Month: April 2012
MCT – DBSV
Southern belle works its rents again
• Full year DPU beat our forecast by c.5%
• Positive rental reversions from VivoCity, and PSAB to be seen next quarter
• Maintain BUY at slightly higher TP of S$1.11
Highlights
Slightly ahead of expectations. 4Q12 gross revenues and NPI was c.10.9% and 16.1% y-o-y higher respectively, largely due to Vivocity’s strong positive rental reversions, as well as the progressive opening of Alexandra Retail Centre (ARC). On a q-o-q basis, NPI also rose by a healthy 6% despite a seasonally-weak quarter on the back of lower property and maintenance expenses. Consequently, 4Q DPU came in at 1.554cts. Full year DPU beat our forecast by c.5%.
Our View
VivoCity exceeded expectations. Monthly rents are now at S$10.62, which is above the earlier forecast of $10.40 psf. Rental uplift for the year was 24.9% and retention rate at a high of 92.1%. Negotiations for its FY12/13 leases (33.4% of its revenue) have begun and management has indicated that there is healthy interest amongst tenants. Most of these leases will expire in 2H and are largely specialty shops. As these leases were likely signed in 2009, at the trough of the retail market, so assuming a typical three-year lease term, we expect the trust to see healthy positive rental reversions, supported by high shopper traffic (+15.5% y-o-y) and tenant sales (+8.7% y-o-y). Meanwhile, occupancy costs remain healthy at 15.8%
More to come. ARC has been opening up, progressively from 15 December, 2011 and has reached a committed occupancy rate of 57.1%. PSAB has also completed its asset enhancement work, and the incremental 15k of office space has already been leased out. We should see a higher contribution from this asset going forward. Meanwhile rents for the offices continued to trend up nicely by 8.6%yoy on the back of higher occupancy (98.2%).
Balance sheet remains healthy. Gearing dipped marginally to 37.6% with no major refinancing in FY12. Average cost of borrowings remains low at 1.96%
Recommendation
Maintain BUY. We continue to like MCT for its proactive leasing strategy and its ability to drive rental renewals. We have nudged TP up by 1.8% to S$1.11 to account for its better-than-expected performance at VivoCity. FY13/14 yields are at 6.8/7.2 % and our revised TP of S$1.11 offers a total upside of close to 30%.
CDL H-Trust – DMG
Inspiring quarter with stable growth going forward
1Q12 DPU better than expected. CDL Hospitality Trust (CDL-HT) reported 1Q12 DPU of 2.78S¢ (+16.8% YoY), equivalent to 25.0% of our FY12 DPU estimate. Gross revenue and RevPAR came in at S$38.4m (+19.0% YoY) and S$213.0 (+9.3% YoY) respectively, on the back of strong visitors arrival during 1Q12 and a revenue boost of S$2.7m from the acquisition of Studio M Hotel in May 2011. In the subsequent quarters, we expect CDL-HT to continue to register strong numbers on the back of 1) continual growth in Singapore’s tourism; 2) demand continues to outstrip supply of new hotels and 3) strong RevPAR in 2012. Given the bright prospect in the tourism industry of Singapore, we maintain our BUY call on CDL-HT with an increased DDM based (COE: 8.6%, terminal growth: 2.0%) TP of S$2.20. With CDL-HT currently offering a forecasted 2012 yield of 6.3% and trading at 4.9% spread vs the historical and pre-crisis mean of 4.5% and 2.6% respectively, our TP represents a spread of 3.9% posting a potential upside of 17.6%.
Respectable results from organic growth and Studio M Hotel. CDL-HT’s strong set of results are mainly attributed to the organic growth of the trust’s portfolio and a boost of S$2.7m in revenue from its Studio M Hotel. The organic growth of the trust is a combination of factors resulted from its completed refurbishments at Orchard Hotel and Clarke Quay, strong visitor arrivals during 1Q12 and record high 1Q RevPAR. Concurrently, the trust’s portfolio in Australia continues to perform strongly as it is bolstered by the buoyant natural resource sector and static supply of hotel rooms.
Much headroom for future acquisition. Currently, with a low gearing ratio of 25.6% and an internal maximum gearing rate of 40% (which translates to an additional S$301m of debt the trust can take on), there is much room for CDLHT to undertake future acquisitions in Asia. CDLHT has a BBB- rating from Fitch.
Continues to remain strong. As tourism in Singapore continues to remain robust, together with the impeccable management skills of CDL-HT and the ability to tap on potential pipeline of assets from both M&C and CDL, we expect CDL-HT’s performance will continue to remain solid. Given limited additional hotel supply in the coming years together with a growing range of new attractions and strong event calendar in 2012, we believe CDL-HT is well positioned to benefit from this stable demand.
