Month: January 2013
StarHill Global – OCBC
CLEAR GROWTH DRIVERS
- 4Q12 results within view
- Strong growth from local portfolio
- Not resting on laurels
Robust growth in DPU
Starhill Global REIT’s (SGREIT) 4Q12 results came in within our expectations. NPI grew by 2.9% YoY to S$37.5m due primarily to strong contribution from its Singapore portfolio. DPU rose at a faster pace of 11.9% to 1.13 S cents on the back of lower interest costs and lower tax expenses. This set of results almost coincides with our quarterly NPI forecast of S$37.1m and DPU projection of 1.10 S cents. We note that ~S$0.6m from the distributable income will be retained for working capital purposes. For the full-year, DPU amounted to 4.39 S cents, up 6.6%. This translates to a FY12 DPU yield of 5.2%.
Local portfolio overcame softness from overseas
SGREIT’s Singapore properties contributed 63.0% to 4Q revenue, higher than the 62.3% contribution seen in prior quarter. This was partly fuelled by strong performance from Wisma Atria’s retail segment, which saw its NPI jump 23.5% to S$10.3m amid positive rental reversions, and also a 10.5% growth in Ngee Ann City office segment on higher occupancy and higher secured rentals. As a result, the strength from the local scene more that offset the weakness seen across all its overseas assets: Japan (-4.7% in NPI due to weaker JPY), Chengdu (-13.9% due to higher competition and weaker retail market) and Australia (-9.0% due to weaker AUD and vacancies between tenancies).
Maintain BUY
Looking ahead, SGREIT is exploring the possibility of an asset redevelopment of Plaza Arcade and David Jones Building to reap any potential synergies between the two buildings. On its capital management front, management is in active discussions with banks to refinance its term loan maturing in Sep, which we believe may lead to improved debt profile and interest savings. SGREIT also updated that valuers’ work on the rental valuation for Toshin master lease at Ngee Ann City is expected to be finalised by 1Q13. We now factor in Plaza Arcade acquisition and roll our valuations to FY13. This bumps up our fair value to S$0.95 from S$0.84 previously. Maintain BUY.
CDL H-Trust – CIMB
Decent 4Q but muted guidance
Performance was decent amidst headwinds from weaker corporate travels. Given the upcoming room supply and tighter corporate travel budgets, management guidance remains fairly muted. We see little room for outperformance at current levels.
4Q/FY12 DPUs were slightly below street and our estimates, forming 26/98% of our FY12 forecast. The slight deviation came from higher interest costs as operating performance was in line. We cut DPUs on higher interest cost assumptions, hence our lower DDM-based target price (discount rate: 8.1%). Maintain Neutral.
Decent performance amidst headwinds
4Q12 DPU (still on unchanged 90% payout) was down 1% yoy. NPI was flat yoy as stronger performance from Grand Copthorne Waterfront, Novotel Clarke Quay and its New Zealand asset offset yoy declines on its other assets. Local assets were hit by weaker corporate travels, while fixed rents from Australian assets suffered translation loss arising from the weaker A$. Locally, RevPAR was flat as stronger occupancy (+0.8% pts yoy to 89.4%) offset weaker ARR (-1.3% yoy to S$229/day).
Muted guidance
Management guidance was fairly muted, given concerns over tighter corporate travel budgets and room supply (+8%) in 2013. For 1Q13, management expects performance to be affected by the absence of the bi-annual Singapore Air-show and a later Chinese New Year this year, which could affect the momentum in Feb. So far, RevPAR growth is in line at 1% yoy for the first 27 days of 2013 (note the earlier Chinese New Year in Jan 2012). Corporate renewal rates have thus far been lifted by an average of 2-5% yoy.
Maintain Neutral
Valuations are not overly demanding at 6% yield and 1.2x P/BV. However, we maintain Neutral in view of the muted local organic growth outlook. We will turn more positive on signs of improved acquisition momentum and a turnaround in the local hospitality outlook.
A-HTrust – DBSV
Softness Down Under
- 3Q12 results in line
- Australian operations remain under pressure; China hotels, the near-term earnings driver
- Downgrade to HOLD, TP S$1.03
3Q13 results in line.
Ascendas Hospitality Trust’s (A-HTRUST) revenues of S$51.4m was 2.5% below forecasts as its Australian hotels continue to face challenging prospects in a soft operating environment (RevPAR A$129/night, – 7.5% vs forecast) while a weak JPY-S$ marginally impacted the performance of its Ariake Hotel. The strong performance came largely from China (Novotel & Ibis Beijing Sanyuan) which achieved a RevPAR of Rmb378/night, +1.2% y-o-y. Net property income, however, improved by 4.1% against forecasts due to stringent cost measures. Thus, distributable income of S$12.5m (+3.6% above forecasts) translates to a DPU of 1.55 Scts (1.77 Scts after sponsor waiver).
Outlook remains mixed; Australian operations under pressure.
