Month: July 2008
MP REIT – DBS
Prime Orchard Landlord
Story: MP Reit announced their 2Q08 in line with expectations. Gross revenues grew 27.8% yoy to S$30.2m while NPI increased 29.2% yoy to S$23.1m. Distributable income came in 18.7% higher yoy at $33.3m, resulting in a DPU of 1.78 cts.
Balance sheet remains strong with a gearing ratio of 28.9%as at 30 Jun 08 and interest cover of 4.8x. Interest costs remain relatively low at 2.76%. In the near term, MP Reit is in the process of renewing c$220m of expiring debt.
Point: Performance was largely organic in nature arising from higher rental reversions and contributions from its overseas properties despite some disruptions at their Chengdu asset resulting from the earthquake. Moving forward, DPU growth is likely to grow even stronger with (i) rental reversions from another 13% of portfolio NLA up for renewal in FY08, 15% in FY09, (ii) impact of 19.75% increase in rent from Toshin lease, and (iii) AEI activities done on Ngee Ann City will start contributing in 2H08. Key data points to look out for in the near term will be the outcome of the strategic review which management of MP Reit has yet to conclude.
Relevance: Maintain BUY, TP adjusted to $1.39 from $1.61. We have adjusted our DCF valuation downwards to take into account a higher risk free rate of 3.9% and a lower terminal growth of 1%. At current price, MP Reit is trading at an attractive 0.7x P/BV, backed by quality assets and offers a FY08-09 DPU yield of 7.0% and 7.2% respectively.
Allco – Nomura
First look
Allco’s 2Q08 results were in line, with the positive reversionary profile in Singapore over FY08-09F underpinning valuations. We see the acquisition of a 17.7% stake in the REIT by FNN as positive, enabling the REIT to leverage off a pipeline of assets (circa S$640mn), with DPU potentially seeing a fillip on lower funding costs consequent to a review of the REIT’s credit rating and a realised gain on a derivative financial instrument of S$3.9mn. Our STRONG BUY and FV stand.
2Q08: in line with expectations
LMIR – OCBC
Back on track in second quarter
Outperforms IPO guidance this time. Lippo-Mapletree Indonesia Retail Trust (LMIR) had a relatively smoother ride over 2Q08 – it posted S$24.5m in gross revenue, 15% higher than the trust had guided during its November 2007 IPO. This was a welcome change from the previous period, when it had missed its own guidance by 5.11%. The trust will pay out 1.5 S cents per unit for the quarter, 3% above guidance. On a normalized QoQ basis, DPU is almost unchanged as the trust had been able to cushion the last period’s revenue shortfall with some one-time gains.
Sun Plaza booster, rest on track. Earnings were primarily boosted by Sun Plaza, which was acquired on 31 March. The retail mall in Medan, LMIR’s first (partially) debt-funded buy, increased the trust’s total portfolio NLA by almost 20%. Management disclosed that the portfolio ex-Sun Plaza performed as per LMIR’s guidance – contributing about 1.46 S cents of the 1.50 S cents DPU. Management also told us that rent reversions have been in line with LMIR’s assumptions at its IPO – the trust is seeing reversionary growth of about 10% per annum. Occupancy rates are also increasing as expected except for dark horse Bandung Indah where occupancy shot up to 97.4% as of 30 June from 89.3% on 31 March.
Asset enhancement plans. Macro-level uncertainties have led LMIR to re-assess its acquisition plans and we continue to expect a more conservative pace than what was indicated at its IPO. In any case, our valuation has always been based on the existing portfolio alone. In the meantime, the trust plans to roll out asset enhancement initiatives worth about S$3m at the trust’s Istana Plaza and Mal Lippo Cikarang malls that will increase the malls’ NLA by 2.4% and 17.3%, respectively.
Revise up DPU estimate, maintain BUY. We have tweaked our occupancy and rent assumptions, increasing our DPU estimates by about 4%1. Meanwhile, LMIR has appreciated over 9% since our last report in June. Our view on the trust is unchanged – the oft-discussed macroeconomic risks are balanced by the opportunities inherent in Indonesia’s retail sector. And while market conditions have currently reined in the trust’s acquisition plans, its low 10.2% gearing and strong acquisition pipeline gives it headroom for growth as credit conditions improve. LMIR’s 10.1% FY08F distribution yield (annualized) is an attractive entry point for investors, in our view – maintain BUY and S$0.70 fair value estimate.
