Month: April 2007
Cambridge – SGX
Cambridge Industrial Trust acquires 9 Bukit Batok Street 22 for S$18.3 million
24th April 2007, Singapore – Cambridge Industrial Trust (“CIT”) announced that it has signed a Put and Call Option Agreement to acquire 9 Bukit Batok Street 22 (the “Property”) for S$18.3 million. The acquisition is expected to be financed by debt or alternative funding sources in line with the Manager’s capital management strategy to optimize the funding of the Trust.
Mr Wilson Ang, Chief Executive Officer of the Manager said, “Bukit Batok is a niche industrial locale with an immediate catchment to manpower due to its close proximity to the Bukit Batok HDB estate, a major housing estate in Singapore. Although the building is more than 10 years old, considerable Addition and Alteration works were completed recently in 2006, enhancing the value and marketability of the Property. More importantly, the Property provides a stable income stream and will further enhance the current CIT portfolio.”
General Description of the Property
Completed in 1994, the 5-storey industrial building with a basement carpark sits on a land area of 6,258.2 square metres. The Property has a gross floor area of 14,666.0 square metres. Inaddition, it has a long land lease duration of 30 years effective from 1 February 1993, with an option to renew for a further term of 30 years.
The Property is located along Bukit Batok East Avenue 6 and is about 5 to 7 minutes’ walk to the nearby Bukit Batok MRT station. More importantly, it is easily accessible to other parts of the island via the Pan-Island Expressway (PIE).
Upon completion of the Sale and Purchase, Ascender Investment Pte Ltd (“Ascender”) will leaseback the Property for a 7-year term. The rental escalation is 5% at the beginning of the third and fifth years. The Property houses tenants from industries such as electronic manufacturing, trading and furniture sectors. Ascender will bear the cost of maintenance of the Property while CIT will bear the cost of land rent and property tax.
FrasersCT – BT
FCT posts Q2 income of $10.3m
FRASERS Centrepoint Trust (FCT) yesterday said that its distributable income for the second quarter ended March 31 came to $10.3 million, or 1.67 cents per unit. The figures were higher than the forecast distributable income of $9.1 million, or 1.46 cents a unit. There were no comparable figures for 2006 as FCT was only listed on July 5 last year. Net property income for the three months came to $13.4 million.
The trust said that the stronger than expected performance was mainly due to higher turnover during the festive period. ‘Historically, increased shopper activity during the festive period has provided a seasonal boost to turnover rent during the January to March quarter,’ said FCT. ‘On average, turnover rent for the January to March quarter has been three-fold higher than that of a normal quarter.’
The increase was also helped by improved carpark income due to higher vehicle count, and additional income derived from casual leasing resulting from the increase in demand for atrium space, kiosks and advertising.
FCT said that it has four assets lined up for acquisition: Northpoint 2, YewTee Point, Bedok Mall and The Centrepoint. ‘It is our plan to start acquiring Northpoint 2 and YewTee Mall by the fourth quarter of 2008,’ said Christopher Tang, chief executive of the Reit’s management team.
FCT shares closed one cent up at 1.71 yesterday. The trust’s stock price has climbed 11.8 per cent since the start of the year.
MMP – OCBC
Finally delivers on acquisition promise
Flattish growth. Macquarie MEAG Prime REIT’s (MMP) 1Q06 came in within expectation. Top-line came in at S$23.4m, improving 3.5% QoQ, but Net Property Income (NPI) of S$17.3m (-0.4% QoQ) led to flat distributable income per unit (DPU) of 1.47 cents. The top-line benefited from positive rental reversion, while the lower NPI was attributed to higher property expenses (mainly depreciation) as the result of the installation of escalators linking Wisma Atria basement to Orchard road and higher cost for changing the tenancy mix.
Organic growth to come from office. MMP’s office space is presently under-rented with rents at about S$5psf/mth, whereas market rents are approaching the S$8-10psf/mth mark. More importantly, with 182,000 sq ft (about 70% of office space) of leases due for renewal over the next two years, we see a lot of upside potential.
Finally bought something but accretion marginal. On the acquisition front, MMP has been fairly disappointing since its IPO in 2005. However recently, it has made up for lost time by making two separate acquisitions in two different countries. One was in Tokyo (7 retail properties) for a total of S$182.5m, while the other was for a 50% stake in a Chengdu retail mall
for S$30m. Though in absolute terms these purchases are small and has no material impact on its asset size of S$1.5bn, it is nevertheless a step in the right direction. With gearing at only 26%, debt funding makes the most sense. We estimate that if the acquisitions were fully debt funded,
the full year DPU accretion is about 0.2 cents. As our FY07 and FY08 forecasts already contain growth assumptions, we will retain our numbers for now and will review them in 2H07. We also remain hopeful that more meaningful assets can be acquired.
