Month: January 2012
CLT – DBSV
Growing presence in Changi
• Acquisition of Changi North Warehouse at initial yield of 7.7%
• Accretive to earnings, gearing to head up to 32.6%
• BUY, TP raised to S$1.13
Strategic acquisition of Changi North warehouse for S$35.2m. Cache Logistics Trust (Cache) announced the acquisition of a 4-storey ramp-up warehouse in Changi North International LogisPark for S$35.18m (all in cost of S$37m). The facility has a niche location in Changi North, which has limited upcoming competing supply, thus enjoying robust demand for space. The area caters to endusers operating in the air cargo industry. The vendor, Pan Asia Logistics, will lease back the facility for 10 years.
Accretive to earnings, gearing to head up to 32.6%. Initial yield is estimated to be c7.7%, in line with its current implied trading yield. We note that Cache has the financial capability to fund this acquisition. Assuming it is fully debt-funded, gearing is estimated to head towards 32.6%, which means that deployable headroom (to its regulatory limit of 35%) will be limited to a further cS$30m.
Further acquisitions could involve capital raisings. There is a visible pipeline of completed / completing warehouse properties from its sponsor CWT/C&P which could be on offer for Cache to acquire in the medium term. Hence, obtaining a credit rating will provide the REIT greater financial flexibility to gear up beyond 35%. In our view, potential acquisitions could also involve some form of capital raising exercise, which we have not factored into our estimates.
Maintain Buy, TP raised slightly to S$1.13. Our estimates are raised slightly to account for this acquisition. Cache continues to offer attractive prospective yields of close to 9%, which should have more upside in the event of more acquisitions.
CDL H-Trust – CIMB
Ending on a high
4Q11REVPARwas a record for the fourth quarter.Backed by a transformed tourism landscape, a larger dependenceon Asian travellers and resilient Asian consumption, we expect arrivals and REVPAR to hold upin 2012, despite headwinds.
4Q/FY11 DPU meets consensus and our forecasts, at 26/97% of our FY11. The slight miss in the full-year figure was due to higher retained income. We keep our DPUs and DDM target price (disc. rate: 8.6%) pending an analysts’ briefing, and introduce FY14 numbers. Maintain OP.
Ball still in hoteliers’ court
We are still expecting 3-5% growth in arrivals which should keep hotel occupancy at 84-86%, given a moderate 4% expected increase in rooms this year, which should allow hoteliers to raise rates. 4Q11 REVPAR of S$205 was its highest for 4Q (+6.0%), mainly on room-rate increases (+7.7%) to S$232, though occupancy dipped 1.4% pts yoy to 88.6%. Qoq performance was boosted by a return of rooms after the completion of upgrading work at Orchard Hotel, its largest asset.
Strong balance sheet
Asset leverage dipped to 25.3% from 26.5% on asset revaluations across its local and Australian properties. This positions it for debt-funded acquisitions and AEI. Management has remained prudent in retaining a larger portion of income (10% vs. 9% in FY10) to fund capex and working capital.
Trading below long-term average
While the stock has been re-rated by 16% since our last note in Dec 11, stock is still trading at 1.1x P/BV vs. its long-term average of 1.3x. Book valuations of about S$600k per room key for its local properties do not appear excessive especially when benchmarked against that of S$900k per room key for some market transactions.
StarHill Global – CIMB
Steady quarter
Rental step-ups for David Jones and AEI contributions from Starhill Gallery buffered AEI disruptions and negative office reversions. We anticipate a stable 2012, with earnings anchored by master leases,upside from AEI at Wisma Atria and a potential uplift from Toshin.
4Q/FY11 DPU broadly meets our estimates and consensus at 25%/97% of our numbers. The slight miss was due to higher borrowing costs. We slightly lower our DPU estimates but keep our DDM target price (disc. rate: 8.8%). We also introduce FY14 forecasts. Maintain Outperform.
Stable quarter
4Q11 NPI was flat yoy as AEI disruptions and negative office rental reversions were buffered by a full-quarter of rental step-up for David Jones and AEI contributions from Starhill Gallery. Positives were rising office occupancy, although negative office rental reversions slightly disappointed. Mitigation could come from slightly tightening occupancy and low office leases expiring in 2012. Enquiries and asking rents thus far are healthy.
Wisma Atria AEI
Disruptions have been moderate with retail occupancy at 94.8% in 4Q11. While pre-commitments are unchanged at 75%, we do not anticipate major problems in leasing out the remaining space given limited upcoming retail supply along Orchard Road and still-strong tourist arrivals. We expect pre-commitments to climb as AEI progresses.