CDL H-Trust – Phillip
Positive on hospitality market
Company Overview
CDL HT is a stapled group comprising both REIT and Business Trust structures. Its mandate is to invest in a diversified portfolio of income-producing real estate which is primarily used for hospitality and/or hospitality related purpose.
• 1Q12 revenue $38.4mn, NPI $36.0mn, distributable income $26.9mn
• 1Q12 DPU of 2.78 cents
• Raise FY14-16 DPU estimates by 5.6%-6.0%
• Maintain Accumulate with target price increased to S$2.000
What is the news?
CDL HT delivered a set of remarkable performance, registering the highest recorded 1Q RevPAR of S$213 since the inception of CDL HT, partly due to a record high occupancy of 88.5%. Gross revenue and net property
income came in at 19% and above to $38.4mn and $36.0mn respectively in 1Q12. The double-digit jump was mainly attributable to the absence of Studio M Hotel in 1Q11 and higher receipt of variable income from the Australia Hotels. DPU gained 16.8% y-y to 2.78 cents, owing to the 17.7% rise in distributable income after deducting the retained income. This implied 24.1% of our FY12 DPU estimates.
How do we view this?
1Q DPU was broadly in-line with our expectation despite not being able to achieve a quarter of our FY12 DPU estimates. As we believe the already high RevPAR will continue to gain traction for the subsequent quarters, with tourism hot spots such as Garden by the Bay (Phase 1), the River Safari, and the Marine Park at Resorts World Sentosa opening in the rest of 2012. These new attractions are expected to draw more visitor arrivals barring any negative major events.
Investment Actions?
The positive outlook has prompted us to raise FY14-16 DPU estimates by 5.6%-6.0%. This lifted our price target to $2.00 but no change our Accumulate call.
StarHill Global – CIMB
Another stable quarter
Stronger Japan and Australia contributions offset negative office rental reversions and weaker Chengdu rentals. Valuations remain undemanding against sector peers given stability with potential catalysts from a Toshin rent review and Wisma Atria's AEI.
1Q12 DPU matches our estimate and consensus at 25% of FY12. We keep our numbers but raise our DDM-based target price on a lower discount rate of 8.4% (from 8.8%). Maintain Outperform.
Stable quarter
1Q12 NPI was up 0.8% yoy as stronger Wisma, Australian and Japanese contributions offset negative office rental reversions at Ngee Ann City and weaker Chengdu rentals. Office occupancy at Wisma Atria and Ngee Ann City improved, though rental reversions at the latter were negative on high expiring rents. Signing rents were stable at S$9-10psf. Rental softening at its Chengdu mall from competition with new malls was unexpected. Repositioning work is underway, with Armani expected to open in 2Q12.
Wisma Atria's AEI on track
Wisma Atria's AEI is on track for completion by 3Q12. Disruptions have been moderate with retail occupancy up to 95.3% from 4Q11's 94.8%. While pre-commitments were unchanged at 75%, we understand that enquiries have been strong and management is holding out for better rentals as AEI nears completion. Separately, Food Republic is being renovated to unveil a new-concept food outlet in 3Q12.
Still waiting for Toshin
Starhill is still awaiting a response to its appeal on the Toshin rental review mechanism. Meanwhile, Toshin has signalled its intention to renew its lease term, commencing 8 Jun 13. While this could negate any upside from a complete lease overhaul (and direct management by Starhill), other upside could come from a downside-protected rent review then.
CDL H-Trust – BT
CDLHT's Q1 distribution per security rises 16.8%
Gross revenue up 19% to $38.4m; NPI rises 19.6% to $36m
CDL Hospitality Trusts (CDLHT) has posted distribution per stapled security of 2.78 cents for the first quarter ended March 31, 2012, up 16.8 per cent from the same year-ago period. The payout is after retaining 10 per cent of income available for distribution as working capital to fund capex on asset enhancement initiatives.
Before deducting income retained for working capital, the Q1 2012 distribution per stapled security is 3.09 cents, up 17 per cent year on year.
The group's Q1 2012 combined weighted average stats for its Singapore hotels excluding Studio M, which was acquired on May 3, 2011, showed that their revenue per available room (RevPAR) and average occupancy rate were also the group's best-ever Q1 performance.
Fuelled by the general increase in visitor arrivals and bolstered by the Singapore Airshow in February 2012, RevPAR for the Singapore hotels excluding Studio M rose 9.3 per cent year on year to $213 in Q1 2012, while their average occupancy rate increased 2.7 percentage points over the same period to touch 88.5 per cent. The average daily rate rose 6.2 per cent year on year to $241.