Month: January 2008
CCT – BT
CCT posts 14.5% rise in Q4 distributable income
CapitaCommercial Trust (CCT) posted distributable income of $32.3 million in last year’s final quarter, an increase of 14.5 per cent from a year previously.
Full-year 2007 distributable income rose 52.7 per cent to $120.4 million on the back of a 54.2 per cent jump in gross revenue to $240.1 million – due mainly to the consolidation of CCT’s 60 per cent interest in the Raffles City complex which was acquired in September 2006. Higher rental income, car park income and other income from the trust’s properties also boosted the bottom line for the year.
The trust reported $1.3 billion fair value gain on revaluation of its investment properties, boosting its total asset size to $5.3 billion as at the end of December.
Currently less than 5 per cent of CCT’s assets are overseas, but in the medium term the overseas share could grow to 20-30 per cent, CapitaCommercial Trust Management Ltd (CCTML) chief executive Lynette Leong said yesterday.
Vietnam is among the promising markets where CCT sees a lot of growth, Ms Leong said.
The trust said that its interest-rate exposure is small, as 86 per cent of total borrowings are on fixed rates and no major refinancing is required until March 2009.
In addition, its low gearing of 23.9 per cent gives it sizeable debt headroom to support any new asset growth strategy.
Assuming the trust decides to gear up to 40 per cent, it could take additional debt of about $800 million, analysts observed. This should come in handy for CCT when competing for acquisitions with some other Reits with much less room for taking further debt.
The stock market slump has raised the distribution yields at which Singapore Reits are trading. That means equity cost has gone up and Reits will need to acquire assets at much higher property yields if they are going to finance them by issuing new equity rather than using debt.
Riding on the spike in office rents, CCT achieved significantly higher rent reversions for offices leases that were renewed as well as new leases signed during 2007. Rents committed for renewals were on average 36.8 per cent higher than preceding rents, while new leases were committed at 130.8 per cent above preceding rents.
And with about 57 per cent of CCT’s office portfolio (by gross rental income) up for renewal and rent review in 2008 or 2009, the trust can look forward to further positive rent reversion given the shortage of offices.
This factor, coupled with limited exposure to interest rate risk, led CCTML to say it expects to perform better than its forecast distribution per unit (DPU) of 10.04 cents for the current financial year. The forecast was made in a circular in November last year.
CCT unitholders will receive a DPU of 4.47 cents for the July 1 to Dec 31, 2007 period.
This works out to 8.87 cents on an annualised basis, reflecting a distribution yield of 4.6 per cent based on CCT’s closing price of $1.91 yesterday. The counter ended four cents lower yesterday.
CCT’s adjusted net asset value (excluding distributable income to unitholders) rose from $1.86 as at Dec 31, 2006 to $2.80 as at Dec 31, 2007.
The trust has secured commitments for more than half of the 9,600-sq-m office space at Wilkie Edge in the Selegie area, ahead of the development’s completion expected in Q4 this year.
CCT – CIMB
Ripe for the picking
• 4Q07 distribution above expectations. Despite lower-than-expected revenue in the quarter, CCT’s distribution was higher than expected due to higher contributions from its associate Quill CapitaTrust, lower interest expenses, and fewer-thanexpected shares issued for the period. Revenue was up 10% yoy to S$62m while distributable profit was up 14.5% yoy to S$32.3m. Full-year revenue was S$240.1m with a distributable profit of S$120.4m and DPU of 8.7cts, which is 1% above consensus and 2% above our estimate. As at 31 Dec 07, CCT’s portfolio reached S$5.1bn with revaluation gains of S$1.3bn.
• Ripe for harvest. Asking rents for offices should peak this year before a large supply of office space floods the market from 2009. Some 57% of CCT’s leases (by gross rental income) would be up for renewal over 2008-09. These are expected to enjoy strong rental reversions in the current supply crunch. We also expect occupancy levels to approach 100% from the already-high 99.6% at end-Dec 07. Its mixed development project, Wilkie Edge, is expected to be completed in 4Q08, and is more than 50% pre-committed for its office space.
• Upgrade to Outperform from Neutral, although target price lowered from S$2.80 to S$2.75. Our DPU estimates for FY08-10 have been raised by 0.6-4.1%, following adjustments to our assumptions for QCT contributions and gearing. CCT’s low debt-to-asset ratio of 24% will allow it to continue with acquisitions without the need for equity fund-raising in the current volatile capital markets. On the other hand, our DDM-derived target price has been lowered marginally to S$2.75 as we increase our cost of equity assumption to 5.6% from 5.3% to reflect more volatile capital markets. Nevertheless, upgrade to Outperform as the current share price offers strong upside potential of 44%.
Indian REITs – BT
S’pore listings of Indian Reits may be delayed
THEY should be perfect for choppy markets – low volatility securities in a mature stock market based on assets in a fast-growing Indian economy that many believe will weather the global storm.
