Month: October 2008
a-iTrust – BT
a-iTrust reports $13.8m Q2 distributable income
BUSINESS space trust Ascendas India Trust (a-iTrust) yesterday reported distributable income of $13.8 million for the second quarter ended Sept 30, 2008 – 24 per cent higher than a year ago.
This translates to a distribution per unit (DPU) of 1.82 cents, 23 per cent more than for the corresponding period last year. The DPU for the first half of the year stands at 3.47 cents, and represents an annualised yield of 13.2 per cent when seen against a-iTrust’s closing unit price of 52.5 cents on Sept 30.
‘Our high-quality IT parks, serving our target market of largely multinational corporations which appreciate the quality of the environment, services and lifestyle within our parks, continue to enjoy rental growth, high occupancy and a stable income stream,’ said Jonathan Yap, CEO of a-iTrust trustee-manager Ascendas Property Fund Trustee.
a-iTrust’s portfolio of completed space across the Indian cities of Bangalore, Chennai and Hyderabad, amounting to 4.8 million square feet, was 98 per cent occupied as at Sept 30. Less than 18 per cent of space is due for renewal in the current financial year.
In the first half of the financial year, 0.6 million sq ft of space was leased or renewed at higher average rental rates.
With economic and financial headwinds sweeping across the world, Mr Yap believes that a-iTrust’s target tenants will continue to find India’s cost competitiveness and large market attractive. According to the trust, the economic slowdown could encourage the offshoring of operations to India. Tighter credit conditions could even work in its favour by reducing the new supply of space in the market.
As for financing, ‘I don’t see a very big concern on that front,’ Mr Yap told BT. a-iTrust raised around $550 million when it was listed in August last year. Its gearing as at Sept 30 was 5 per cent. It also had cash and cash equivalents of $42 million, exceeding the $20 million of borrowings payable within a year.
In fact, banks looking to diversify their loan books could consider a-iTrust, said Mr Yap. ‘If lenders want a bit of Indian exposure, we do believe that the trust represents a relatively safe way for them to do that, (because) it is regulated by Singapore law and the portfolio in India is very established.’
a-iTrust’s units ended trading 3.5 cents higher yesterday at 46 cents.
Cambridge – CIMB
Working on refinancing
• In line, management fees paid in cash. 3Q08 results were in line with consensus and our expectations. DPU of 1.49cts form 24% of our forecast of 6.14cts for FY08. Gross revenue of S$18.3m was up 35.8% yoy on full contribution of acquisitions completed earlier. YTD DPU of 4.6cts forms 75.2% of our full-year estimate, in line.
• 100% of management fees to be paid in cash. DPU for 3Q08 shrank 12.4% yoy from 1.7cts as the management had elected the full payout of management fees in cash, as opposed 65% in units and 35% in cash earlier. This was primarily to reduce dilutive effects to existing unit-holders.
• Expect FY09 cost of debt to rise. The management is working on refinancing of S$337m of debt due by Feb 09. Cost of funding is expected to increase significantly “with a corresponding reduction in distributions” although the quantum was not guided. Nonetheless, we expect CIT to be able to secure financing with significant stakeholder National Australia Bank possibly coming in as the lender of last resort.
• Changes to assumptions. As all of CIT’s leases are on long lease arrangements, we maintain our forward rental estimates. However we cut our FY08 acquisitions of S$95m to S$32m, as MOUs for the acquisitions of Natural Cool Lifestyle Hub and a private lot at Tuas South St 5 had lapsed. We also increase our cost of debt assumption from FY09 by an additional 300bps, in line with indicative market rates, and adjust for cash payment of management fees from 3Q08.