The refurbishment and rebranding exercise that is ongoing at its seven Australian hotels remains on track for completion by Aug13 (1QFY14). We note that occupancy rates have slipped slightly to 79.5% in the midst of a tough operating climate. We note that the industry continues to price rates competitively and thus, A-HTRUST hotels have to follow likewise in order to maintain occupancies. Nevertheless, upon completion in 2H13, we expect the new Accor-branded Australian portfolio to continue to reap the benefits of its refurbishment exercise through room rate hikes and improved margins. Its China hotels, namely Novotel & Ibis Beijing Sanyuan, are expected to continue benefiting from the robust domestic demand for travel into Beijing.
Downgrade to HOLD with revised TP of S$1.03. Our TP is nudged slightly upwards to S$1.03 as we reduce our discount rates but downgrade to HOLD, given limited upside to our TP objective. Upside surprise is likely to hinge on acquisitions that we have not factored in. The stock offers yields of 7.3-7.6%.
StarHill Global – CIMB
Strong Singapore portfolio
Singapore was the star in 4Q12, with positive rental reversions for office and a full quarter of contributions from Wisma Atria retail AEI, bringing 4Q12 DPU growth to 12% yoy. Performance for overseas assets was muted, with Chengdu still impacted by soft luxury demand.
4Q/FY12 DPU was largely in line at 26%/99% of our full-year estimates and 26%/102% of consensus. We adjust FY13-14 DPUs upwards to factor in the recent acquisition of Plaza Arcade in Perth, and introduce FY15 estimates. Our DDM-based target price inches up (discount rate: 7.9%). Maintain Neutral. Stronger Toshin rental valuation and sizeable acquisitions are rerating catalysts.
Singapore strength
4Q12/FY12 NPI was up 2.9%/3.4% yoy, while DPU grew 11.9% and 6.6% respectively. DPU growth was led by Wisma Atria retail which saw stronger centre sales post-AEI. NPI was up 23.5% yoy, albeit in part due to small disruptions in rental in 4Q11. Wisma Atria and Ngee Ann City office also saw positive rental reversion on 46%/55% of leases expiring in 2013 renewed. Portfolio occupancy inched up from 98.7% in 3Q12 to 99.4% in 4Q12. Chengdu asset saw FY12 NPI fall 8.7% yoy as demand for luxury retail remained soft.
More to look forward to
We continue to expect more positive reversions on the remaining office leases expiring this year. Independent valuers have been appointed for the Toshin master lease, and a stronger-than-expected rental valuation (to be finalised 1Q13) could be a rerating catalyst. S$24.7m of revaluation gains were booked, largely from Malaysia and Ngee Ann City assets, with the latter revalued up by 1.9%. We expect weakness at Chengdu to persist.
Australia acquisition
Acquisition of Plaza Arcade in Perth at 7.8% yield is a positive, but it is relatively small at 2% of portfolio value. Management estimates DPU accretion of 1.9%. Proforma gearing on completion of acquisition this quarter is c.31%. Synergistic benefits through 13k sf of unutilised space potentially converted to retail, connecting to David Jones, could kick in by 2014/15.
CDL H-Trust – OCBC
FLAT 4Q12 RESULTS AS EXPECTED
- Revaluation gain of S$15m
- 4Q12 RevPAR flat
- Maintain FV
4Q12 in line
CDL Hospitality Trusts (CDLHT) reported 4Q12 results that were generally in line with ours and consensus estimates. Revenue grew by 1.4% YoY to S$38.3m, and net property income rose by 0.2% YoY to S$35.6m. For 4Q12, NPI contribution from the Australia hotels declined 3.0% YoY to S$4.3m due to translation loss arising from the weaker AUD. CDLHT recorded a revaluation gain of S$15.0m on its properties, which was largely due to its Singapore properties. 4Q12 DPU of 2.90 S cents was down 1.4% YoY. FY12 DPU totaled 11.32 S cents, up 2.4% YoY and giving an annualised distribution yield of 5.7% based on the closing price on 29 Jan 2013.
Full year RevPAR record
RevPAR for the Singapore hotels was flat YoY in 4Q12 at S$205; occupancy was up 0.8ppt at 89.4% while average daily rate fell 1.3% YoY to S$229 (excludes Studio M Hotel, which was acquired on 3 May 2011). Management indicated that travellers remained cautious about their expenditure due to the weak global economic climate, and MICE business was affected too. For FY12, RevPAR excluding Studio M Hotel grew by 3.3% to S$211, a record high. Our assumptions turned out to be fairly accurate; we had assumed 3.2% YoY RevPAR growth for the Singapore hotels.
Quiet outlook for SG hotels
In the first 27 days of Jan 2013, the RevPAR for the Singapore hotels (excluding Studio M Hotel) increased by 0.9% YoY. For 1Q13, management noted that apart from stiffer competition, there will be the absence of the bi-annual Singapore Airshow and additionally, CNY will fall later this year (Feb instead of Jan), possibly delaying the seasonal pick-up in corporate travel. Weak accommodation demand by corporate and leisure travellers is likely over the next 12 months. The proposed acquisition of Angsana Velavaru Maldives is expected to be completed around the end of Jan 2013. Gearing post-acquisition will be healthy at ~27.9%.
Maintain HOLD
We maintain our fair value of S$1.93 and HOLD rating on CDLHT.