Month: November 2011
PST – BT
Net exit offer for each PST unit is 42.27 US cents
This is after deduction of Q3 distribution
THE net exit offer price for Pacific Shipping Trust’s (PST) delisting will be 42.27 US cents per unit, after deducting the third-quarter distribution of 0.73 US cent from the offer of 43 US cents by Pacific International Lines (PIL).
PIL detailed this in its exit offer letter sent yesterday to unitholders of PST.
PST, which is the Singapore Exchange’s first listed shipping trust, received a voluntary offer from its sponsor PIL to delist in October.
An extraordinary general meeting (EGM) will be held on Dec 16 to approve both the delisting of PST and the exit offer.
A green light for both resolutions requires at least 75 per cent of total issued units held by unitholders present and voting as well as the tally of nay votes not exceeding 10 per cent of the total issued units.
PIL holds some 76 per cent of the total number of issued units and it will vote all of its units in favour of a delisting.
The last date to submit the proxy form of the EGM is Dec 14, 10am.
PIL’s offer of 43 US cents represents a 15 per cent premium to its last traded price of US$0.375 on Sept 29.
After PST is delisted, PIL intends to streamline PST’s operations which may include plans to sell PST’s fleet to PIL or the redeployment of employees to other entities owned by PIL.
It may also wind up the operations of PST.
PST cited the low trading liquidity with an average daily trading volume that represents about 0.1 per cent of the trust’s total free float as a reason to delist.
Going private would also give it greater operational flexibility.
‘Any potential acquisitions will be benchmarked against PST’s distribution yield to ensure that they are accretive to unitholders,’ said PST.
‘This places a constraint on PST’s ability to issue new units since its investment decision will be compared against its distribution yield, which is in turn a function of the prevailing trading prices of the units.’
MCT – BT
MCT unveils tax refund scheme for unitholders
UNITHOLDERS of Mapletree Commercial Trust (MCT) will be able to use back-end tax refund procedures to claim over-deducted tax on income distributions.
This follows an arrangement established with the Inland Revenue Authority of Singapore (IRAS), MCT’s manager Mapletree Commercial Trust Management said yesterday.
According to the arrangement, foreign non-individuals holding MCT units directly, or individuals and foreign non-individuals whose MCT units are held through a depository agent, and who have had their distributions taxed, are eligible under the scheme.
Under the latter category, refunds have to be claimed by the respective depository agents.
Other categories of beneficial unitholders will need to go through the normal process of tax return filing to claim a refund, if any, of the over-deducted tax.
Distributions made by real estate investment trusts (Reits) listed on the Singapore Exchange to individuals, whether foreign or local, are tax exempt, except for individuals who derived the distributions from the carrying on of a trade, business or profession, or from a partnership in Singapore.
Reits’ distributions to foreign non-individual investors on the other hand are entitled to a reduced tax rate of 10 per cent for distributions made from Feb 18, 2005 to March 31, 2015.
The back-end refund is applicable to MCT distributions made on or after April 27.
To make a claim for refund, unitholders need to supply the appropriate forms and subsidiary income tax certificates (SITCs). The trustee and manager will file a claim for refund with the IRAS on a half-yearly basis.
Sabana – BT
Sabana Reit set to buy Woodlands industrial property
SABANA Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) is set to acquire a three-storey industrial property located at Woodlands for a purchase consideration of $14.8 million, to be funded by debt.
Easily accessible by Bukit Timah Expressway (BKE) and close to the Admiralty and Sembawang MRT stations, the JTC leasehold property located at located at 6 Woodlands Loop has a total gross floor area (GFA) of 77,544 square feet (sq ft) and a remaining tenure of about 43 years.
HSBC Institutional Trust Services (Singapore) Limited – in its capacity as the Reit’s trustee – has on Nov 25 entered into a sale and purchase agreement (SPA) with Winstant & Co Pte Ltd (Winstant & Co) for the general industrial building.
Upon completion of the acquisition, Sabana Reit will enter into a three-year lease agreement with MMI Holdings Limited, the existing tenant of the property.
Under the SPA, the vendor has agreed to provide rental income support, subject to a maximum of $958,058, for a period of three years from the acquisition completion date.
The manager of the Reit, Sabana Real Estate Investment Management Pte Ltd, believes the proposed transaction to be beneficial to Sabana Reit’s unit-holders, saying also that it is in line with with its strategy to invest in ‘income-producing real estate and real-estate related assets used for industrial purposes in Asia’ that provide strong cash flows and are yield-accretive.
