Month: February 2009
Rickmers – DBS
Financing remains key
Rickmers Maritime did not surprise and maintained its quarterly DPU payout of 2.25 UScts, in line with steady operating performance. We believe the payout can be sustained in FY09. However, RMT still needs to find a solution to its committed FY10 capex needs of US$711m. In addition, near term refinancing needs include a US$130m bullet repayment due in 1H10. With spot charter rates currently hovering around 50-60% below contracted long term charter rates, the risk of renegotiations cannot be ruled out either. Hence, we maintain HOLD at a reduced target price of S$0.40.
Net profit affected by impairment charges. In a prudent move, RMT took a US$3.5m impairment charge on the Maersk Djibouti vessel to account for the risk that Maersk may exercise the early termination option by Feb’10. No other vessel has this clause, however.
Current Loan to Value ratio is within range but risks persist. Data from Clarksons Research indicates that newbuilding prices for similar vessels as those on RMT’s orderbook may have fallen 10-12%. We estimate one of the loan tranches, a US$288m facility financing the 5 Mitsui ships, may be at risk of technical default.
FY09 DPU should be stable, but lack of visibility. RMT will add 5 vessels to its portfolio this year, fully financed by existing credit lines. This should ensure enough cash flows in FY09 for RMT to maintain the 2.25 UScts quarterly payout, even while conserving cash. However, with financing uncertainties looming, dividend visibility may be clouded beyond that. In our forecast numbers alongside, we assume a 60% debt-funded potentially dilutive acquisition scenario. But our target price of S$0.40 is derived as the average of fair values under 3 probable scenarios – I) as described above, ii) non-realization of above acquisition and cash flows accruing only from portfolio as of end-FY09 and iii) inability to conclude near-term refinancing deals.
CMT – BT
Rights issues to pad up CapitaLand, CMT war chests
Both issues offered at steep discounts; CapitaLand looking at acquisitions, CMT to pay off debt
Singapore’s biggest property developer CapitaLand and its listed retail trust CapitaMall Trust (CMT) yesterday announced two rights issues totalling some $3.07 billion.
CapitaLand said that it will raise $1.84 billion in a 1-for-2 rights issue to build up its war chest to $6 billion, from $4.2 billion now, as it remains on the lookout for acquisition opportunities in markets such as Singapore and China. The developer’s fourth-quarter net profit slumped 88 per cent.
And CMT, Singapore’s largest real estate investment trust which is 29.7 per cent owned by CapitaLand, will raise $1.23 billion in a 9-for-10 rights offer. It will use most of the proceeds to pay off $956.2 million of debt due this year.
Market rumour that CapitaLand was planning a rights issue first surfaced early last month, depressing the company’s shares.
CapitaLand is the second major Singapore company to raise money through a rights issue in recent months. In late December, DBS Group said that it planned to raise about $4 billion to bulk up its capital base. Both CapitaLand and DBS count Singapore investment company Temasek Holdings as their largest shareholder.
‘This year is turning out to be a race in raising funds through rights issues and has depressed CapitaLand’s shares for a while,’ Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co, told Bloomberg.
But while CapitaLand’s rights issue was expected, CMT’s announcement took some by surprise. Analysts were expecting it to just look for debt refinancing. Another one of CapitaLand’s Reits, CapitaCommercial Trust, recently said that it had refinanced at attractive rates.
Another element that caught most analysts by surprise was the steep discounts at which the rights issues are being done.
CapitaLand’s rights offer is priced at $1.30 a share, which represents a 45 per cent discount to its closing price of $2.36 a share last Friday, the last day that the stock was traded. The offer price is also at a 54 per cent discount to CapitaLand’s post-rights issue net tangible asset (NTA) of $2.80 per share.
Likewise, CMT is making its rights offer at 82 cents a unit – 43.4 per cent lower than last Friday’s closing price of $1.45 and also 50.3 per cent lower that CMT’s expected net asset value per unit once the rights issue is completed.
‘CapitaLand and CMT could be pricing the rights issues lower to entice their shareholders to take up their allotments in the current weak market,’ said one analyst.
