Month: April 2008
PLife – UOBKH
Acquiring pharmaceutical distributing facility in Japan
Taking a small bite in Japan. Parkway Life REIT has executed an agreement to acquire a pharmaceutical production and distribution facility in Japan for total cash consideration of ¥2.59b or S$35m. The two-storey freehold building is located in Matsudo City, Chiba prefecture with net lettable area of 34,875sf. Nippon Express has a master lease at the premise with unexpired lease term of nine years. The building is currently occupied by Inverness Medical Japan, which is involved in drug development, manufacturing, export and sales. Nippon Express provides logistics and distribution support and has a back-to-back lease with Inverness Medical Japan. Inverness Medical Japan utilises the facility to manufacture, sell and distribute medical test kit devices.
Potential to redevelop the site. The acquisition provides initial net yield of 5.3%. The ratio of the building’s floor area to the land area is about 40% compared to allowable ratio of 200 % based on current zoning regulation. There is therefore potential to redevelop the site to maximise returns. The acquisition will be funded by debt, which increases gearing from 4% to 8%.
We like Parkway Life REIT for its healthcare focus and strong defensive qualities. It benefits from revenue growth at Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital as variable rent is 3.8% of adjusted hospital revenue. Our target price is S$1.82 based on the discounted dividend model (required rate of return: 6.75%; terminal growth: 2.5%).
AREIT – CIMB
Ascending the ranks
• Portfolio reaches S$4.1bn, record occupancy levels of 98.7%. Revaluation gains of S$483.6m and additions from acquisitions, completed development projects and asset enhancements valued at S$290.6m expanded A-REIT’s portfolio to S$4.1bn in FY08. Record occupancy levels of 98.7% were achieved as at 31 Dec 07.
• Large supply in the pipeline; 59% pre-committed. Industrial supply in the pipeline is significant over 2008-09. However, with 59% of the pipeline already pre-committed, demand from the manufacturing sector and office users is likely to be sufficient to absorb the remaining supply. The outlook for industrial rents is positive, with rents likely to rise by up to 15% yoy in 2008.
• Upgrading DPU forecasts; target price raised to S$2.99 from S$2.60. We raise our FY08-10 DPU forecasts by 0.3-11.8% on higher yield assumptions for development projects and higher rental growth assumptions. Following this, our DDM-based target price for A-REIT (discount 6.7%) rises to S$2.99. Maintain Outperform.
FCT – SGX
ACQUISITION OF FURTHER UNITS IN HEKTAR REAL ESTATE INVESTMENT TRUST IN MALAYSIA
1. In its announcement dated 5 June 2007, Frasers Centrepoint Asset Management Ltd., as manager of Frasers Centrepoint Trust (“FCT”, and manager of FCT, the “Manager”), announced that HSBC Institutional Trust Services (Singapore) Limited, as trustee of FCT, had acquired 86,400,000 units in Hektar Real Estate Investment Trust (“H-REIT”, and units in H-REIT, “H-REIT Units”), representing 27.0% of the total issued and outstanding H-REIT Units.
2. Pursuant to Rule 704(15)(d) of the Listing Manual, the Manager is pleased to announce the acquisition by FCT of a further 13,000,000 H-REIT Units (“Additional Units”), thereby increasing FCT’s unitholding in H-REIT to 31.06%. The purchase consideration was at RM1.33 per H-REIT Unit at an aggregate purchase consideration of RM17.29 million. The purchase consideration was arrived at on a “willing buyer, willing seller” basis.
3. The acquisition of the Additional Units is funded, at least initially, wholly with debt, save for the acquisition fee payable to the Manager, computed as one percent (1.0%) of the purchase consideration of the Additional Units, which is to be satisfied in the form of FCT units issued to the Manager at the prevailing market price.
PST – UOBKH
Raising earnings forecasts to reflect ship acquisitions
Raising our forecasts for ship acquisitions. We are raising our earnings forecasts for the acquisition of four new ships from Pacific Shipping Trust’s (PST) sponsor Pacific International Lines (PIL). Two of these ships are chartered back to PIL for a term of eight years while the other two ships will be chartered to CSAV, the largest liner shipping company in South America, for a term of five years. The four new ships will expand PST’s portfolio of vessels by 50% to 12 from its initial fleet of eight ships (which are on remaining charters of 6-8 years). In total, the four new vessels are expected to raise PST’s total contracted revenue p.a. by 79% to US$61.9m. We raise our 2008 and 2009 earnings forecasts to US$14.0m and US$17.8m for 2008 and 2009 respectively from US$13.9m and US$14.6m respectively, and initiate our 2010 forecast at US$19.4m.
Acquisitions to be funded by debt, thus causing gearing to spike up. PST is funding these new ships entirely by debt. We estimate PST’s net gearing will rise rapidly from 69% as of end-07 to 217% by end-08. However, we have assumed an issue of new shares of 25% of total share capital in 2009 and 10% in 2010. If the Singapore stock-market’s weakness continues into 2009, a rights issue would be more likely than a share placement. PST’s net gearing is forecast to fall below 100% by 2011. The trust has an acquisition target of US$200m p.a. Apart from the four new ships that have been announced, we have not factored in other ship acquisitions.
Despite issue of new shares in 2009 and 2010, DPU should still improve. Despite our assumption of new share issues in 2009 and 2010, we expect DPU to improve from 4.3 US cents in 2007 to 4.4 US cents in 2008 and 4.7 US cents in each of 2009 and 2010. These translate into DPU yields of 10.7-11.5% over the next three years. We maintain our target price of US$0.50 for PST, based on a fair value 2009 net yield of 9.5%. Maintain BUY.
Rickmers – BT
Rickmers secures US$627.5m facilities
RICKMERS Maritime has secured US$627.5 million in new credit facilities. The funds will be used in its fleet expansion. Rickmers said it will benefit from attractive interest rates ranging from 0.95 per cent to 1.2 per cent above US$ Libor per annum. A significant portion of the credit facilities will be hedged, thereby fixing the future cost of debt financing, it said.