Month: May 2007

 

CDL H-Reit – DMG
CDL Hospitality Real Estate Investment Trust (CDL H-Reit) has purchased the Novotel Clarke Quay in a deal that prices the 398-room hotel at $219.8 million or about $552,000 per room. The amount comprises a purchase amount of $201 million and assumption of potential liability of about $18.8 million. The hotel site has a remaining lease of about 70 years. For the seller, a Lehman Brothers entity, the divestment represents a doubling of its investment. Lehman bought the hotel, then known as Hotel New Otani, in 2004 for $82 million from a Wuthelam Group-controlled entity and spent a further $19 million renovating it, resulting in an all-in investment of around $101 million. It later appointed French hotel chain Accor to manage the hotel under the four-star Novotel brand. City Developments Ltd’s Londonlisted hotel arm, Millennium & Copthorne Hotels (M&C), has a 39 per cent stake in CDL Hospitality Trusts.
The yield-accretive acquisition of Novotel Clarke Quay will boost CDL Hospitality Trusts’ Singapore hotel room count by around 20 per cent to 2,324, making it Singapore’s biggest hotel owner, in terms of number of rooms. The acquisition will also see the value of the trusts’ properties grow from about $1.1 billion to $1.3 billion. CDL H-Reit will enter a lease agreement appointing the hotel’s incumbent manager Accor SA to manage and operate the hotel under the Novotel flag until end-2020, for a fee that works out to a tad below 10 per cent of the hotel’s gross operating profit. The projected annualised property yield of the hotel for this year is about 5.5 per cent, higher than the 3.9 per cent implied property yield for CDL H-Reit’s current portfolio for the current year.

The acquisition is forecast to boost annualised 2007 distribution per unit (based on Q1 2007 results) by 8.9 per cent, from 7.10 cents to 7.73 cents. Vincent Yeo, CEO of M&C Reit Management Ltd, the manager of CDL H-Reit, said that assuming the acquisition of Novotel Clarke Quay is fully funded by debt, the trusts’ gearing ratio will increase from 35 per cent to 46 per cent. He said that while the trust is on the lookout for more hotel acquisitions in the Asia-Pacific – in countries like China, India, Philippines and Vietnam – Singapore still remains one of his favourite markets because of its growth potential and risk profile.

For Q1 2007, CDL Hospitality Trusts’ Singapore hotels achieved a 25.4 per cent year-on-year increase in revenue per available room (RevPar). ‘Based on the strong performance so far in the second quarter, the industry players expect a much higher year-on-year RevPar growth in Q2. And we expect that to be the same for the hotels in the CDL Hospitality Trusts.’

The acquisition of Novotel Clarke Quay will increase CDL Hospitality Trusts’ exposure to the strong Singapore hotel market, which is expected to benefit from continuing strong growth in visitor arrivals and minimal new hotel room supply this year and next.

May 18, 2007 Uncategorized No Comments »

Frasers CT – DMG

FRASERS CENTREPOINT TRUST (FCT SP: S$1.76): Venturing overseas

FCT has ventured into Malaysia through the acquisition of a 27% stake in Malaysian-listed Hektar Reit for S$46.6m. At the same time, its sponsor FCL would also take a 40% share of Hektar Reit’s manager. The purchase would have a small but accretive immediate impact to FCT’s bottomline. However, more importantly, it opens a strategic platform for FCT to enter into the Malaysian retail property market as well as opportunities for cross-border operational synergies. In terms of growth, Hektar Reit offers potential for organic and acquisition growth with its planned pipeline of 1.25msf GFA. This would further boost FCT’s existing growth prospects in Singapore as well as accelerate its objective of doubling NLA under management over the next 3 years. Our fair value target price is raised to $1.90. Maintain Neutral.
May 18, 2007 FCT No Comments »

FrasersCT – BT

FCT buys 27% of Malaysian H-Reit

M’sia is its first overseas market expansion because of its familiarity

FRASERS Centrepoint Trust (FCT) yesterday said it has paid $46.6 million to buy 27 per cent of a Malaysian real estate investment trust (Reit), kick-starting its overseas expansion.FCT is buying 84.6 million units – or 27 per cent – of Hektar Real Estate Investment Trust (H-Reit). H-Reit was listed on Bursa Malaysia in December last year, and is now the only Malaysian-listed Reit investing purely in retail assets, FCT said.

The strategic partnership will also see FCT’s parent company Frasers Centrepoint Limited (FCL) acquire 40 per cent of H-Reit’s manager Hektar Asset Management Sdn Bhd. FCL will gain board and exco representation in the management company.

FCT paid RM1.21 (53 Singapore cents) for each unit in H-Reit, a slight premium to its closing price of RM1.18 yesterday. The trust will start to see contributions from its new purchase in the July-September financial quarter this year, said Christopher Tang, chief executive of FCT’s management team.