Maintain BUY. MMP remains one of the very few REITs with a low price to book ratio. It is currently trading at about 1.1x P/B. This implies that market has not factored in growth and that upside surprise is possible if a meaningful acquisition is done. Finally with a DPU yield of about 5.0% and a capital value upside of about 6.5%, total return of over 10% is possible. We thus remain positive on MMP and see it as one of the lowest-risk REITs in the market. Maintain BUY with a fair value of S$1.32.
ART – OCBC
1Q boosted by recent acquisitions
Results benefited from recent acquisitions. Ascott Residence Trust (ART) reported 1Q07 revenue of S$29m and distributable income of S$8m, 5% and 10% higher than its own forecasts respectively. Distributable income per unit (DPU) was 1.59 cents, in line with forecast. ART’s higher 1Q revenue was primarily driven by higher average daily rates in Singapore and the Philippines. The strong performance was further boosted by the inclusion of the Philippines (Ascott Makati) and Vietnam in late March 2007.
More of the same in 2H07. In 2006, ART announced the acquisition of five assets worth about S$218m. So far this year, ART has announced deals worth S$144m, and when completed, this will raise its asset size to about S$1.1bn. This implies asset growth of 40% since its IPO. Going into 2H07, we see ART announcing more acquisitions to drive its growth.
Cash call well subscribed. In our Jan 07 report, we had articulated that a cash call was imminent. This was because as of end 2006, ART’s gearing of 29% (and with no credit ratings) left not much headroom for more debt. Furthermore, it had already announced S$266m of acquisitions which had yet to be completed. Indeed in Mar ART had an equity fund raising to raise S$199m via the issue of 105.3m new units. The fresh equity together with the credit rating means that ART is ready for further acquisitions. We estimate that it has an estimated war chest of about S$353m.
ART S$2.0bn target size is achievable. With the potential to gear up to 60%, ART should see no issue in achieving its target asset size of S$2.0bn by end 2008. Based on current size of S$1.1bn, this means about S$450m of acquisitions per year. We see a high possibility of ART exceeding this and believe S$2.5bn as achievable with the bulk of its acquisitions coming
from parent The Ascott Group.
Maintain fair value S$1.94. Even though we continue to like ART as a unique service residential REIT play, capital value upside remains limited. Moreover with DPU yield at only about 3.7%, the estimated total potential return of only about 8.5% is not compelling. We thus maintain our HOLD rating and fair value estimate of S$1.94.
FrasersCT – DMG
FCT posted an in-line set of 2Q07 results with distributable income exceeding IPO forecast by 14.4% to $10.3m (DPU: 1.67cts), thanks to higher rental and other income. Going forward, the focal point of FCT would be on its asset enhancement and acquisition activities. Over the next 2 years, Anchorpoint would be repositioned as a F&B-focussed village mall while retail areas at Causeway Point and Northpoint would be reconfigured to increase returns. In terms of acquisition, its plan to double floor space under management is certain but would happen only from early FY09 onwards.
FCT is currently trading at FY07 yield of 3.7% and P/book NAV of 1.1.57x, indicating much of its growth expectations could have been priced in. We have raised price target to $1.86 but lower our call to Hold on valuation grounds.
Results in line with expectations. Distributable income was 14.4% ahead of IPO forecast to $10.3m (DPU: 1.67cts) while topline came in 3.9% ahead of projections to $19.6m. The better performance was due to higher rental income and lower than projected operating expenses.
Lifted by greater rental and other income. The rise in revenue was due to a threefold increase in turnover rent during the Chinese New Year period. Higher patronage during this festive period also resulted in increased carpark and casual leasing income. During the quarter, a small 0.4% of FCT’s portfolio was renewed, however, rentals achieved were at a significant 10% above the preceeding level.
FCT offers significant organic growth potential. Going forward, the focus for FCT would be on its AEI and acquisition potential. Enhancement activities at Anchorpoint are scheduled to begin in May 07. It would also look to boost returns from Causeway Point and Northpoint by reconfiguring and rejigging tenant mix when the leases are up for renewal. An estimated 45% and 50% of NLA at Causeway Point and Northpoint are expiring over the next 18 months. .
Acquisition pipeline is certain. FCT is committed to double the area under management to 1.3msf NLA in the medium term. In the pipeline are Northpoint 2 and YewTee Point, scheduled to complete in early FY09, as well as the Bedok Town Centre and Centrepoint. Together, these properties could provide a further 0.63msf GFA.
Raised price target to $1.86 but downgrade to Hold. While we still like FCT for its strong organic growth potential and visible pipeline, this appears to have been largely factored into share price. The stock is trading at FY07-FY08 yields of 3.7-4.4% and P/book NAV of 1.57x. Our price target of $1.86, based on doubling asset base to $2b, offers less than 10% upside.