Month: October 2007
FrasersCT – SGX
Frasers Centrepoint Trust closes first full year with DPU 12% above forecast
- Full year 2007 DPU of 6.55 cents
- FCT to acquire Northpoint 2. Four malls for injection over the next three years
- FCT will start on its second mall enhancement initiative at Northpoint in first quarter 2008
- “We are firing well on all cylinders,” says CEO Christopher Tang
FCT’s distributable income for fourth quarter 2007 (period 1 July to 30 September 2007), was S$10.3 million, 13.5% higher than the forecast of S$9.1 million. This translates to a distribution per unit (“DPU”) of 1.67 cents. Full year DPU was 6.55 cents, an increase of 12.0% above the forecast of 5.85 cents.
In fourth quarter 2007, gross revenue was S$19.8 million with net property income at S$12.8 million. In spite of the Anchorpoint asset enhancement programme which began in May 2007, the weighted average occupancy rate of FCT’s portfolio was 94.5% as at 30 September 2007. Causeway Point and Northpoint achieved occupancy rates of 99.9% and 100.0% respectively. Anchorpoint’s occupancy rate was 52.0% as sections of the mall had been vacated for asset enhancement and repositioning works. There was strong rental reversion, with new and renewed leases recording an increase of over 12% above preceding rates. “This demonstrates the trend for strong and sustainable rents for FCT’s malls, and our asset enhancement initiatives will benefit tenants and pave the way for further rental growth,” said Mr Christoper Tang, CEO, Frasers Centrepoint Asset Management Ltd, the Manager of Frasers Centrepoint Trust.
“We are firing well on all cylinders. FCT’s primary focus is to be a leading retail mall owner and manager delivering sustainable DPU growth through four strategic growth thrusts. And on all four we have a healthy state of report,” he says. The four thrusts are building up a pipeline of quality malls for future injection into FCT; growth through increasing rental reversions; growth through asset enhancement initiatives; and growth through overseas expansion.
Source : SGX
AREIT – OCBC
Market continues to expect strong growth
DPU growth slowed on fewer acquisitions. Ascendas REIT (AREIT) reported an unexciting 2Q08 results with revenue rising 15% YoY and 4% QoQ to S$80.2m. Distribution per unit (DPU) came in at 3.51 cents +11% YoY and +4% QoQ. This is slightly better than our forecast of 3.4 cents, and we are marginally adjusting our FY08F from 13.4 cents to 13.9 cents. We retain our FY09 estimate of 14.5 cents. The growth driver in the last quarter was from lease renewal and not from acquisition. This is clearly seen from the flat sequential growth of AREIT’s investment property portfolio. Its NPI margin remains at 75%, similar to the last 2 quarters, reflecting the difficulty in achieving greater efficiency for industrial assets.
Market getting very crowded. The industrial market space is getting very crowded. There are presently four listed industrial REITs, with JTC REIT expected to come into the market over the next 12-18 months. More importantly, there is very little to differentiate their growth strategies. This means that growth will get more difficult and less accretive. AREIT’s situation is compounded by market continuing to price in strong growth.
Taking greater risks to deliver growth. One way to avoid the price war with other REITs is to develop its own properties. Presently, AREIT has projects (both started and yet to start) worth about S$338m. This is about the maximum that it can take based on present REIT rules and its asset size of about S$3.3bn. Assuming that it takes about 1.5 years to complete these projects, this means that AREIT’s annual capacity for new development project is at best S$200-300m. We believe this is below market growth expectation and perhaps explains the share price weakness. Another possibility open to AREIT is via M&A with other smaller players (e.g. Cambridge or MacarthurCook). Whichever route AREIT takes, it means that the risk profile is likely to rise.
Maintain HOLD. The key worry for AREIT is its high price-to-book ratio of about 1.65x (down from 2.1x since our last report in July). With the industrial REIT space getting very crowded, we see a high risk of market being disappointed . Alternatively, AREIT should start to moderate expectations. Finally, in terms of valuation, we maintain our fair value of S$2.63 and HOLD rating.
CMT – OCBC
Maiden contribution from China
Growth from CRS acquisition. CapitaMall Trust (CMT) reported a good set of 3Q07 results with revenue rising 39.5% YoY and 10.2% QoQ to S$114.5m. However, as operating cost grew at a much slower pace of 30.3% YoY and 2.2% QoQ, Net Property Income (NPI) was strong at S$76.8m +44.5% YoY and +14.5% QoQ. While no reason was given for the slower pace of operating cost growth, it did benefit from the full period consolidation of CapitaRetail Singapore (CRS) into its result as CRS was acquired in June 2007. Distributable income came in at S$53.2m, +29.1% YoY and 9.0% QoQ. The slower bottom-line growth was attributed to higher interest expense due to higher debt level from the consolidation of CRS. This was partly offset by the maiden contribution from CMT’s China associate CapitaRetail China Trust (worth about S$1.5m or 0.09 cent per CMT unit). DPU for the period came in at 3.4 cents and is slightly higher than our estimate of 3.2 cents. In light of the better performance, we are adjusting our FY07F and FY08F to 13.6 cents and 14.3 cents, up from 12.6 cents and 13.0 cents, respectively.
Benefitting from lower operating costs. In the current results, CMT benefited from higher NPI margins of about 67% as a result of lower cost escalation, which grew only 2.2% QoQ versus topline growth of over 10% QoQ. This is a reversal from 2Q07 where sequential cost grew 19% compared to revenue growth of 7%. However CMT’s NPI margin has historically not been stable and over the last 7 quarters, margin has varied from 63% to 68%. The cost inflation also does not appear to coincide with acquisitions. One possible explanation is a lag effect of cost recognition as a result of consolidation of new malls into its portfolio.