H-Reit owns two suburban retail malls with a total net lettable area of 944,500 sq ft in Malaysia at present. The malls – Subang Parade in Selangor and Mahkota Parade in Melaka – house more than 230 major international and domestic retailers and enjoy a combined footfall of more than 279,000 people per week.

‘The Reit gives us a platform to grow further in Malaysia,’ said Mr Tang. ‘We want to use it as a vehicle to acquire more properties.’

FCT has chosen Malaysia as its first overseas market to expand into because of its familiarity, said Mr Tang. In addition, FCT’s parent company FCL has a strong network in the country. Both H-Reit’s sponsor Hektar Group and FCL will work together to rebrand the Reit and the malls in its portfolio. FCT also said there could be possible collaboration between the two parent companies in real estate projects, providing a steady acquisition pipeline for H-Reit.

Mr Tang also said that the FCT is eyeing China’s second-tier cities for future acquisition opportunities as it looks to continue expanding overseas. However, the majority of growth in the near future will come from Singapore, where the Reit has yet to exercise its option to acquire the flagship The Centrepoint.

FCT’s shares closed one cent down at $1.76.

May 17, 2007 FCT No Comments »

CDL – DBS

CDL REITS, DBS remains a BUY with target price $2.20

– Revenue was in line, net investment income was slightly above our expectations due to higher occupancy levels. The 1Q07 gross revenue registered at S$18m and net property income hit S$16.7m, both 30% and 32% above the proforma numbers. The portfolio enjoyed higher occupancies (from 82% to 84%) and higher weighted average room rate (S$182 vs S$162) than the proforma numbers with RevPAR increasing from S$132 to S$153, an increase of 16%. The New Zealand property enjoyed occupancy of 78% at an average daily rate of NZ$142 and RevPAR of NZ$111. The DPU for the quarter hit 1.75cents, or an annualised rate of 7.1cents, 27.7% above the proforma forecast.

– The outlook for the hotel market continues to be strong with tight supply situation in Singapore and high demand from both business and leisure travellers. Singapore Tourism Board (STB) expects number of visitor arrivals growing at a CAGR of 6.4% from 2006 to 2015. On the supply front, the addition of 2,849 rooms by the end of 2008 may be inadequate in the face of robust demand. In New Zealand, the Ministry of Tourism said growth would be at 4.9% y-o-y and rising to 59.8 mn in 2012, underpinned by increased exposure of New Zealand as a tourist destination. We expect growth of 15% in room rates in Singapore for 2007. Further growth is also expected through CDL REIT’s expansion plans locally as well as overseas, especially in high-growth countries like China, India, Vietnam and the United Arab Emirates. The group plans to increase contribution of overseas contribution from 10% currently to 40%.

– With the potential asset injection from parent M&C or via third-party acquisitions, as well as the continued increase in business travel volume to Singapore and around the region, we remain positive on CDREIT. Maintain BUY with no change in assumption and TP of S$2.20 backed by DCF calculation.

May 5, 2007 CDL H-Trust No Comments »

CDL – GS

CDL REITS, gs remains a BUY with target price $2.13

– What’s changed . CDLHT net income for 1Q07 rose 40% yoy to S$11.3 mn helped by a 25% jump in RevPAR for its 4 Singapore hotels. Distribution per unit (DPU) for the latest quarter of 1.75 cents exceeded management’s projections by 28%. On an annualized basis, DPU was 7.1 cents, slightly lower than our FY07 forecast of 7.72 cents. We attribute the difference to seasonality, and highlight that all operating metrics since listing in July ’06 suggest good health 1) Revenue grew 60% to S$18.0m (from S$11.3m in 3Q06); 2) RevPAR grew 9.3% to S$153 (from S$140 in 3Q06); and, 3) Net Property Income grew 62% to S$16.7m (from S$10.3m in 3Q06).


– Implications. We believe 1Q07 results were positive and remain comfortable with our FY07 earnings and DPU forecasts. We continue to favor the Singapore hotel sector and are confident of demand absorbing the expected 10% growth in hotel rooms between end-2008 and end-2006. We note that for Singapore hotels, 1Q is traditionally the weakest quarter because of holidays such as the Lunar New Year in February. RevPAR for its Singapore hotels in 3Q06 and 4Q06 were 15% and 20% higher than in 1Q06 respectively. Given a stronger 2H07 and sustained visitor growth, we expect CDLHT to deliver 2-yr EPS CAGR of 8.5% per annum over FY07-09F.


– Valuation. We maintain our DCF based 12-m TP of S$2.13 for CDLHT, implying a share price upside potential of 16.4% and total returns of 20.6%. We like the dynamics for hotels in Singapore and look to CDLHT’s acquisition of the 440 room Copthorne Orchid as a catalyst. This hotel is subject to a right of first refusal granted by CDLHT’s sponsor Millennium & Copthorne.
May 5, 2007 CDL H-Trust No Comments »