Month: April 2008
AREIT – UOBKH
4QFY08: Benefitting from spillover demand from the CBD
A-REIT reported gross revenue of S$84.4m in 4QFY08, an increase of 13.9% yoy. Overall occupancy reached 98.4% at Mar 08, compared to 96.6% last year. A-REIT announced DPU of 3.69 cents for 4QFY08, an increase of 11.8% yoy. This represents annualised yield of 6.3% and will be paid on 30 May 08.
Positive rental reversion for Science & Business Park and Hi-Tech Industrial space. A-REIT benefits from the shortage of office space within the Central Business District (CBD). This has forced many companies to relocate non-client-facing backroom and data centre operations to suburban locations such as Alexandra Technopark and Changi Business Park (CBP). There is also positive impact from inflow multinational companies expanding in Singapore. AREIT has signed renewed and new leases for total net lettable area (NLA) of 784,925sf during the quarter, representing 9.7% of NLA for multi-tenanted buildings. Renewal rates for Science & Business Parks and Hi-Tech Industrial were S$3.76 and S$3.10psf pm, 68.8% and 49.8% higher on a yoy basis.
A well diversified portfolio. A-REIT has a portfolio of 84 properties and total assets of S$4.2b at Mar 08. The weighted average lease to expiry at 5.9 years. It has a quality and well diversified tenant base of over 790 international and local companies. The top 10 tenants accounted for 27.9% of portfolio income. The largest tenant Singtel accounted only 6.5% of portfolio income. A-REIT’s weight average funding cost is 3.1% due to its corporate rating of A3 and consistent track record. It will be concluding a three-year S$200m transferable loan facility, after which the earliest date for refinancing is Aug 09.
Maximising returns through development projects. A-REIT has completed its third development project HansaPoint@CBP, a partial built-to-suit seven-storey business park building, in 4QFY04. The building is already fully occupied and anchor tenant is Rohde & Schwarz. It has another three development projects located at Plot 8 Changi Business Park (substantially pre-committed to Citigroup), Plot 7 & 8 Changi LogisPark (substantially pre-committed to Zuellig Pharma) and Pioneer Walk.
Maintain BUY. A-REIT provides FY08 distribution yield of 6.41%, a healthy spread of 4.04% over 10-year Singapore government bond yield at 2.37%. Our target price is S$3.00 based on 2-stage dividend discount model.
AREIT – BT
A-Reit full-year distributable income rises 14.3% to $187.3m
ASCENDAS Real Estate Investment Trust (A-Reit) has reported gross revenue of $322 million for the full year ended March 31, 2008 – an increase of 13.9 per cent over the previous year.
Net property income for the year came to $243 million, up 15.8 per cent year on year.
Distributable income for the FY2007-08 totalled $187.3 million, up 14.3 per cent year on year, while distributable income per unit (DPU) was 14.13 cents, a 10.8 per cent rise. This also represents an annualised yield of 5.94 per cent based on the closing price of $2.38 per unit on March 31, 2008.
For the quarter, DPU was 3.69 cents, an increase of 11.8 per cent compared with the same period a year ago. This will be paid out on May 30, 2008.
A-Reit manager Ascendas Funds Management Ltd’s CEO Tan Ser Ping attributed growth in net property income to ‘positive rental reversion, active leasing and full-year contribution from prior year acquisitions’.
A-Reit now has 84 properties worth $4.2 billion, up from 77 properties worth $3.3 billion a year ago.
In the mandatory annual revaluation exercise conducted in March 2008, A-Reit also recorded a net appreciation of $494.1 million or 14.2 per cent over the book value of the properties (before revaluation) as at March 31, 2008.
In the year, A-Reit acquired seven properties and completed its third development project, HansaPoint@CBP, as well as two asset enhancement initiatives for a total of about $310 million.
The overall occupancy for A-Reit’s portfolio of 84 properties stands at 98.4 per cent compared with 96.6 per cent a year ago. Occupancy rate for multi-tenanted buildings increased by 2.7 per cent to 96.4 per cent compared with a year ago. It said the increase in occupancy is partly due to the spillover demand from the tight office supply situation in the CBD and the continued inflow of multinational companies setting up or expanding operations in Singapore.
For the year, A-Reit renewed or leased a total of 274,061 sq m of space. On a year-on-year basis, it registered 46 per cent and 40.3 per cent for its renewal rental rates for the Business and Science Parks, and high-tech industrial sub-sectors.
For the year ahead, A-Reit manager Ascendas Funds Management said it ‘expects to be able to deliver a DPU for the coming year that is in line with its recent performance’.
However, it did highlight a CB Richard Ellis report which expects the increase in rents and occupancy rates for high-tech and business parks space to continue at a ‘less brisk pace due to limited upcoming supply’.