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. CMT continues to guide for a target asset size to S$8.0bn by 2010. In terms of valuation, CMT is not cheap as it is trading at a high price-to-book of over 1.77x and with yield at only about 3.7%. We maintain our HOLD rating and fair value of S$3.44.
FirstREIT – SGX
First REIT’s 3Q07 distributable income exceeds forecast by 7.5% to S$4.68 million
Revenue exceeds forecast by 15.3% to $7.02 million with contributions from four new acquisitions
DPU of 1.72 Singapore cents is 7.5% above forecast; translates to annualised distribution yield of 8.65%
Portfolio expansion continues with China MOUs
SINGAPORE – 22 October 2007 – Bowsprit Capital Corporation (the “Manager”), the manager of First Real Estate Investment Trust (“First REIT”), Singapore‟s first healthcare real estate investment trust, today announced distributable income of S$4.68 million for First REIT‟s third quarter FY2007 ending 30 September 2007. This exceeded forecast by 7.5%.
Distribution Per Unit (“DPU”) for the third quarter was 1.72 Singapore cents or 7.5% higher than forecast. This translates to an annualised DPU of 6.70 Singapore cents, representing a distribution yield of 8.65%, using the closing price of S$0.775 per unit on 19 October 2007.
Actual revenue was booked at S$7.02 million, exceeding the forecast by 15.3% from a base of S$6.09 million. Net Property Income (NPI) grew 15.6% from a forecast of S$6.06 million to an actual NPI of $7.0 million.
The Books Closure and Distribution Payment dates are 1 November 2007 and 29 November 2007 respectively.
Revenue growth in the third quarter was driven by contributions in rental income from First REIT‟s newly acquired properties – Pacific Healthcare Nursing Homes at Bukit Merah and Senja in April 2007, The Lentor Residence in June 2007 and the Adam Road Hospital in July 2007.
With the addition of four healthcare facilities in Singapore, First REIT‟s total group assets amounted to S$328 million while Net Asset Value (NAV) per unit was 0.88 Singapore cents, as of 30 September 2007.
Dr Ronnie Tan, Bowsprit‟s CEO noted, “The regional macroeconomic environment, including Indonesia and Singapore where we have the bulk of our properties, remains positive for 2007. As such, we are confident of exceeding our forecast DPU of 6.51 Singapore cents for the full year.”
Potential Acquisitions
Providing an update on First REIT‟s acquisition targets, Dr Tan added, “Leveraging on the buoyant regional healthcare markets, coupled with our strong acquisition pipeline, we are confident of raising our asset portfolio to S$500 million before end of 2009.”
“In fact, one of our strengths lies in our low gearing at approximately 16.5% giving us more options to fund prospective acquisitions. We have recently ventured into China, establishing agreements with hospitals located in Wuxi, Shanghai and Jiangsu province to explore potential acquisitions”
First REIT signed a Memorandum of Understanding (MOU) with Nantong Rich Hospital Co. Ltd. (“Nantong”) in August 2007 to invest in the property assets of a 500-bed hospital in Jiangsu province via a subscription of Redeemable Convertible Cumulative Preference Shares (RCCPS).
In September 2007, First REIT entered into a conditional agreement to invest in the property assets of the 200-bed Shanghai Woman and Child Healthcare Hospital and the proposed Hengshan Urology Hospital, both located in Shanghai.
Most recently, in October 2007, First REIT signed a MOU to acquire the 90-bed Wuxi New District Phoenix Hospital.
Besides acquiring assets from other vendors in the region, First REIT continues to explore potential acquisitions with its Sponsor, Lippo Karawaci in Indonesia.
Source : SGX
AREIT – UOBKH
Growing through acquisitions and office spillover
• In line with expectations. DPU grew 11% yoy to 3.5cts in 2QFY08, driven by higher rental income from completed acquisitions, improved overall occupancy and rental reversions. The YTD distribution payout represents 49% of our forecast of 14.2 cts, and 51% of consensus’ forecast of 13.6 cts for the full year.
• Business and Science Park segment boosts portfolio occupancy. Contribution from new acquisitions, increased occupancy rates and rents drove up 2Q08 gross revenue 14.8% yoy to S$80.2m. Overall portfolio occupancy moved 1.1%-pt to 98.3% in the period, primarily driven by occupancy levels in the Business and Science Park segment. This surged 9.8%-pt to 97.2% in 2Q08, up from 87.4% in 1Q08. Strong spillover demand from office users saw 2Q08 rents for the same segment rise 33% qoq to an average of S$40 psm per month, up from S$30 psm per month in 1Q08. With the office supply crunch unlikely to be significantly alleviated in the next two years, the Business and Science Park segment is likely to still lead strong rental reversions going forward.
• Expanding through development projects. A-Reit announced two development projects amounting to a total development cost of S$277 mil at Changi Business Park (CBP) and Pioneer Walk. The development at CBP comprises three business park buildings with a combined gross floor area (GFA) of 74,660 sqm – two built-tosuit (BTS) facilities and a multi-tenanted block with an amenity podium. The development project would be completed in phases through CY09 and CY10. The second development at Pioneer Walk comprises two blocks of ramp-up industrial facilities with a combined lettable area of 80,609 sqm. About 35% of the development has been pre-committed. Completion is expected by 2H08.
• Maintain Outperform. Our DPU forecasts and DDM-derived target price of S$2.90 remain unchanged, based on a cost of equity of 6.2%. For FY08 ytd, A-Reit has announced a total of S$359m of acquisitions and development projects while another S$61m worth of development projects await completion. We believe that AReit remains on target to achieve an asset size of S$5bn by CY10 via its development projects and a S$500m acquisition pipeline from sponsor Ascendas Land. The recent share price weakness and forward yields of up to 6.1% makes AReit
an attractive buy now.