Month: July 2008
FSL – BT
FSL to grow assets by US$300-350m a year, says CFO
SINGAPORE’S First Ship Lease Trust (FSL) yesterday said that it aims to buy up to US$350 million worth of vessels a year and that borrowing costs remain reasonable despite the credit crunch.
This could double its portfolio within several years, as FSL aims to tap growing global trade and a trend of shipping firms leasing a larger portion of their fleet.
‘Going forward, we are looking at US$300 to US$350 million on an annual basis to grow our portfolio,’ chief financial officer Cheong Chee Tham told Reuters in an interview.
Borrowing costs remain ‘reasonable’ at around Libor (London Interbank Offered Rate) plus 120 basis points compared with Libor plus 100 basis points about a year ago, he added.
FSL, which leases liquid tankers, container ships and dry bulk carriers to firms such as Taiwan’s Yang Ming and Russia’s Rosneft, has acquired US$280 million worth of assets so far this year to boost earnings and revenue.
For the second quarter ended June 30, the trust’s revenue rose 71 per cent to US$20.7 million from a year ago while distribution to unitholders increased 28 per cent to 2.8 US cents a share.
FSL expects to pay a third quarter distribution of 3.05 US cents, Mr Cheong said, adding that the payout will remain at 100 per cent of surplus cash flow in the foreseeable future.
Mr Cheong said that the trust favoured smaller ships as these were easier to sell in the second-hand market or lease out once the original leases expired.
He said that he expects shipping firms to lease a larger proportion of their fleet to reduce capital expenditure and free up funds for other operations.
‘In terms of shipping, operating leasing is still relatively less mature than for aircraft,’ he said, noting that just 10-15 per cent of the total financing market for ships involved leases compared with 40-50 per cent for commercial aircraft.
He also said that FSL will likely borrow to pay for new acquisitions, or ask its main shareholder, First Ship Lease, to buy and ‘warehouse’ the ships on its behalf until conditions in equity markets improve.
FSL has a fleet of 22 vessels with another on the way once financing is completed.
The trust had a net book value of US$938 million as at end-June.
FSL and the other two Singapore-listed shipping trusts, Rickmers Maritime and Pacific Shipping Trust , currently trade at distribution yields of around 11 per cent compared with about 7 per cent for US-listed ship financiers such as Seaspan.
They offer higher yields than Singapore-listed real estate investment trusts (Reits), which currently yield around 5-6 per cent, because ships typically have a lifespan of 25-30 years.
Shares of FSL closed at $1.28, down 1.5 per cent after paring earlier losses.
The trust has gained around 8 per cent since the start of the year, beating the benchmark index’s 16 per cent fall. — Reuters
MapleTree – BT
MapletreeLog’s sponsor backs rights issue
It will apply for excess rights units in case any rights units aren’t taken up by trust’s unitholders
AMID market concerns about a potential share overhang, Mapletree Investments Pte Ltd (Mapletree) – the sponsor and parent of Mapletree Logistics Trust (MapletreeLog) – yesterday declared its full backing for the trust’s rights issue.
In a move to take up all rights units, if any, not taken up by unitholders of MapletreeLog, Mapletree said it has decided to apply for excess rights units.
‘Mapletree will rank last in priority after excess rights applications from all other unitholders are allocated,’ said the sponsor.
Mapletree had last month already undertaken to subscribe in full for its 30.16 per cent rights entitlement.
The ‘share overhang’ worry in the market is that in the event of the rights issue not being fully taken up, the excess rights units could end up in the hands of issue underwriters who, on disposing of the units, would cause the unit price to fall.
Mapletree’s move could address this concern because of its long-term investment approach.
The issue of the 831.1 million rights units at 73 cents each will reduce the trust’s gearing from 56.3 per cent currently to 38 per cent – addressing another major concern in the market about MapletreeLog.
Mapletree CEO Hiew Yoon Khong said in yesterday’s statement: ‘As the sponsor and natural investor in MapletreeLog, we have every confidence that the manager of MapletreeLog will continue to enhance the distribution per unit for unitholders.’
A Mapletree spokeswoman said yesterday: ‘We noted the concerns that MapletreeLog’s price was trading for a short period of time below the issue price and the concern of a price overhang. We believe the rights price of 73 cents is attractive and we are fully confident that once the rights issue is completed, MapletreeLog will have a more robust balance sheet and greater financial flexibility.’
The counter closed unchanged at 75 cents yesterday.
MapletreeLog unitholders will be offered three rights units for every four existing units held.
The trust will make an announcement next week on when subscription for the rights units opens.
Last Friday, MapletreeLog’s unitholders approved the rights issue and independent unitholders (excluding Mapletree) gave Mapletree the option to pick up excess rights units without being obliged to make a mandatory general offer for the trust.
The underwriters for the rights issue are DBS Bank, Goldman Sachs (Singapore), Macquarie Capital Securities (Singapore) and UBS Investment Bank.
Mapletree’s Mr Hiew stressed: ‘MapletreeLog is an integral component of the Mapletree group’s funds management platform . . . At the rights issue price of 73 cents, we believe this is an excellent investment opportunity. Our decision to take up all unsubscribed rights units is also a demonstration of our strong support and complete confidence in the sustained growth of MapletreeLog.’