• Maintain Outperform at lower target price of S$0.52 (from S$0.90). Following our adjustments, our FY08-10 estimates decrease by 1-25%. We have a lower target price of S$0.52 (from S$0.90) based on DDM valuation at a higher discount of 9.6% (from 8%), which more accurately reflects industry and company specific risks vis-à-vis other REITs under our coverage. Despite our increase in cost of debt assumptions, forward dividend yield in FY09 remains attractive at 19.8% due to overselling of the stock. Yields for CIT remain the highest within the industrial REIT sector in FY08, and above average S-REIT yields at 15.2%. We remain positive on the relative resilience of the industrial sector anchored by its long weighted average remaining lease term of 5.9 years. Maintain Outperform.
CDLHTrust – CIMB
Negatives priced in
• Meeting expectations. 3Q08 results were in line with consensus and our estimates. DPU of 2.93cts grew 24.2% yoy to form 26% of our forecast of 11.2cts for FY08. Gross revenue of S$29.1m was up 21.3% yoy on double-digit revenue per available room (REVPAR) growth in its Singapore properties. YTD DPU forms 78.5% of our full-year estimate, in line.
• Average room rates up but occupancy slow. Room rate increases for Singapore hotels remained strong at 27.6% on a yoy basis, boosted by F1 in September. However occupancy levels slowed from the high base in 3Q07, dropping 4.4- percentage points to 85.5%
• Debt facilities due in Jul 09. All of CDLHT’s debt of about S$297m would be due for refinancing by Jul 09. All-in cost of funding as at Sep 08 was 3.1%. With CDLHT’s low asset leverage at 19.3%, high interest cover of 12.2 times, BBBrating and strong sponsor M&C, we believe that refinancing would not be difficult for the company.
• Changes to assumptions. In line with our house view that the US financial crisis could result in a marked slowdown in Asia, we cut our REVPAR forecasts (a function of occupancy and average daily rates) to reflect between 10-20% decline in FY09-10. Separately, we remove our earlier acquisition assumptions of S$300m per annum over FY09-10 as we do not expect any acquisitions in the current credit climate. We also increase our cost of debt assumptions by another 50bps from FY09.
• Maintain Neutral at lower target price of S$0.77 (from S$1.78). Following our adjustments, our FY09-10 estimates decrease by 19-29%. We apply a higher discount rate of 10.8% (previously 8.5%) to our DDM valuation to reflect increased risks for the short-stay tenures of the hospitality industry in this climate vs. other property segments (average 3-year leases). Our earnings reductions account for 72% of the change in our target price. Our new target is S$0.77 (from S$1.78). CDLHT’s sharp price fall of 77% since Jan 08 has priced in the negatives of slowing growth. Maintain Neutral.
MP REIT – Nomura
3Q08: in line with expectations
MMP’s 9M08 results were broadly in line with expectations, with reported DPU of S¢5.32/unit (up 18.0% y-y) representing 77.1% of our full-year forecast. Still, the deteriorating macro outlook (we have lowered our Singapore GDP forecast for 2009F to 1.3%, from 3.6% previously) amid higher retail supply likely calls for a review of our rental forecasts and yield assumptions with a negative bias. This will likely hurt our core net asset valuation of S$1.27/unit.
REITs – BT
Reit shares up on Macquarie deal
Shares of Singapore real estate investment trusts (Reits) rose yesterday, helped by improved sentiment after Malaysia’s YTL Corp bought a 26 per cent stake in Macquarie Prime Reit at a more-than-50-per cent premium.
‘YTL’s investment indicates there are investors who are confident in the longer-term prospects of Singapore property,’ Goldman Sachs said in a report. ‘We view this development as positive for Macquarie Prime Reit and for the Singapore Reit sector.’
CapitaCommercial Trust closed trading at 89 cents, up 1.1 per cent after an intra-day high of $1.05, while CapitaMall Trust hit a high of $1.84 before easing 1.8 per cent to $1.62. Macquarie Prime too surged 9.3 per cent before closing 1.9 per cent up at 55 cents.
YTL, a property and infrastructure conglomerate, said on Tuesday it will buy 26 per cent of Macquarie Prime and 50 per cent of the Reit’s management firm for $285 million. The price of $0.82 a unit represents a 52 per cent premium to the Reit’s last traded price and a 49 per cent discount to book value. — Reuters