But planned Singapore listings of real estate investment trusts, spun off by Indian developers, are being thwarted by the US subprime crisis, which has rocked stock markets and raised doubts about property investment, wherever it is.
DLF Ltd, India’s most valuable property firm, Unitech and Indiabulls Real Estate have been talking to investment banks about listing Reits in Singapore, possibly as early as the first quarter.
But Australian-backed MacarthurCook Industrial Reit last week became the latest to delay a deal when it shelved a $200 million secondary offering in a Singapore market that has fallen by a fifth this year.
One banker, who asked not to be named, said his team has been advising Indian issuers to hold off on Singapore issuance plans because of volatile markets.
‘The market is crap right now. I wouldn’t advise anyone to come and list now,’ the investment banker said.
Indian developers are keen to raise funds for expansion by selling buildings into property trusts, in which they would retain a controlling stake. The trusts should then become willing buyers of buildings as the developers roll out new projects.
The Indians have been watching the success of Singapore’s Reit market, which has grown to almost US$19 billion.
India does not yet allow the securities, although regulators issued draft Reit guidelines last month and analysts expect next month’s Budget to give some indication of when India will get its own Reit market.
DLF is looking to raise US$1.5 billion and has picked Goldman Sachs and Lehman Brothers, bankers have said.
Unitech wanted around US$600 million from listing an office trust and has mandated Deutsche Bank, JPMorgan, UBS and Morgan Stanley as book-runners, two people involved in the deal told Reuters.
The two developers had been looking to launch early 2008 IPOs, banking sources said, but the cost of equity has jumped as much as 30 per cent for some Singapore-listed Reits since July, said Mark Ebbinghaus, head of Asian real estate investment banking at UBS.
‘Where we are at present, clearly the cost of equity for a number of Reits is under pressure, largely because of the flow of capital leaving Asia,’ he said.
But deals could be pushed through because of the scarcity value of Indian property accessible to foreign investors.
‘As long as the pricing is acceptable, we would see a variety of vehicles having some support levels in the Singapore business trust environment,’ Mr Ebbinghaus said. ‘But the timing remains uncertain.’
Reits, which pay most of their rent as dividends, have caught on across Asia in the past five years, with investors liking the bond-like steady income with the prospect of growth if rents and property values rise.
But although Reits are usually regarded as defensive plays, trusts across the world suffered in the second half of last year as the US sub-prime crisis unfolded and hit commercial property markets in the United States and Europe.
The only Indian Reit, Singapore-listed Ascendas India Trust, closed at 99 cents yesterday, well below its IPO price of $1.18.
Singapore’s Reit index has fallen 21 per cent since the start of the year through Monday, in line with a 20 per cent slide by the benchmark Straits Times Index .
Because of the market downturn, at least US$800 million worth of IPOs in Singapore and several million dollars worth of secondary share offerings were delayed in the October-December period. — Reuters
a-iTrust – BT
$11.3m Q3 distributable income for Ascendas India
ASCENDAS India Trust has reported a distributable income of $11.3 million for the third quarter ended Dec 31, 2007.
Net property income was $15.7 million – 57 per cent higher than the same quarter last year – while DPU was 1.50 Singapore cents over the period.
For the first nine months of the year, the trust reported a DPU of 4.45 cents – representing an annualised yield of 5 per cent over the IPO price of $1.18 per unit.
The trust attributed the strong showing to continued high portfolio occupancy of 99 per cent, rising average rental rate and constant focus on cost efficiency.
Net asset value as at end-December was $857.7 million or $1.14 per unit.
Said chief executive officer of the trustee-manager, Jonathan Yap: ‘We are pleased to report the construction completion of two buildings – Vega at The V (Hyderabad) and Crest at International Tech Park Chennai – with a combined 1.1 million sq ft of space.
‘The two buildings expanded the trust’s portfolio by 31 per cent to 4.7 million sq ft and their combined occupancy is 91 per cent as at Jan 23, 2008.’
The trust said this provides a ‘solid foundation to the forecast 22 per cent distributable income increase in the next financial year over the forecast for the current year, as disclosed in the listing prospectus’.
It added that works on additional development are also in progress.
For example, a master plan has been completed to develop ‘the balance 2.7 million sq ft of space’ in International Tech Park, Bangalore.
Plans are in place to make government approval submission for the first phase of the development.
In addition, the manager aims to add an additional level of growth through acquisition, ‘be it through the two first rights of refusal it enjoys or from the market’.
It has a first right of refusal from Ascendas Land International and Ascendas India Development Trust to acquire substantially income-producing business space.
The former is Ascendas’ main overseas investment vehicle and the latter is a private fund managed by Ascendas with a target investment value of $1 billion.
Looking ahead, the trust manager said the trust will continue to focus on growing the operating earnings of its assets, optimising its capital structure, and growing the portfolio.
Given the strong nine- month results, it is confident of at least meeting the 5.6 Singapore cents forecast for the current financial year.