Month: January 2008
MMP – SGX
Corporate family rating of Baa1 remains unchanged
SINGAPORE, 16 January 2008 – Macquarie Pacific Star, Manager of MMP REIT – the S-REIT with the largest presence in Orchard Road – is pleased to announce that Moody’s Investors Service (Moody’s) has assigned a ‘Baa2’ rating to the S$2 billion multi-currency Medium Term Note (MTN) programme set up for MMP REIT on 8 January 2008. Moody’s corporate family rating of ‘Baa1’ with a stable outlook for MMP REIT remains unchanged. The corporate family rating was first assigned to MMP REIT in July 2006 and reaffirmed in May 2007.
Moody’s reiterated MMP REIT’s ‘Baa1’ corporate family rating reflects the high quality of its assets, strong rental reversions, almost full occupancy with staggered tenancies into 2010, and manageable tenant concentrations which provide stable recurring revenue streams.
Mr Franklin Heng, Chief Executive Officer of Macquarie Pacific Star, said: “Moody’s Baa2 rating for the MTN programme underscores our prudent debt management strategy, while its reaffirmation of the Baa1 corporate family rating for MMP REIT reiterates the quality of our assets. MMP REIT enjoys low gearing and a strong balance sheet. At 30 September 2007, gearing was 34.2 per cent, of which 88 per cent is fixed rate debt. The MTN programme will allow us to tap into other sources of funding, providing us with greater flexibility to manage our capital requirements, fund acquisitions and drive organic growth in our portfolio of assets.”
CRCT – BT
CapitaRetail China equity exercise completing soon
CAPITARETAIL China Trust (CRCT) is proceeding to complete a $280 million equity-raising exercise to fund the acquisition of Xizhimen Mall in Beijing by the end of this month.
CapitaRetail China Trust Management Ltd’s (CRCTML) CEO Lim Beng Chee, who said this at the trust’s fourth-quarter results briefing yesterday, also expressed confidence of getting legal title to Wangjing Mall – currently the trust’s main income generator – by May. CRCT currently does not have legal title to this property, also in Beijing. Instead, it has only contractual rights to the asset.
The trust posted distributable income of $8.6 million for the fourth quarter ended Dec 31, 2007, 9.1 per cent higher than the CRCTML’s forecast, despite net property income and gross revenue falling below forecast. CRCT’s Q4 distribution per unit of 1.80 cents reflects an annualised payout of 7.15 cents, translating to 3.78 per cent distribution yield based on CRCT’s closing price of $1.89 yesterday. The counter ended two cents lower yesterday. It reached an intra-day high of $3.34 in October last year.
Yields on real estate investment trusts like CRCT go up as their unit prices on the stock market fall, all other factors being equal.
Based on the trust’s current price, the upcoming $336 million acquisition of Xizhimen Mall will still provide yield accretion, going by the asset’s initial property yield of 5.7 per cent for the first year, Mr Lim added.
CRCTML obtained unitholders’ approval for the equity-raising exercise on Dec 4 but has yet to launch it because of weak equity market conditions. Assuming CapitaLand and CapitaMall Trust each subscribe for the new units to maintain their current 20 per cent stake each in CRCT, the amount to be raised from external parties would be $168 million, which Mr Lim described as a ‘very small equity raising’ for which he expects good response based on the keen interest among investors on the China growth story during CRCTML’s roadshow in November.
For Q4 ended Dec 31, CRCT posted net property income of $11.6 million, 13.6 per cent below the trust manager’s forecast in the trust’s listing prospectus dated Nov 29, 2006, on the back of gross revenue of $17.9 million, 11.2 per cent below forecast. This was due mainly to three of the trust’s seven established malls – Qibao Mall, Xinwu Mall and Jinyu Mall.
The shortfalls were temporary in nature – for instance, delays in the start of certain leases on the upper floors in the case of Qibao Mall. Management has taken a longer-than-expected time to sign new leases to achieve a more optimal tenancy mix and rental rate. Revenue is expected to improve within three to six months, CRCT said in its results statement.
Despite lower-than-expected revenue and net property income, CRCT’s Q4 distributable income still came in above forecast because of net interest saving, and over-provision of taxation in previous quarters.
For the year ended December 2007, CRCT posted distributable income of nearly $32 million, 9.5 per cent above forecast.
The trust’s asset size will increase to $1.2 billion after the Xizhimen acquisition and the trust manager is confident of achieving the $3 billion target size by end-2009, thanks to the strong acquisition pipeline put in place sponsor CapitaLand.
FSL – BT
First Ship Lease Trust’s US$12.1m Q4 distribution beats IPO forecast
FIRST Ship Lease Trust (FSLT) is to distribute US$12.1 million to unit-holders for the fourth quarter ended Dec 31, 2007, 13.6 per cent better than the projection made during its initial public offering (IPO) in March last year.
The Q4 distribution represents 100 per cent of the amount available for distribution. Distribution per unit (DPU) is 2.42 US cents compared with a forecast 2.13, and works out to 9.68 cents on an annualised basis. The Q4 DPU is also 8.5 per cent higher than that for the preceding quarter.
Based on Jan 15’s closing unit price of $1.20 and assuming a Singapore dollar/US dollar exchange rate of $1.431, this translates into a distribution yield of 11.5 per cent.
Revenue for the quarter came up to US$15.2 million, 31.4 per cent higher than the initial projection. The increase in DPU of 0.19 US cent over the preceding Q3 was made possible mainly by incremental cash flow resulting from the purchase and leaseback of two product tankers from Groda Shipping and Transportation in November.
