Month: January 2008
CMT – DBS
Stability amid turmoil
Comment on Results
• CMT reported FY07 results in line with estimates. Revenue and NPI grew by 30.2% and 32.2% y-o-y to S$431.9m and S$287.8m respectively. This was mainly due to full
contributions from the Raffles City acquisition as well as buyback of CRS assets from 1 June 07. As an indication of organic growth, comparison of 4Q06 asset base into 4Q07 reflects revenue increase of 5.2%.
• FY07 DPU of 13.34 cents was registered, translating to 5% yield. This includes S$4.6m capital
distribution which was previously retained in 1Q07 to manage cashflows for AEI initiatives.
• CMT’s gearing has reached 34%. Interest cover remains healthy at 5.3x, and average cost of debt remains stable at 3.2%.
Recommendation
• Despite strong sponsorship from CapitaLand and consistently delivering value through AEI initiatives which backs our Buy recommendation for CMT; we believe concerns over a lack of
liquidity from debt and equity markets to fund acquisitions (which could lead to possible muted AUM growth) has led to negative sentiment for the S-REIT sector and CMT.
• However with current c.34% leverage, CMT is still able to achieve its targeted S$7bn AUM by 2009 (S$8bn by 2010) by funding acquisitions fully by debt while maintaining leverage levels
around targeted 45%. Sponsor pipeline remains visible with the line of ION Orchard, Clarke Quay and One North assets.
• We derive our DCF-based target price of S$4.05 for CMT after paring down acquisition assumptions.
FirstREIT – ML
FY07 results
FY07 Results
First REIT has reported FY07 results with DPU of 6.73cps, which is 5.7% higher than IPO forecasts and in line with ML estimates. DPU growth is attributable to organic growth from the Indonesian portfolio together with income contribution from the Singapore assets which were purchased in 2007.
4 MOUs signed for China assets
During 2007 First REIT signed MOUs for 4 China assets which comprise a combined total of 1290 beds. We expect First REIT will be able to transact on at least one MOU in 1H08. We are positive on First REIT’s push to regionally diversify the existing healthcare portfolio.
Positive asset revaluation
First REIT has revalued its underlying portfolio during the period, which has resulted in a valuation uplift of S$92mn vs purchase price. The stock is now trading at a 24% discount to revalued NAV of S$0.95/share. Portfolio size now stands at S$326mn.
Maintain Buy, PO S$0.84
We maintain our Buy rating and 12 month price objective of S$0.84/share. As one of only two Singapore listed Healthcare REITs, we believe First REIT has access to a wide range of Healthcare related assets both in Singapore and regionally. We have updated our earnings estimate to reflect the FY07 results.
First Reit – SGX
- Q4 net property income exceeds forecast by 18.6% with the addition of four new healthcare properties
- Full-year DPU of 6.73 Singapore cents translates to distribution yield of 9.0% – one of the highest amoung Singapore REITs
- Portfolio expansion to continue with China MOUs
AREIT – CIMB
Record occupancy lifts DPU
• 3Q08 results exceed expectations. Gross revenue rose 12.8% yoy to S$80.2m in 3Q08 while distributable profit grew 15.1% yoy to S$47.2m. 3Q08 DPU of 3.56 cts represents 26% of our full-year forecast and consensus and fulfils 76% of our FY08 DPU forecast. This could be attributed to higher occupancy levels in its multitenanted buildings (97% vs. 96.2% in 2Q08). A-Reit’s portfolio occupancy reached a record high of 98.7%, up from 96.1% a year ago. Renewal rates for the Business Park and Hi-Tech segments also grew by double digits (+46.1% and +71.5% over previous transacted rates respectively).
• Upcoming acquisitions. A-Reit announced MOUs amounting to S$201m for the acquisition of income-producing properties. In addition, it has completed the acquisition of Goldin Building at Pioneer Walk for S$22.5m. To date, A-Reit has invested S$299m in new acquisitions and S$338m in development projects, which would be completed over 2009-10. We believe it is on track to achieve its target asset size of S$5bn by end-2010.
• HansaPoint @ CBP fully pre-committed. Scheduled for completion in 1Q08, Hansa Point, a multi-tenanted business park building, is now 100% pre-committed with more than 50% of the pre-commitment coming from financial institutions as the office crunch persists.
• Large impending warehouse supply may dampen rents. According to URA statistics, some 6.7m sf of gross warehouse space is due for completion in 2008-09. We estimate this could translate to an average 2.7m sf of net warehouse space p.a., more than double the last five years’ average net new supply of 1.3m sf p.a. This is likely to have a negative impact on A-Reit’s income stream as the logistics segment is its income largest contributor.
• Downgrade to Neutral from Outperform; target price lowered to S$2.83 from S$2.89. In view of the impending warehouse oversupply, we have moderated our income estimates for the logistics segment. This lowers our FY09-10 DPU forecasts by 1.2-1.8%. Accordingly, our DDM-derived target price has been trimmed from S$2.89 to S$2.83 (cost of equity unchanged at 6.2%). Downgrade to Neutral as we believe that the stock will track the STI’s performance in the near term.
AREIT – UOBKH
3QFY08: Fewer acquisitions, more development projects
Rising rental rates for Science & Business Parks and Hi-Tech Industrial sectors. Gross revenue expanded 12.9% yoy to S$80.2m in 3Q08. Overall occupancy reached an all-time high of 98.7%, compared to 96.1% last year. This is driven by demand for office space outside the Central Business District (CBD) and multinational companies expanding their operations in Singapore. A-REIT announced DPU of 3.56 cents for 3QFY08, an increase of 11.3% yoy. This will be paid on 29 Feb 08.
A-REIT has renewed and signed new leases including expansion for total net lettable area of 505,182sf during the quarter. They represented 6.8% of net lettable area for multi-tenanted buildings. Renewal rental rates for Science & Business Parks and Hi-Tech Industrial sectors were 46.1% and 71.5% higher compared to previous transacted rates. New tenants include Pfizer at The Capricorn. A-REIT also completed the acquisition of Goldin Building, a logistics building at Pioneer Walk, for S$22.5m.
Positive impact from rental reversion. A-REIT has a portfolio of 79 properties with average lease to expiry at 6.2 years. It benefits from the surge in office rental within the CBD. This has forced many companies to relocate backend operations to suburban locations. Only 1% of its leases will expire this year. Positive rental reversions will knick in subsequently with 42.7% of its leases expiring from 2009 to 2011. 52.8% of the leases expiring are in the high-growth
Science & Business Parks and Hi-Tech Industrial sectors.
More development projects. A-REIT has four development projects worth S$338m. HansaPoint@CBP, a partial built-to-suit development project, has achieved 100% pre-committed occupancy and is expected to be completed by Feb 08. The other three development projects are also substantially precommitted to tenants such as Zuellig Pharma and Citigroup. Development projects provide yield of 8-9% compared to yield of 6-6.5% from acquisitions.
Maintain BUY. A-REIT’s share price has retraced to a more attractive level and provides annualised distribution yield of 6.5%, among the highest for S-REITs.