Month: July 2007
Fortune – SGX
Distribution Per Unit Improved To 17.70 HK cents
Attractive Tax Exempt Yield Of 5.4%
31 July 2007. ARA Asset Management (Singapore) Limited (“ARASL”), as manager of Fortune Real Estate Investment Trust (“Fortune REIT”), is pleased to announce the results for Fortune REIT for the half year ended 30 June 2007 (“1H07”).
“We are pleased to continue to deliver stable returns and growth to our Unitholders. The net property income (“NPI”) for the quarter ended 30 June 2007 and 1H07 grew by 3.0% and 2.6% year on year (“Y-o-Y”). Correspondingly, the income available for distribution for 1H07 improved to HK$143 mil with a distribution per Unit (“DPU”) of 17.70 HK cents, reflecting an attractive tax exempt yield of 5.4%1 to Unitholders. In the reporting period, the portfolio of assets has also performed admirably with healthy rental reversion of 11% for 1H07. We are glad that ongoing asset enhancement initiatives in Waldorf Garden Property is on target as more than 80% of the enhanced space has been pre-committed at rents which are about 3 times over preceding rents. We believe Fortune REIT’s strong asset and financial performance has been driven by buoyant economic conditions, real wage growth, record low levels of unemployment and positive local consumption demand. We are optimistic that Hong Kong’s retail sector will continue to benefit from sustainable economic growth and positive social sentiments for the remainder of 2007.” Sam Wu, Chief Executive Officer of ARASL commented.
Source : SGX
Suntec – UOBKH
3Q07: Not Much Good News
NPI increased 4.3% yoy, DPU up 11.9% yoy to 2.1 Scts. Suntec REIT’s Q3 results recorded a gross revenue of S$46.7m, a 6.3% increase yoy, while NPI was only a mere 4.3% yoy increase at S$34.1m. The slight increase in revenue was a result of higher office rental income, partially offset by a S$0.2m (or 0.8%) dip in retail revenue. The committed office occupancy also strengthened to 99.3%. Property expenses were 12.0% higher than 3Q06 as a result of higher maintenance charges for Suntec City, marketing expenses and property taxes. DPU however, improved by 11.9% yoy to 2.1 Scts.
Proposed acquisition of One Raffles Quay. Suntec REIT has entered into a conditional share purchase agreement with Cavell (SPV holding one-third of issued share capital of One Raffles Quay) for the acquisition of One Raffles Quay for S$941.5m. The acquisition is expected to be yield accretive, taking into account potential rental top-up payments of S$103.5m over 54 months. The acquisition is targetted to complete by first quarter of 1Q08, upon which Suntec
REIT’s total portfolio would increase to S$4.8b.
Revise HOLD, fair value at S$2.31. Since our initiation with a HOLD at S$2.09, the share price has declined to the current price of S$1.86, and trading at an attractive yield of 4.41%. We will be revising our call and factor in higher acquisitions to our FY07F forecast of S$4.0b at present.
KREIT – UOBKH
Proposed Maiden Acquisition of One Raffles Quay
Proposed maiden acquisition of One Raffles Quay. K-REIT has announced the proposed maiden acquisition of one-third interest in One Raffles Quay for S$941.5m from the its sponsor, Keppel Land’s divestment of the property. It has also entered into a conditional share purchase agreement with Boulevard for the acquisition, who will provide K-REIT with an income support of S$103.4m through 2011 should the financial performance of the property does not meet certain requirements. The acquisition will be funded through equity fund raising whereby Keppel Land will subscribe to the issued new units to maintain its proportionate stake of 40.7% in K-REIT.
One Raffles Quay – Prime office property. One Raffles Quay is one of the largest prime office building with an NLA of 1.3m sf located in the heart of CBD. It comprises of a 50-storey North Tower and a 29-storey South Tower, with an underground link to the Raffles MRT station, a plaza featuring a water fountain, and a sheltered drop-off point and carpark hub with 713 carparking lots. The property also boasts of large banks and financial institutions such as ABN AMRO, Deutsche Bank AG, Ernst & Young and UBS AG as its tenants.
