Month: April 2013
CLT – CIMB
Awaiting acquisitions
1Q13 was a steady quarter, led by organic growth from rental step-ups within the portfolio master leases. We look forward to the rest of FY13 as contributions from Precise Two kicks in and expect debt headroom to be utilised for accretive debt-funded acquisitions.
1Q13 DPU met our and consensus estimates at 26% of our FY13 forecast. We lower FY13-15 DPUs, factoring in Cache’s recent equity issuance, offset partially by a higher acquisition assumption. Our DDM-based target price, however, is raised on a lower discount rate of 7.1% (previously 7.7%). Maintain Outperform, with accretive acquisitions as catalysts.
Steady quarter
1Q13 DPU grew 7% yoy on the back of a 12% NPI increase due mainly to rental contributions from the acquisitions of Pan Asia and Pandan Logistics Hub in FY12. Qoq, DPU was up 4% due to some cost savings, with equity dilution kicking in only towards the end of 1Q. A new lease was signed within APC Distrihub with Agility Logistics, leaving Cache with no remaining leases that will expire in 2013.
Acquisition growth
We look forward to contributions from Cache’s recent acquisition of Precise Two which will kick in from 2Q13. NPI yield is at a high 8.7% compared to 7.1% on its existing portfolio. With rental step-ups of 4.0% every two years being incorporated into the master lease, we expect Precise Two to add to the resilience of its existing portfolio and contribute to organic growth.
Asset leverage is at 29% after the recent placement, leaving Cache with ample debt headroom for accretive acquisitions in Singapore, Malaysia and China. Meanwhile, management is also on the search for asset enhancement and re-development opportunities to enhance portfolio quality. Given bigger debt headroom, we now factor in a larger S$120m (previously S$100m) of acquisitions for FY13.
Maintain Outperform
Maintain Outperform as we continue to like Cache for its resilient portfolio, built-in organic growth via rental step-ups and quality assets.
CLT – Lim & Tan
- Cache Logistics Trust posted 1Q ’13 distributable income of S$15.8 million, up 18.3% y-o-y. Distribution per unit (DPU) for 1Q ’13 came in at 2.234 cents (including the advanced distribution of 2.121 cents scheduled to be paid on 26 April 2013). This amounts to an annualized dividend yield of 6.9%.
- The increase in distributable income came mainly from the upward rental adjustments and rentals from investments properties acquired in 2012.
- The trust’s aggregate gearing ratio fell to 29.2%, down from 31.7% in the previous quarter, after it raised approximately S$84.8 million by way of a private placement in March 2013.
- With the current portfolio of assets running at 100% occupancy and 0% of its gross floor area (GFA) due for lease renewal for the remaining of FY ’13, there is little room for earnings from existing assets to surprise in the near term. Going forward, key catalysts would be coming mainly from accretive acquisitions.
MIT – CIMB
Eyes on The Signature
We expect positive rental reversions at MINT’s flatted factories to mitigate downside at The Signature. Though headline yields are decent in the current climate of compressed yields, we maintain a Neutral rating pending clarity on backfilling and further growth catalysts.
4Q/FY13 DPUs were slightly above street and our expectations, forming 26/102% of our FY13 forecast. The variance was due to higher short-term business park rents. We raise DPU estimates and our DDM-based target price (discount rate: 7.3%) factoring in stronger rental assumptions and its recent BTS development.
All eyes on The Signature
We expect positive rental reversions on MINT’s flatted factory assets and asset enhancements to mitigate vacancy with its departing business-park tenants. 4QFY13 DPU was up 7% yoy, thanks to higher rents on a six-month lease extension by Credit Suisse at The Signature and positive rental reversions, offset partially by higher maintenance operating expense within its flatted factories. Qoq, DPU was up 2%.
The portfolio remains healthy pending the departure of major tenants at The Signature. Portfolio occupancy was at 95.4% (3Q: 95.2%), while rental reversions appeared stronger: flatted factories (+30%), business parks (+13%) and stack-up/ ramp-ups (+36%). This year, all eyes will be on The Signature, from which major tenants such as Credit Suisse and Lucas Films are departing. While there has been no formal lease take-ups, management is in advanced negotiations with several prospects.
Lower asset leverage
Asset leverage has been lowered to 35%, thanks to revaluation gains of 5% on the back of higher NPI and occupancy as cap rates remained stable. This should leave it sufficient debt headroom to fund its past AEIs and recently-announced data-centre BTS development.
Maintain Neutral
We expect positive rental reversions at MINT’s flatted factories to help mitigate downside at The Signature. Headline yields are decent in the current climate, but we maintain Neutral pending clarity on backfilling and further growth catalysts.