Both the developer and its trust are expected to be in a better position to grow once the rights issues are completed.
CapitaLand said that the ‘pre-emptive’ rights issue will provide it with ‘greater financial capacity to pursue acquisitions and investment opportunities that may arise’.
‘We will also be well-positioned for any mergers and acquisitions opportunities that might arise,’ said CapitaLand chief executive Liew Mun Leong. ‘We have a number of proposals on the table that we are studying but we are not ready to make any announcements yet.’
He identified Singapore, China and Japan as attractive markets for acquisitions, and also said that CapitaLand is on the lookout for distressed assets.
CMT, on the other hand, will use the bulk of the proceeds to repay borrowings due this year, which total $956.2 million. The balance will be used to pay for asset enhancement initiatives as well as for general corporate and working capital purposes.
DMG & Partners Securities analyst Brandon Lee said that the rights issue puts CMT ‘in the clear when it comes to its debt’ – which means that CMT will not have to compete with other property trusts for financing in the tight credit environment.
Lim Beng Chee, chief executive of CMT’s manager, said that the trust chose to go with a rights issue rather than look for refinancing for its loans as it was looking at the ‘longer-term’. The rights issue is expected to provide the trust with greater financial flexibility for future opportunities, such as asset enhancement works at Jurong Entertainment Centre and the newly-acquired The Atrium@Orchard, he said.
Analysts also said that the trust will be better positioned to make acquisitions after the rights issue as its gearing is expected to fall from 43.2 per cent to 29.1 per cent. This will make it easier for CMT to raise money in future. CapitaLand similarly said that its net gearing will be reduced from 0.47 times now to 0.28 times after the rights issue. But the developer’s NTA per share will fall from $3.57 to $2.80.
CapitaLand has agreed to subscribe for up to 60 per cent of the total size of CMT’s rights issue, including its rights entitlement based on its current 29.7 per cent stake. If CapitaLand takes up 60 per cent of the rights issue, its stake in CMT will climb to 44.1 per cent. The developer said that it will not use any proceeds from its own rights issue to buy any units in CMT’s rights issue, and will instead use existing cash reserves.
CapitaLand also said that Temasek Holdings, which has a direct stake of 39.7 per cent in the company, will subscribe to all rights shares that it is entitled to.
Shares of both CapitaLand and CMT resume trading today.
Rickmers – BT
Impairment charge hits Rickmers’ Q4 earnings
RICKMERS Maritime Trust has posted a 23 per cent fall in net profit for the fourth quarter to US$7.2 million, due to US$3.5 million in provisions for impairment of a vessel. But the shipping trust recommended a distribution per unit (DPU) of 2.25 US cents, the same as for the third quarter and 5 per higher than the 2.14 US cents a year ago.
Net profit for the year came to US$34.4 million, up from US$20.6 million for 2007. Rickmers was formed in March 2007 but commenced activities only upon listing on May 4, 2007.
Fourth-quarter charter revenue rose 76 per cent to US$29.6 million from US$16.8 million a year ago. For the full-year, charter revenue leaped to US$102.1 million from US$37.6 million (for the portion of 2007 that the trust was operating) as Rickmers rapidly added vessels to its fleet in 2008.
Fleet size rose to 13 vessels at end-2008 from nine at end-2007. In FY2008, Rickmers accepted delivery of a 3,450 twenty-foot equivalent unit (TEU) vessel which has been leased to Evergreen unit Italia Marittima on an eight-year fixed-rate charter and three 4,250 TEU ships chartered to Mitsui OSK Lines on 10-year fixed-rate charters.
DPU for 2008 came to 8.89 US cents, representing an average payout ratio of 73 per cent. However, CEO of trustee-manager Rickmers Trust Management, Thomas Preben Hansen, was unwilling to provide further DPU guidance in the current climate even though he believed there is ‘no reason to cut DPU guidance’.
CFO Quah Ban Huat said: ‘In this climate, we took a prudent approach of providing for vessel impairment of US$3.5 million in the fourth quarter of 2008 due to the risk that the charterer of one of our vessels may exercise an early termination option which could result in the redelivery of the vessel from February 2010 onwards.
