Month: April 2008
FirstREIT – ML
1Q08 results
1Q08 results
First REIT has reported 1Q08 results with DPU of 1.85cps, up 5% QoQ and 16% YoY. DPU growth is attributable to organic growth from the Indonesian portfolio together with income contribution from the Singapore assets which were purchased in 2007. Singapore now accounts for 17% of total portfolio assets.
Inline with ML estimates
The results were inline with ML estimates. Net profit for the quarter accounted for 25% of our FY08 estimate. Our earning forecasts remain unchanged however we have adjusted our dividend payout ratio from 90% to 100% as advised by management. First REIT is the highest yielding Singapore REIT offering a FY08E distribution yield of 10.4%
China expansion
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.
Maintain Buy, PO S$0.84/share
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.
CMT – DBS
Results in line
Comment on Results
Results in line with expectations. CMT reported 1Q08 distributable income of $65.4m, up 27% yoy and beating its own forecast by 3%. This was achieved on a 24% jump in revenue to $121.1m. The group elected to distribute 88% of income or $58m in Q1, translating to a DPU of 3.48cts.
Strong organic growth. The better results were achieved on higher rental reversions, which were on the average 10.4% better than preceding levels, particularly at Tampines Mall, IMM Building, Bugis Junction and Plaza Singapura. The higher rentals were also a result of asset enhancement activities (AEI). Management estimates about 38% of DPU improvement since listing came from AEI activities.
More value creation from AEI going forward. Looking ahead, DPU growth is anticipated to come from value add activities at its malls. The group plans to spend $179m this year to decant valuable retail space to take advantage of its additional plot ratio. Positive contributions from these activities will kick in from FY09 as works are completed over FY08 and FY09. Current gearing is low at 35.3%, giving them debt headroom to buy up to S$1.2bn of assets.
Recommendation
We maintain our buy call on CMT with a price target of $3.93. FY08 and FY09 DPU of 15.4cts and 17.0 cts, translate to a yield of 4.4% and 4.9% respectively.
LMIR – OCBC
A pure Indonesia retail play
Singapore-listed Indonesia-focused REIT. Lippo-Mapletree Indonesia Retail Trust (LMIR) is the first Singapore-listed REIT to provide exposure to Indonesia’s burgeoning retail sector. The trust’s investment focus is on income-generating retail malls and retail strata spaces that are strategically located within well-established population catchment areas.
Strong investment case for Indonesia. Indonesia, which enjoys inherent advantages such a wealth of natural resources and a young population, is currently enjoying economic growth and stability under a new political regime. This means growing prosperity among the population and a better quality of life. The emergence of a sizeable urban middle class and a lifestyle shift towards consumerism has made consumption – and the retail sector – the key beneficiary of the Indonesia growth story.
Plenty of growth opportunities, but pace may slow. We believe that LMIR has ample opportunities for inorganic growth thanks to a highly fragmented retail property sector. LMIR came to the market with a clear and ambitious acquisition pipeline from both third-party sellers and through a ROFR granted by its sponsor PT Lippo Karawaci Tbk. It made its maiden post-IPO acquisition worth S$147.4m last month, increasing its portfolio NLA by almost 20%. However, with the present uncertain environment, acquisitions may be made at a slower pace than previously planned.
Key risks. Exchange rate volatility is potentially a concern as both DPU income and interest expenses are SGD-denominated. However, LMIR has entered into forex hedges that should minimize IDR-SGD volatility and protect investor DPU. A steep depreciation in the Rupiah could still threaten NAV as asset values would fall in SGD terms. As LMIR is capitalizing on the low cost of SGD-denominated debt, this balance sheet mismatch could put further pressure on NAV. General country risks, such as political instability and high inflation, also exist.
Initiate coverage with BUY and S$0.70 fair value. LMIR is currently trading at a 30% discount to its S$0.80 IPO price. Our RNAV value of LMIR is S$0.87. In line with the S-REIT universe which is trading at deep discounts to NAVs, our fair value estimate of S$0.70 prices in a 20% discount to our RNAV value. Nevertheless, this offers a 24% upside from current levels. We are projecting FY08 DPU of 5.8 S cents and FY09 DPU of 6.0 S cents. The strong investment case for Indonesia and high distribution yields of more than 10% compel us to initiate coverage on the trust with a BUY rating.
KREIT – BT
K-Reit Q1 distributable income soars 165.9%
This was attributed mainly to income from its stake in One Raffles Quay
K-REIT Asia has reported distributable income of $11.4 million for the quarter ended March 31, a 165.9 per cent increase from the same period in 2007.
This was attributed mainly to income from its one-third interest in One Raffles Quay Pte Ltd, the acquisition of which was completed on Dec 10, 2007.
K-Reit said the contribution from One Raffles Quay was $10.9 million, comprising income support received from the vendor, interest income and dividend income.
Distribution per unit (DPU) for the quarter was 4.6 cents, or 1.3 percentage points more than forecast. K-Reit said this amount will be included in the advance distribution payout, estimated to be 6.45 to 6.5 cents per unit, for the period Jan 1 to May 7, 2008.
Net property income for the quarter was $9.1 million, or 41.5 per cent higher than $6.5 million in the corresponding quarter in 2007. This was underpinned by higher gross rental income from properties, K-Reit said. Gross rental income increased 30.2 per cent year on year to $11.2 million in Q1 2008.
Committed occupancy of K-Reit’s portfolio is 99.6 per cent. With the contribution of the one-third interest in One Raffles Quay, the average monthly gross rent of its portfolio grew 69.4 per cent year on year and 14 per cent from end-2007 to $6.86 per square foot in March 2008.
K-Reit is now engaged in a rights issue. The expected gross proceeds of $551.7 million will be used to partly repay a bridging loan of $942 million drawn down for the acquisition of the one-third stake in One Raffles Quay.
This will reduce K-Reit’s aggregate leverage from 53.9 per cent to 27.7 per cent and provide it with additional funding capacity to acquire further properties.
The rights units are expected to be issued on May 8.
K-Reit said it expects to benefit from positive rental revisions, given its current rents are below market rates and that 42.2 per cent and 20.2 per cent of its portfolio’s net lettable area is due for lease expiry and rent review respectively between 2008 and 2010.
K-Reit’s units closed one cent higher at $1.41 yesterday.
CMT – BT
SINGAPORE – CapitaMall Trust, Singapore’s largest property trust by market value, reported on Tuesday a 24 per cent rise in first-quarter distributable income, helped by stronger rentals at its shopping malls.
CapitaMall, 27 per cent owned by South-east Asia’s largest developer, CapitaLand, will pay $58 million (US$42.9 million) in distributable income for the January-to-March period, or 3.48 Singapore cents per unit.
That compares with $46.9 million in the year-earlier period.
CapitaMall competes with other Singapore-listed real estate investment trusts that own offices and retail malls, including Suntec Reit, Macquarie MEAG Prime and Frasers Centrepoint. — REUTERS