Month: October 2007
FrasersCT – BT
FCT to pay up to $170.5m for Northpoint 2
It will acquire the upcoming shopping mall from its parent firm in Q4 2008
FRASERS Centrepoint Trust (FCT) has entered into a put and call option agreement to acquire the upcoming shopping mall Northpoint 2 for between $139.5 million and $170.5 million, it said yesterday.
The mall, which is being developed by Frasers Centrepoint, will be completed by August 2008. FCT will then acquire it from its parent company in the fourth quarter of 2008.
‘We are doing this (entering the put and call option agreement) now so that we can get a certainty of ownership,’ said Christopher Tang, chief executive of FCT’s manager.
FCT has plans to integrate the upcoming mall with Northpoint, which is already part of its portfolio.
The $30 million asset enhancement programme is expected to be completed by end-June 2009. Together, the two malls will have a combined net lettable area (NLA) of some 232,000 sq ft, an increase of some 56 per cent over Northpoint’s current NLA.
FCT said that the mid-point of the agreed price range for Northpoint 2 – $155 million – is based on an open market valuation. The actual purchase price will be determined by taking the average of two valuations – one each by FCT and Frasers Centrepoint – nearer to the time of the transaction.
FCT also reported its financial results for the fourth quarter ended September 30, 2007 yesterday.
The trust said that distributable income for the three months came to $10.3 million, 13.5 per cent higher than the forecast of $9.1 million as new and renewed leases as well as higher occupancy rates in its malls contributed to increased revenues.
Distribution per unit (DPU) for the quarter came to 1.67 cents, up 13.6 per cent from forecast of 1.47 cents.
Net property income came to $12.8 million, some 2.6 per cent higher than the forecast of $12.5 million.
For its full financial year, FCT reported distributable income of $40.4 million, 11.1 per cent higher than its forecast. DPU came to 6.55 cents, 12.0 per cent higher than forecast. And full-year net property income came to $51.7 million, 3.2 per cent higher than its forecast.
There are no comparable figures for the previous corresponding periods as FCT was only listed on July 5 last year.
FCT has three more Singapore malls awaiting injection into the Reit – Yew Tee Point, Bedok Mall and The Centrepoint. Yew Tee Point will be injected in early 2009 and Bedok Mall in 2010, Mr Tang said. He added that there is no timeline at present for Centrepoint’s injection. The four malls together will double the trust’s current portfolio.
The trust will also look at China and Australia for growth together with Malaysia, where it already has a presence through its stake in Hektar Reit, Mr Tang said.
FCT’s shares closed unchanged at $1.50 yesterday.
CMT – DBS
Office extension, the sequel
Comment on Results
• Revenue and NPI grew by 40% and 45% y-o-y to S$114.5m and S$76.8m respectively. DPU for 3Q07 grew by 19% to 3.4 cts and 9.52 cts.
• For 3Q07, distribution income was retained as CMT continues to dish out Asset Enhancement Initiatives (AEIs). CMT is expected to dish out S$168.6m and S$127.2m for capex in FY07 and FY08 respectively for the whole portfolio. For 3Q07, approx.
S$1.6m was retained by CRCT, which together with the S$4.6m retained in 1Q07, we estimate a DPU kicker of approx. 0.4 cents for 4Q07.
• CMT’s gearing has reached 40%, which suggests an equity raising is imminent for a sizable acquisition. Interest cover remains healthy at 4.9x, and average cost of debt remains stable at 3.5%.
Recommendation
• Apart from decantation of space to create a four-storey retail extension block with 16,500 sf NLA at Lot One Shopping Mall (CRS portfolio), CMT has also announced that URA has granted Tampines Mall a plot ratio increase from 3.5 to 4.2. This creates an additional 95,000 sf of office space, approved for a new office development.
• We are positive on CMT with its consistency in dishing out AEIs, which are integral for the growth of the REIT management business (34% of total DPU growth since listing). With a strong developer sponsorship from CapitaLand, we are also positive about CMT reaching its asset size of S$7bn by FY09. Maintain Buy, target price slightly raised to S$4.34 based on DCF valuation to factor in the announced asset enhancements.
AREIT – DBS
Turning to development projects?
Comment on Results
• Gross revenue and net income available for distribution grew 15% yo-y to S$80.2m and $46.5m respectively, due to additional rental income from completed acquisitions. DPU increased 11% to 3.51 cents.
• As at 30 Sep 07, A-REIT has an aggregate leverage of 38.4%, with an average 91% of interest exposure fixed at a weighted average cost of 3.43% for a term of 4.2 years.
• A-REIT announced that it has committed to develop projects (i.e. Plot 8 Changi Business Park and an industrial facility at Pioneer Walk) at a total cost of S$277m.
Recommendation
• As the environment for third-party acquisitions gets increasingly more difficult in Singapore, we are positive on the move by A-REIT to undertake more development projects, which provide better yields.
• We have reduced our DPU forecast for FY08 and FY09 by 4% and 6% respectively, given that A-REIT has not made any announcements on income-yielding acquisitions in 1HFY08. As we have already assumed an acquisition pipeline of S$400m pa till 2010 in our valuation, the net impact of the inclusion of the development projects (phased over FY09 to FY11) and lower DPU is a slight increase of target price to S$3.18 (based on DCF valuation).