‘This provision will not have any impact on our cash flow and distribution.’
MI-REIT – BT
MI-Reit ups Q3 distribution; refinancing talks still on
MACARTHURCOOK Industrial Reit (MI-Reit) yesterday reported improved results for the third quarter ended Dec 31, 2008, helped by rental income from additional properties acquired.
But good news has yet to come on debt refinancing – the Reit is still negotiating with lenders on a $220.8 million facility coming due in April.
For the third quarter ended Dec 31, 2008, MI-Reit reaped a net property income of $9.39 million – up 49 per cent from a year ago.
This ‘was largely driven by rental income from the nine additional properties acquired during the last financial year’, said Nick McGrath, CEO of trust manager MacarthurCook Investment Managers (Asia).
Distribution to unitholders rose 23 per cent to $6.15 million. This translates to a distribution per unit (DPU) of 2.35 cents, exceeding the 1.92 cents in 3Q 2008.
The trust manager expects MI-Reit to deliver a DPU that is in line with its recent performance for the rest of the financial year.
But MI-Reit is still in talks with its lenders to refinance an existing facility worth $220.8 million. The facility will mature on April 17 and had been drawn to $201.3 million as at Dec 31.
Just last week, Moody’s Investors Service cut the Reit’s corporate family rating from Ba2 to B1 to reflect the refinancing risk. The rating also remains on review for a possible downgrade. As at Dec 31, the Reit had $225.0 million repayable within a year and its gearing ratio stood at 39.7 per cent.
MI-Reit also believes that capital values of industrial properties fell during Q3 2009 ‘although there is little transactional evidence to support a change in values’.
This being so, the trust manager decided to conduct and adopt internal valuations for all its properties. For four of them, values were lower than those produced by external valuations earlier. As a result, MI-Reit’s total portfolio fair value as at Dec 31 was $556.3 million, marginally below the $560.1 million from external valuations.
Units of MI-Reit gained two cents or 8.7 per cent to close at 25 cents yesterday.
CMT – BT
CapitaLand to raise $1.84b, Q4 net falls 88%
CapitaLand, Southeast Asia’s biggest developer, posted an 88 per cent plunge in quarterly net profit and said it will raise S$1.84 billion (US$1.23 billion) via a 1-for-2 rights issue.
Separately, CapitaMall Trust , a shopping mall real estate investment trust (REIT) managed by CapitaLand, said it would raise S$1.23 billion via a 9-for-10 rights issue at S$0.82 a unit.
CapitaLand, 40 per cent-owned by Temasek Holdings, attributed its sharp fall in quarterly net profit, which was above analysts’ expectations, in part to weaker sales in China and Australia.
Looking ahead, CapitaLand said it was difficult to predict the length and severity of the global economic downturn.
But it added it was in a strong financial position ‘to take advantage of the many financial opportunities that are likely to present themselves in future.’
CapitaLand, which owns about 30 per cent of CapitaMall, said it would subscribe for up to 60 per cent of the REIT’s rights shares to support the issue.
‘The rights issue is pre-emptive to strategically enhance the group’s financial flexibility,’ CapitaLand CEO Liew Mun Leong said in a statement. ‘We will also be well-positioned for any mergers and acquisitions opportunities that might arise.’ The property giant did not say if Temasek had committed to support its rights issue.
CapitaLand, which has its main operations in Singapore, China and Australia, posted October-December net profit of S$78 million, down from S$675 million a year ago. The figure was above the S$18 million forecast by 16 analysts polled by Reuters.
Full-year net profit dropped 54 percent to S$1.26 billion, compared with a consensus forecast for S$1.36 billion. The reported earnings did not include unrealised fair value changes, CapitaLand said.
CapitaLand said it will offer shareholders the right to buy one rights share for every two existing shares held at S$1.30 a share, a 45 per cent discount to the firm’s last traded price.
CapitaMall’s rights units are priced at a 43 per cent discount to their last traded price.
CapitaLand brought forward its earnings announcement by one day and suspended trading in its shares on Monday. — REUTERS