Potential trigger to a series of injections. With the first seen divestment of interest in One Raffles Quay from Keppel Land to K-REIT, we believe this is only the start to a series of potential injections of properties into K-REIT from its parent. The proposed acquisition will also bring K-REIT’s portfolio to S$1.6b from S$677m, a step nearer to meeting its target portfolio of S$2.0b over the next few years.
Maintain BUY, target price at S$3.39. We have previously assumed S$100m-150m of acquisitions p.a in our model, and will be revising our acquisition assumptions to accommodate a more aggressive scenario. Currently, it has a gearing of 28.0%. We re-iterate BUY on K-REIT with a target price of S$3.39. The stock is currently trading at a yield of 2.57%.
Cambridge – SGX
Cambridge Industrial Trust’s (“CIT”) DPU outperform forecast by 22.2%
Highlights:
• Annualised distribution per unit (“DPU”) of 6.257 cents is 22.2% higher than the forecast DPU of 5.120 cents for the second quarter ended 30 June 2007.
• Net Property Income of S$11.0 million exceeds IPO forecast by 22.8%, total Distributable Income to Unitholders exceeds forecast by 18.5%, giving DPU of 1.560 cents for the second quarter ended 30 June 2007.
• In 2Q2007, three investment properties valued at S$40.4 million were acquired bringing total investment properties under management to S$662.4 million as at 30 June 2007.
• Option Agreements with a total asset value of approximately S$196.38 million were signed and announced to date. MOUs for approximately S$82.47 million worth of properties were entered into as at 31 July 2007.
Source : SGX
CMT – OCBC
Guiding for larger size
Slightly worst off than 1Q. CapitaMall Trust (CMT) reported a modest set of 2Q07 results with revenue rising 35.8% YoY and 6.7% QoQ to S$103.9m. Income available for distribution (IAD) grew 27.6% YoY, but down 5.2% QoQ to S$48.8m. CMT declared 2Q DPU of 3.12 cents or +13% YoY and +4.0% QoQ. This is slightly below our forecast of 3.16 cents. The anomaly between sequential decline in the IAD and a sequential growth in DPU was due to a low DPU base. In 1Q07, CMT distributed only 90% of its IAD. If 100% of its 1Q07 DPU were distributed, its 1Q07 DPU would have been 3.3 cents (instead of 3.0 cents) resulting in 2Q07 seeing a 5.5% sequential decline, which is comparable to its IAD negative growth.
Higher operating costs and management fees to blame. CMT’s better sequential top-line performance was mainly attributed to the acquisition of 72.8% of CapitaRetail Singapore (CRS) bonds. However, the better revenue could not offset its higher operating costs which rose 19.3% QoQ. This was compounded by higher manager/trust fees which rose 22.7% QoQ. The net effect is that CMT suffered NPI margin decline of 4% QoQ to 65%. CMT attributed the higher operating costs to higher property tax and higher marketing and maintenance expenses. As for the higher managers’ fees, this was probably due to higher fees from the revaluation of its portfolio. An extra S$290m in revaluation surplus was added in 2H07.
Completed acquisition of CapitaRetail Singapore bonds. Over the last quarter, CMT completed the acquisition of 72.8% of CRS class E bonds for an aggregate value of S$516.9m. As CMT previously already owned 27.2% of CRS, it now owns 100% of CRS bonds and hence all the 3 malls within CRS.
Maintain HOLD. With the CRS acquisition, CMT’s asset size has been boosted from S$4.6bn (end 2006) to S$5.6bn (including revaluation surplus of S$290m from recent revaluation). Furthermore, with the likelihood of CMT acquiring a development project soon, it is on target to achieve an asset size of S$7.0bn by 2009. In light of this, CMT has revised up its target asset size to S$8.0bn by 2010. Even with the revalued portfolio, CMT is not cheap, trading at a very high price-to-book of over 1.75x and with yield at about 3.5%. We thus maintain our HOLD rating and fair value of S$3.44.