‘We are very pleased with our achievements for the fourth quarter where revenue continued to grow compared to the preceding quarter and was significantly higher than what we projected at IPO,’ said Philip Clausius, chief executive of FSLT’s trust-manager FSL Trust Management.
FSLT had an initial portfolio of 13 vessels at listing. This has expanded to 18 vessels as at Dec 31, 2007, comprising four containerships, nine product tankers, three chemical tankers and two dry bulk carriers.
The trust aims to continue pursuing acquisition opportunities as part of its growth strategy but FSLT’s revenue base is still quite dependent on container ships and product tankers. It is, however, working to better diversify its portfolio, said chief financial officer Cheong Chee Tham.
It is on track to accomplish its IPO target of US$200 million asset acquisitions within 12 months of its listing date and has raised the target to US$300 million for financial year 2008. So far, US$158 million worth of vessels which are subject to long-term leases have been acquired.
FSLT’s books closure date is Jan 24 and payout will be made on Feb 22. The trust closed two cents lower at $1.18 yesterday.
FSL – UOBKH
FY07: DPU in line with expectations
First Ship Lease Trust (FSLT) has announced its FY07 results. Earnings came in at US$6.3m, 17.9% below our calculations mainly due to differences in calculation of depreciation (unlike the other shipping trusts, FSLT has a depreciation policy based on cost vs estimated residual in the 20th year) and amortization of debt upfront fees. Overall distributions per unit (DPU) announced for the period came in at 6.95 US cents, 2.1% below our estimated DPU for the year but spot on with management’s guidance following their Nov 2007 acquisition of 2x 47,000DWT product tankers.
Quarterly DPU to be made on 22 Feb 2008
FSLT will be paying out a distribution of 2.42 US cents for 4Q07 which is in line with management’s guidance, following the acquisition of 2x 47,000DWT product tankers in Nov 2007 and 13.6% above the projected distribution at IPO. Investors are advised to take note of the following dates:
• 22 Jan 2008: Ex-distribution date
• 24 Jan 2008: Books closure date
• 11 Feb 2008: Deadline for unitholders to complete and return the Distribution Election Notice to CDP in order to receive distributions in US dollars
• 22 Feb 2008: Payment of distributions.
Appointment of US Investor Relations
FSLT has announced that it has retained the IGB Group as its US investor relations and financial communications agency in order to increase its visibility among US based investors and financial media. We view this as a positive for FSLT as US investors have a greater appreciation for shipping trusts. Seaspan and Danaos, the two shipping trusts in the US originally started out like the shipping trusts in Singapore, trading at a DPU yield of between 8.5-9.0% at listing. Continued accretive acquisitions lead to a re-rating of the sector resulting in yield compression to between 5.5-6.0%. Currently the US shipping trusts are trading at a DPU yield of between 7.5-7.9%, much lower than FSLT’s current 12.6%.
Stable and visible distributions: Maintain BUY
We continue to like FSLT for its stable and visible distributions which are supported by its long term timecharters of between five to eleven years. Among the three shipping trusts, FSLT currently also has the lowest debt to equity ratio of 0.34x. As FSLT has a target long-term debt-to-equity ratio of 1x, we expect future acquisitions to continue to be highly accretive as they can be funded by lower cost debt. We maintain our BUY recommendation on FSLT and maintain our target price of US$1.22 (S$1.76).
PST – BT
Pacific Shipping Trust sees 15% rise in fleet value
Independent broker values its portfolio of 8 ships at US$287m
PACIFIC Shipping Trust’s (PST) current portfolio of eight ships has been valued at US$287 million. This is 15 per cent higher than the book value and nearly 6 per cent higher than the total purchase price.
The valuation was done by Singapore-based independent broker Team Shipbrokers and was conducted on a charter-free basis. The eight vessels in Pacific’s current portfolio had a book value of US$249 million as at Dec 31, 2007, and their total purchase price was listed as US$271 million at the trust’s initial public offering in May 2006.
‘The rise in our asset values reflects the strong demand for quality container ships in 2007, when both new building and second-hand vessels were sold at record prices,’ said PST Management chief executive Subhangshu Dutt. ‘We hope this valuation dispels the concerns among some investors that ships only depreciate in value.
‘As trustee manager of PST, we are committed to maximising value for unitholders by providing a high, stable yield that comes from a diversified portfolio of quality, well maintained assets,’ he added.
PST will keep to its accounting policy of not revising the book values of its vessels.
PST also announced yesterday the launch of a new 1,800 TEU (twenty-foot equivalent) vessel. The US$43 million vessel is being built at China’s Dalian Shipbuilding Industry (Group) Co and is due for delivery at end-March.
The vessel will be Singapore-flagged and bareboat-chartered to PST sponsor Pacific International Lines (PIL) for eight years. In bareboat charters, the shipowner provides only the ship. The charterer has complete control over the management and operation of the vessel for an agreed leasing period and pays all operating costs including crew stores and bunker.
The Kota Nabil’s sister vessel, another 1,800 TEU container ship costing US$43 million, will be delivered to PST by end-May. These two ships are expected to raise the shipping trust’s total contracted revenue per annum by 15.7 per cent to about US$61.9 million.
Last September, PST announced the acquisition of two 4,250 TEU ships from PIL which it will time-charter to leading South American liner shipping company CSAV. With the latest two new vessels, PST’s portfolio will expand by half from eight to 12 vessels by the end of the year.
‘The early delivery of this vessel will mean that our unit-holders will realise the yield accretion promptly,’ said Mr Dutt. And he assured unit-holders that ‘we are continually on the lookout for more acquisitions which are yield accretive and which can diversify our charterer base’.