Fortune – BT
Fortune Reit Q2 distributable income up 13.5%
FORTUNE Real Estate Investment Trust, which owns 11 Hong Kong malls, has posted distributable income of HK$79.4 million (S$13.8 million) for the second quarter ended June 30, 2008, up 13.5 per cent from the corresponding year-ago period.
The latest Q2 bottomline included HK$21.9 million non tax-exempt income, which referred mainly to interest income from fixed deposits and structured swaps entered on June 28, 2006. ‘Included therein for the period 1 April 2008 to 30 June 2008 is a positive fair value of HK$16.6 million (1 April 2007 to 30 June 2007: Nil) as well as the value of HK$5.02 million for the unwinding of one of the structured swaps,’ the trust said in its results statement.
Total revenue rose 2.8 per cent year-on-year to HK$156.6 million in Q2, while net property income increased 2 per cent over the same period to almost HK$115 million.
For the six months ended June 30, 2008, Fortune Reit’s net property income was flat at around HK$229 million, while total revenue inched up 0.2 per cent to HK$308.9 million. Distributable income rose 5.3 per cent to HK$150.9 million.
Unitholders will receive a tax-exempt distribution per unit of 18.51 HK cents for the half-year ended June 30, 2008. That works out to an annualised distribution yield of 8.2 per cent based on Fortune Reit’s HK$4.54 closing price on June 30.
Fortune Reit was last traded on Monday (July 28), when it closed at HK$4.31, down five cents from the Friday closing.
Its net asset value per unit (excluding hedging reserves) slipped 2 HK cents to HK$9.02 as at June 30, 2008, from HK$9.04 as at Dec 31, 2007.
Fortune Reit currently has 11 malls – many of which are in the New Territories – worth about HK$9.7 billion, against five malls worth HK$3.3 billion when the trust was listed in 2003.
The trust’s manager, ARA Asset Management (Singapore) Ltd, said: ‘Asset enhancement initiatives to improve revenue and shopping experience are in progress with the major initiatives at City One Shatin Property, Household Center and Smartland, to refine the physical enhancements and tenant mix.’
It also noted that the trust’s low gearing of 23.4 per cent ‘provides management with debt flexibility of about HK$1.8 billion for opportunistic acquisitions, before a credit rating and before the statutory borrowing limit of 35 per cent is reached’.
LMIR – BT
LMIR Trust beats forecast with $16m Q2 distributable income
Contribution from Sun Plaza boosts results; it is upbeat about prospects
LIPPO-MAPLETREE Indonesia Retail Trust (LMIR Trust) yesterday said that its second-quarter distributable income came to $15.9 million – 3 per cent higher than the $15.4 million forecasted.
Distribution per unit (DPU) for the three months ended June 30, 2008, was 1.50 cents, also 3 per cent higher than the forecast DPU of 1.45 cents.
Net property income for Q208 was $23.3 million, 17 per cent higher than the forecast of $19.9 million.
There is no comparable period for 2007 as LMIR Trust was only listed on the Singapore Exchange in November last year.
LMIR Trust invests in Indonesian retail assets. Its current $1.2-billion portfolio consists of eight retail malls and seven retail spaces located within other retail malls.
The trust’s financial performance was boosted by contribution from its Sun Plaza mall, which was acquired in March this year. The $147-million acquisition increased LMIR Trust’s total portfolio net lettable area by about 20 per cent to 4.1 million sq ft.
For the trust’s 2008 financial year-to-date – which spans from Aug 8, 2007 to June 30, 2008 and covers both its time as a private trust and as a listed entity – distributable income was $39.3 million, while DPU was 3.7 cents – both 3 per cent higher than the forecasts.
The trust is upbeat about its future prospects and the continued growth prospects for the Indonesian economy, which have stood up well despite rising inflation and interest rates, said Viven G Sitiabudi, chief executive officer of the trust’s management team. ‘LMIR Trust’s malls are defensive in nature, as they are located in high catchment middle to upper-middle income residential areas where the inflation effect is moderate,’ she noted.
The trust is planning asset-enhancement initiatives at two of its malls – Istana Plaza in Bandung and Mal Lippo Cikarang in Greater Jakarta. Some $3 million will be spent in total on both malls to boost traffic and rental income.
The stock gained 0.5 cents to close at 59 cents yesterday. LMIR Trust has shed 11.3 per cent since the start of the year.