.
• We maintain BUY, especially should the unit price drop this morning on the above news.
HPH Trust – DBSV
Smooth sailing so far
• Year-to-date throughput numbers in HK and Yantian Port are largely on track with our expectations
• 7%-8% throughput growth along with modest improvement in rates to drive EBITDA growth in FY11
• Maiden interim DPS of c. US 1.8cts projected when HPHT reports 1H11 earnings before mid August
• Maintain BUY and US$1.15 TP
Throughput volumes on track with our projections. Throughput volumes for the first four months of 2011 rose by 5.7% y-o-y at Yantian Port, 7.9% at COSCOHIT, and we believe by between 6%-8% at HIT, which means that operations at HPH Trust are on track to meet our expectations for FY11.
Firm prospects over the short and medium term. We like HPH Trust for its stable and growing earnings profile, which we believe will be driven by continued rising trade volumes into and out of the Pearl River Delta region, translating into an annual growth of 10% in distributions to unit-holders for the next few years. HPH Trust is due to report its interim results by mid-Aug, and we are expecting a DPS of c. 1.8UScts to be declared.
Maintain BUY and US$1.15 TP. Given that HPH Trust seems to be well on its way to meet our projections in FY11/12, current FY11/12 yields look very attractive at 6.6%/7.2%; expect DPU CAGR of 10% up to 2013. Maintain BUY on the stock with a TP of US$1.15. This implies a total return potential in excess of 30% at current prices. Amongst Singapore listed REITs, Business Trusts and high yield plays, HPH Trust offers one of the highest combinations of yield and DPU growth.
MCT – DBSV
Southern Belle
• First mover into Singapore’s Southern growth corridor
• Strong organic expansion with deep acquisition potential
• Recommend Buy, TP $1.05 translates to 26% total return
Strong growth play in the Southern corridor. Mapletree Commercial Trust (MCT) stands out as a key beneficiary of the growth potentials in the Southern corridor. Having a first-mover presence will allow the trust to leverage on the long-term benefits of the redevelopment and rejuvenation of the Harbourfront-Alexandra-Tanjong Pagar locality as well as Pulau Brani into a new waterfront city. These will have a positive knock-on effect on property values and rentals in the area. Recent addition of iconic landmarks such as the Sentosa Integrated Resort boosts tourist arrivals while a growing office and residence population will enable the trust to benefit from rising sales and shoppers’ footfall.
Strong organic growth, significant and visible acquisition growth potential. As VivoCity, Singapore’s largest mall moves into its first rental renewal cycle, we anticipate the trust to enjoy strong rental pricing ability given the robust double-digit growth in shoppers’ traffic and retail sales psf since the opening of the Sentosa IR. In addition, upgrading works at PSA Building (PSAB) and development of the Alexandra Retail Centre (ARC) will enable the trust to capture the growing working population once completed by end 2011. MCT has a ROFR for a pipeline of properties from its Sponsor, which could potentially triple its initial portfolio’s NLA. In our view, the recently completed Mapletree Business City located in the Harbourfront-Alexandra Precinct, could be the maiden purchase.
Recommend Buy, TP $1.05. The investment case for MCT is its first mover advantage into the Southern growth corridor and a very visible acquisition pipeline. The stock is currently trading at FY12 and FY13 yields of 5.8-6.4%. Our DCF-backed TP of $1.05 translates to an absolute total return of 26%. Key risks include location and asset concentration risks as well as susceptibility to general economic climate, which will affect tourism and consumption patterns in Singapore’s relatively open economy.
PCRT – BT
Perennial China to raise $776.2m in IPO
Firm confirms that its units will be priced at 70cents each
PERENNIAL China Retail Trust (PCRT) will be raising $776.2 million in gross proceeds from its initial public offering.
It confirmed yesterday that its units will be priced at 70 cents each – at the bottom of the indicative range of 70-76 cents. This is in line with what Reuters reported on Thursday.
‘We had a much stronger book at the lower range,’ said Pua Seck Guan, CEO of PCRT’s trustee-manager. By pricing units at that level, ‘we think we leave (a) few cents on the table . . . hopefully we give investors a better return’.
PCRT has been been on market watchers’ radar for several months. It was due to list earlier at $1 a unit to raise some $1.1 billion but plans were shelved in March, reportedly due to volatile market conditions.
But bad news, ranging from deepening sovereign debt problems in the eurozone and worries of slower growth in China, have continued to hit equity markets this month.
Based on the offer unit price of 70 cents, PCRT is expected to provide an annualised distribution yield of 5.3 per cent for Forecast Year 2011 and 5.51 per cent for Projection Year 2012.
The gross proceeds are expected to come from the offering of 563.6 million units and the issuance of sponsor as well as cornerstone units.
The 563.6 million units include around 52.1 million in a Singapore public offer, which opens today and closes on June 7. Trading is expected to start on June 9. There will also be an international placement of 511.45 million units.
Trust sponsor Perennial Real Estate will subscribe for $20 million worth of units for a 3.7 per cent stake.
PCRT’s IPO has drawn eight cornerstone investors, including CB Richard Ellis Global Real Estate Securities, Henderson Global Investors and Prudential Asset Management (Singapore). The eight will together own 46.1 per cent of PCRT.
PCRT will have an initial property portfolio of around $1.1 billion, comprising five assets in Shenyang, Foshan and Chengdu. These include Shenyang Longemont Shopping Mall and Shenyang Longemont Offices.
With the listing now on track, PCRT will be focusing on growth next. Mr Pua is looking to ‘very quickly activate’ the options to purchase two commercial developments projects which are directly connected to high speed rail stations in Chengdu and Xi’an.