Seeking appeal for Toshin
Starhill plans to appeal again for a review of the Toshin rental review mechanism after the Court’s recent unfavourable ruling. While failure to obtain any rental uplift could affect our DPU by 3% (we had factored in 10% rental uplift on renewal), downside should be capped by the upward-only rental-review clause and should be compensated by other sources such as rental improvements at a refurbished Wisma Atria.
StarHill Global – DBSV
Only time will tell
At a Glance
• DPU slightly below expectation pending Toshin’s lease rental reversion
• Healthy reversion for Wisma Atria leases despite AEI works
• Healthy balance sheet and ready for acquisitions
• Maintain BUY at lower $0.71 TP
Comment on Results
Slightly below expectations. Gross revenue and NPI posted flat growths in 4Q11. However, DPU fell 2.9% due to higher tax and finance expenses. Full year DPU was 4% below our forecast on the back of higher property expenses and the absence of additional income assumed from Toshin’s rental reversion. Stripping the latter off, DPU will be a marginal 2% lower.
Wisma Atria new look ready in Sep12. Footfall grew by 9% y-o-y but retail sales were down 4% in the same period due to the commencement of asset enhancement works in Jul’11. However, renewal remained robust with some leases locked in higher rates in excess of 20% compared to preceding rents. Occupancy will remain at 95% for the next two quarters before heading up in 3Q after completion of the AEI works in Sep this year.
Toshin’s lease yet to be resolved. The court has dismissed Toshin’s appeal on the rent review in Jan 2012. SGReit has submitted an appeal against that decision and hearing will take place in Feb 2012. We are assuming flat rental growth vs 10% previously till more clarity and guidance are given.
Balance sheet is healthy. Only 3% (S$27m) of its debts are due for refinancing in FY12 and gearing is a healthy 30.8% after the trust took in S$28m revaluation gain, mainly from Wisma Atria Ngee Ann City but was partially reversed by its Japan Properties.
Recommendation
Maintain Buy at a lower TP of S$0.71. We continue to like SGReit for its undemanding valuation at 0.64x P/BV. We have lowered out TP by 7.9% to S$0.71 and reduced our FY12/13 DPU by 8-9% as we revised down our rental forecast, as well as no conversion of the CPUs till 2016 instead of the earlier 2013. Meanwhile, re-rating catalyst will be from possible accretive acquisitions and better than expected rental reversions.
StarHill Global – BT
Starhill’s Q4 DPU falls 2.9%
STARHILL Global Real Estate Investment Trust (SGReit) posted a 4.7 per cent decline in income available for distribution to $22.2 million for the fourth quarter ended Dec 31, 2011, from $23.3 million a year back.
Income to be distributed to unitholders also fell 2.9 per cent during the same period to $19.6 million. Correspondingly, Q4 distribution per unit (DPU) dipped 2.9 per cent to 1.01 cents from 1.04 cents a year earlier. This was mainly attributed to rental disruptions from the asset redevelopment works at Wisma Atria and negative rental reversions in Singapore office space, which also led to a 0.6 per cent decline in net property income (NPI) to $36.5 million for the quarter.
For the full year, SGReit posted NPI of $143.6 million, a 10.1 per cent increase from $130.5 million.
Income available for distribution also rose 10.1 per cent year-on-year to $90.8 million from $82.5 million, while annualised DPU for FY2011 rolled in at 4.12 cents, translating to a yield of 7.3 per cent using the Reit’s closing price of 56.5 cents as at Dec 30, 2011, the last trading day of 2011.
Gearing levels remained at a healthy 30.8 per cent as at the end of the financial year, leaving comfortable debt headroom for future acquisitions, the company said. In addition, a $65 million unsecured revolving credit facility maturing in December 2013 was obtained, enhancing the group’s financial position. Management also highlighted that there will be no debt refinancing till 2013.
Demand for the Reit’s office space also remained healthy, with occupancy levels within the Wisma Atria and Ngee Ann City offices rising to 95.8 per cent and 94.9 per cent respectively as at Dec 31. Take-up for retail space at both assets was also strong as leases expiring last year managed to secure positive rental reversions.
The company said the asset redevelopment of Wisma Atria is ‘on track’ and is slated to be completed in the third quarter of this year. So far, more than 75 per cent of the double-storey facade units fronting Orchard Road have received pre-committed leases and the manager will try to ‘minimise disruptions’ with a ‘two-phase handover’ of the finished units over the first half of 2012.
Yesterday, the counter closed unchanged at 60 cents.