Yesterday, A-Reit’s unit price fell two cents to close at $2.35 per unit.
AscottREIT – UOBKH
A Pedigree Pan-Asian Hospitality Play
Stable earnings underpinned by diversified asset portfolio. Ascott Residence Trust (ART) owns 37 properties, with 3,550 serviced residence/rental housing units, spread across 11 cities and seven Asia-Pacific countries. Its diversified regional exposure in both emerging and mature markets ensures stable earnings. Compared with hotels, the relatively longer-term leases of ART’s portfolio cushion it against short-term economic shocks. Excluding Revenue Per Available Unit (RevPAU) growth, we expect ART’s existing asset portfolio to offer a floor DPU yield of 5.9% and 6.1% in 2008 and 2009 respectively.
Potential S$300m asset acquisitions in 2008. ART’s ability to execute acquisitions can be seen from the over S$500m worth of acquisitions it has made since Mar 06. With a low gearing of 33.1%, ART can fund yield-accretive acquisitions of up to S$300m through debt (assuming debt/asset ratio of 45.0%) without having to tap the equity market. With RevPAU growth and S$300m worth of asset acquisitions, ART’s DPU yield will improve to 6.5% and 7.4% in 2008 and 2009 respectively .
Pedigree enhanced by CapitaLand’s TAG privatisation. ART has the right of first refusal to its sponsor The Ascott Group’s (TAG) serviced residence/rental housing assets in Asia-Pacific. TAG is the largest serviced residence owner-operator outside of the US. Its extensive exposure in Asia-Pacific provides a potential pipeline for asset injections into ART. The privatisation of TAG by its parent, CapitaLand, will increase the latter’s effective stake in ART from 37.3% to 46.6%. This streamlining of CapitaLand’s hospitality segment will strengthen ART’s importance in the Group and thus boost its potential for value creation for CapitaLand.
Initiate coverage with BUY and target price of S$1.77. Our target price of S$1.77 is on a par with our DCF valuation per share (WACC: 6.9%; terminal growth rate: 2.0%). ART is trading at a 27.7% discount to our target price and a 20.0% discount to ART’s 2007 NAV of S$1.60/share. Our earnings forecasts have not factored in other acquisitions besides the S$300m assumed for 2008. Risks include a sharp economic downturn in Asia, an inability to raise cheap debt, prolonged downturn in equity markets and competition in asset acquisitions.
PLife – BT
Parkway Life Reit agrees to buy property in Japan
It will acquire a distributing facility in Matsudo city for 2.59b yen
PARKWAY Life Reit will soon add an overseas property to its portfolio, following an agreement to buy a distributing facility in Japan for 2.59 billion yen (S$35 million).
The Reit’s manager, Parkway Trust Management, yesterday said Parkway Life Reit has agreed to acquire a two-storey building named J-REP Matsudo II with a net lettable area of about 3,240 square metres.
The freehold property, in Chiba prefecture’s Matsudo city, offers an initial net yield of 5.3 per cent. Parkway Trust said there is potential to increase the net lettable area as the current ratio of the building’s floor-to-land area is only 40 per cent, while the allowable ratio is 200 per cent.
Completed in 2005, the building is currently leased by logistics firm Nippon Express Co, which has an A2 credit rating. Nippon, in turn, has a back-to-back lease with its partner Inverness Medical Japan Co. Inverness uses the property to manufacture, sell and distribute its diagnostic test kits and medical devices.
‘We are very excited about Parkway Life Reit’s first investment in Japan,’ said Parkway Trust Management CEO Justine Wingrove. ‘This is a key market for us as the demand for good quality healthcare real estate assets is expected to grow, driven by the fact that by the year 2050, it is predicted that one in three Japanese will be over 65 years of age.’
The master tenancy agreement with Nippon will expire in nine years’ time. The property was valued by Colliers Halifax to be worth about 2.619 billion yen, as at last month.
Parkway Life is making the investment through its wholly owned subsidiary Matsudo Investment Pte Ltd. The seller of the property is J-REP Co, whose majority shareholder is Macquarie Goodman Asia.
The investment, to be funded through debt, will increase Parkway Life’s gearing to 8 per cent, from 4 per cent. With its ‘BBB+’ credit rating, the Reit can have about $1.2 billion worth of additional debt capacity.
Parkway Life did not reveal how much the investment will add to its distribution per unit (DPU), only saying it is ‘yield-accretive’.
Between last August, when it was listed, and end-December, Parkway Life posted a distributable income of $13.64 million, leading to a DPU of 2.27 cents.
Shares of Parkway Life ended two cents down at $1.19 yesterday.