CCT – DBS
Steady growth
Story: CCT’s 23% yoy jump in Q2 distribution income to $36.1m was in line with expectations. This was achieved through a 25% rise in revenue to $74.4m on the back of strong organic rental growth. NPI increased by a slightly lower 19% to $51.5m, eroded by higher property taxes. On a qoq basis, bottomline rose a modest 0.6%, despite a 4.5% hike in topline due to higher interest expense. The group revalued its properties by an average 9% to $5.6b, translating to a book NAV of $3.07.
Point: With portfolio occupancy at a high 99%, the uplift to bottomline came largely from positive rental reversions across its buildings. About 10.7% of portfolio office space was renewed in 1H08 at rents 193% above preceeding levels while retail rents were up 52% over previous rates. For eg, leases at 6 Battery Rd were contracted at $21.6psf/mth while at Robinson Pt, rents reached $12psf/mth. Looking ahead, we believe the pace of office rental growth is likely to moderate in 2008 given the slower global economic growth. Nonetheless, CCT should still enjoy positive earnings growth given the significant spreads between average passing and new rents and the tight near term supply of prime office space. 2H08 earnings will be driven by organic growth as well as new contributions from One George St (OGS). CCT has a remaining 3% and 2% of office and retail space respectively to be renewed. Going into 2009-10, an estimated 26% of office and 16% of retail space is up for reversions.
Relevance: We have tweaked our FY08 and FY09 DPU up slightly to 10.5cts and 12.2cts respectively. Our price target is adjusted down to $2.23 based on higher risk free rate assumption of 3.9%. The stock is currently trading at 0.6x P/Bk NAV and is offering DPU yields of 5.3% and 6.2% respectively over FY08-09.
ART – DBS
1H08 Results in Line
Story: Ascott Residence Trust (ART) turned it a stable 2Q performance. Gross revenues grew 13% yoy to $46m and net property income grew by 27% to $23.2m, coming in within 50% of our full year forecasts. Distributable income also grew 10% yoy to $13m in 2Q08, translating to a DPU of 2.19 cts for 2Q. ART also announced a distribution of 4.52 cts per unit for its 1H08 performance.
Point: Growth was largely derived from i) organic growth driven by the outperformance of its Singapore and Vietnam operations. On a same store basis, revenue contribution from existing properties grew 7% to S$43m and gross profit grew 19% to S$21.6m and ii) new contributions from asset acquisitions in Japan and Australia, adding $2.5m and $1.6m to revenue and net property income respectively. Outlook remains stable given that 55% of its rental income are signed on a long term basis, (> 6 months), average length of stay for the portfolio stands at more than 8 months. Outlook for its major markets, namely Singapore, Vietnam, China and Philippines remains stable in the face of a tight supply for quality serviced residence accommodation, forming a base for a sustained performance in near term.
Relevance: We continue to like ART for its exposure in the Asian mid-term hospitality sector that is still expected to remain firm in the medium term. As such we re-initiate coverage of ART with a BUY recommendation, target price of S$1.36 based on DCF. Our valuation methodology is based on a risk free rate of 3.9%, risk premium of 5.5% and a terminal growth rate of 0.5% with beta pegged to 0.8x, as per our S-REITs sector peers. The stock is currently trading at an attractive 7.9% FY08 and 8.2% FY09 DPU yield.
ART – BT
ART Q2 distributable income climbs 9.6%
Trust cites organic growth, acquisitions for better results
ASCOTT Residence Trust (ART) said yesterday its second-quarter distributable income climbed 9.6 per cent to $13.3 million, from $12.1 million a year ago.
Distribution per unit was 2.19 cents, an increase of 9 per cent from 2.01 cents in Q2 last year.
The trust said its better performance was due to organic growth across its portfolio – particularly in Singapore and Vietnam – and contributions from properties acquired in the past 12 months.
Revenue for Q2 ended June 30 rose 13.3 per cent to $46 million, from $40.6 million in Q2 2007. In Singapore, revenue per available unit rose some 30 per cent from last year.
For the first six months of 2008, distributable income rose 36.1 per cent to $27.5 million. Distribution per unit rose 25.6 per cent to 4.52 cents. Revenue for the half-year rose 31.6 per cent to $91.6 million.
ART intends to increase its investment in emerging markets such as China, Vietnam and India, said Chong Kee Hiong, chief executive of the trust’s management team. ‘If you look at the current environment, I would say the opportunities are in emerging markets,’ he said.
Right now, the trust has 50 per cent of its $1.5 billion portfolio in emerging markets. Mr Chong said he wants to increase the proportion to 60-70 per cent in the longer term. ART owns 3,550 apartments in 37 properties across seven countries.
The trust said the global financial turmoil triggered by the sub-prime crisis and tighter credit had some effect on the Asian hospitality industry in the first half of this year.
‘Should these factors persist, there will be further impact on business travel patterns to the markets we operate in, although the group’s geographical diversity and extended stay business model allow it to mitigate these factors,’ it said.
The trust’s units rose two cents to close at $1.12 yesterday. The units have shed 22.8 per cent since the start of the year.