StarHill Global – MayBank Kim Eng
The Big 1Q13??? Toshin, Japan and YTL
Special Distribution expected in 1Q13. SGREIT will be announcing its 1Q13 results on 26 Apr (aft. market). We think SGREIT is likely to announce a special distribution of 0.2 SG-cts, following the 10% rent increase for the master lease with Toshin at Ngee Ann City (NAC). The net rental arrears from 8 Jun 2011 to 31 Dec 2012 amounted to ~SGD3.8m. We forecast 1Q13 DPU at 1.37 SG-cts and FY13 DPU at 4.88 SG-cts. This represents an 11% YoY growth, boosted by positive rental reversions following Wisma Atria’s AEI (21.5% of gross rent up for renewal in FY13) and acquisition of Plaza Arcade.
Toshin rental dispute resolved. What to expect next? A separate rent review exercise with Toshin is in progress to determine the NAC renewal rent to be paid upon the commencement of the option period of 12 years starting 8 June 2013. The 10% increment from 8 Jun 2011, estimated at SGD14.90 psf/mth, will be used as the base rent for this renewal. Our sensitivity analysis shows that every 50 SG-cts psf/mth increment of the base rent will add another 1 SG-cts to our TP.
How big a drag will Japan be? Following the depreciation of Yen against SGD(down ~9% last quarter), we expect the Japan portfolio to report weaker earnings (down 8%-12% QoQ) this round. SGREIT adopts a natural currency hedge strategy (capital hedge), which maximises the use of local currency denominated borrowings, whenever possible, to match the currency of the asset investment. Occupancy rate is also likely to come under pressure from 92.7% in 4Q12. Nonetheless, Japan portfolio represents only a small fraction of SGREIT’s asset, constituting 4% of FY12 revenue/NPI and FY13 RNAV,
Will YTL convert its CPUs? YTL Corp (sponsor) holds 173m CPUs, as part of the consideration for the acquisition of the Malaysia Properties (Starhill Gallery & Lot 10) in 2010. YTL is being paid up to RM0.1322 per CPU equivalent to a distribution rate of 5.65% per annum. The CPUs are eligible for conversion by the sponsor after 28 Jun 2013 at a conversion price of SGD0.7266. If fully converted, this will bring down Unitholders’ fund/shr to SGD0.86 from SGD0.88, with 238m newly issued units (10.9% dilution post-conv). Compared to FY12 DPU yield of 4.6% vis-à-vis CPU coupon rate of 5.65%, we think SGREIT is likely to benefit from the cost savings in annual CPU payments (SGD9.1-9.3m), if the CPUs are converted in full. Nonetheless, this will be at the expense of free float, with YTL increasing its SGREIT’s deemed interest to 37.09% from 29.38%.
Regardless, Investment thesis is intact. SGREIT’s key assets are in the coveted Orchard Road area, where tight supply and the entry of new international retailers should give it greater bargaining power in terms of leasing its space. We continue to like SGREIT for the rental upside at Wisma Atria and income stability in Malaysia and Australia. At 5.2% FY13F yield and 1.06x P/B, we reiterate BUY with a DDM-derived TP of SGD1.02.
MCT – DBSV
Waiting for the next big bang
- 4Q13 results slightly ahead of our expectations
- Organic growth outlook robust; further upside from acquisitions
- BUY, TP raised to S$1.53
Highlights
Strong end to FY13; slightly ahead of our expectations. Mapletree Commerical Trust’s (MCT) 4QFY13 revenue and net property income (NPI) rose by 22% and 23% y-o-y, to S$60.7m and S$44.2m respectively. Growth was largely driven by strong rental reversions at Vivo City and PSA Building, supported by improved occupancy levels of 97.7% (vs 94.6% a year ago). Meanwhile, the quarter also saw partial contribution from Mapletree Anson, which was acquired on 4 Feb 13. Distributable income came in at S$34.7m (+20% y-o-y), translating to a DPU of 1.737 Scts (+12% y-o-y).
Optimized balance sheet. With revaluation of close to S$196m made at the year end, MCT’s NAV increased by 11% to S$1.06. Gearing, as a result,fell slightly to 40.8%. Financial metrics remain healthy with an interest cover of 5.4x, c70% of interest costs is fixed, and weighted average lease expiry is 3.3 years.
Our View
Organic growth a main driver for FY14. MCT’s portfolio achieved a robust uplift in rental revenues for FY13 with strong retention rates of c83% (retail) and 65.2% (office). Notably, revenue from VivoCity increased by c6% y-o-y, supported by a 33% uplift in fixed rents while its office leases, namely PSA Building (PSAB) were signed at 44.3% higher rates. Looking ahead, the outlook remains robust coming from (i) the trust has 17.9% of its income up for renewal, of which a majority will be leases at VivoCity. The manager has plans to continue to remix the mall’s tenant base to maintain its appeal, and (ii) full year contribution from Mapletree Anson, which offers further upside when its leases are up for renewal in the coming year.
Recommendation
BUY, TP raised to S$1.53. While we believe that the current price fully reflects the positives of the current portfolio, we remain optimistic that given the significant pipeline from its sponsor, acquisitions will remain a key feature for MCT. A medium term target remains Maple Business City, which will provide a solid platform for MCT to grow to the next level. We have assumed S$1bn worth of acquisitions in FY15F (@ 5.25% yield, with an equity/debt funding ratio of 60%/40%, keeping gearing constant).