The manager also said that the acquisition will raise the Reit’s weighted lease tenure as well as lower its lease expiry concentration in 2013 and 2015.
Factoring in the post-acquisition impact of the Woodlands industrial building along with recently completed purchases comprising properties based in Joo Koon and Toh Tuck, the Reit’s aggregate leverage stands at about 32.2 per cent. If including 39 Ubi Road 1 – a proposed acquisition that is pending legal completion – the aggregate leverage is expected to increase to 34.2 per cent.
The counter closed trading unchanged at 87 cents yesterday.
REITs – Lim and Tan
• A BT columnist’s piece on Saturday The Reit Myth Busted is interesting, especially amid the K-Reit controversy.
• The CapitamallTrust (CMT) illustration shows a unit holder having to fork out $1549 taking up all of his rights entitlements since the 2002 listing, vs distributions received of $1264, for a net outflow of $285.
• What is however interesting is that total shareholders return since 2002, a far more important metric in our opinion, is 127.2%.
• There is as such no need to consider what if he / she chose not to take up all rights entitlements, by selling their nil-paid rights.
• The weekend piece serves one useful purpose: drawing attention to the need for some tweaking of rules governing the sector, before more damage should be inflicted on the carefully nurtured sector.
• For a start, it is high time the regulators re-looked at how reit managers are compensated, for sure not based on the size of portfolio.
• So have they to re-look at Income Support, which was seen in K-Reit’s latest purchase of Ocean Financial Centre /, and before it (as did Suntec Reit), 1/3 stake of One Raffles Quay, and Marina Bay Financial Centre Towers 1&2 / Marina Bay Mall Link; CapitaCommercial Trust buying One George Street.
• We believe selected S-Reits are attractive, eg Fraser Centrepoint Trust (FCT), Mapletree Commercial Trust (MCT, albeit showing negative 1.8% total return since listing late 2010), Parkway Life. (We also favor City Spring, an infrastructure business trust, probably the worst performer in the sub-sector.).
ART – DBSV
Quality asset acquisition
• Buying quality property within Shinjuku, Tokyo but minimal impact on overall earnings
• Perceived high gearing vs peers and weaker business travel outlook to weigh on performance
• Yields attractive at 8.6-8.8%; but worsening European outlook could mean potential downside, Downgrade to HOLD, TP cut to $1.13.
Acquiring quality asset in downtown Shinjuku, Tokyo. Ascott REIT has entered into a conditional sale and purchase agreement to acquire a 60% interest in 160-unit Citadines Shinjuku Tokyo from Mitsubishi Estate Co Ltd (MEC). A quality serviced residence with good patronage from corporate/leisure travelers since opening owing to its good location and excellent accessibility to regional subway lines. Purchase consideration amounts to JPY 2.6bn (S$45.7m), implying an initial yield of 4.5%yield. While this is lower compared against our estimated WACC of 7.3% for the REIT, as the acquisition will be fully funded by debt, it should be accretive to earnings. Post acquisition ART’s gearing level is expected to head slightly upwards to 42% (vs 41% previously).
Gearing to head up 42%; declining business travel market likely to continue to weigh on share price performance. The impact of the acquisition on ART’s earnings/assets is minimal. Looking ahead, we believe that the following factors will weigh on share price performance: (i) ART’s higher than average gearing level of 42% vs peers, which we believe is justified given its multi-country exposure. The manager has taken higher debt levels overseas, which act as natural hedges against currency fluctuations and for tax efficiency purposes. We also note that other financial metrics (debt maturity profile, interest coverage ratio) remain healthy. (ii) Expected declining business travel especially in/from Europe, which is likely to limit opportunities to raise rates. However, close to 45% of its earnings are contributed by master leases (to Ascott Limited)/minimum income guarantee structures, which offer downside protection. We reduce our RevPAU expectations slightly to reflect our more moderate outlook, resulting in a 3-4% reduction in our FY12-13F DPU estimates.
Downgrade to HOLD, TP revised to S$1.13. While stock offers a relatively attractive yield of 8.6, there exists potential downside risk in the event of a worsening European crisis, given that 42% of its assets are in Europe. Our TP has been revised to S$1.13 due to lower DPU estimates and higher WACC assumptions for its European exposure.