Month: June 2009
MI-REIT – Phillip
Net Property Income (NPI) for FY2009 registered an increase of 48.5% to $36.9 million. DPU for the full year is 8.925 cents.
Actual NPI is not far off from our estimates of $35.2 million. However DPU is 7.2% lower than our estimates. Fourth quarter DPU was 1.875 cents, which was 20% lower than the three preceding quarters of 2.35 cents, even though the fourth quarter DPU comprised retained distributions from first quarter through third quarter.
Asset value declined 4.5% from $555.4 million in FY2008 to $530.3 million in FY2009. In addition, MIREIT took a $20 million provision to its balance sheet as it anticipates the decline in asset value of the IBP development building it will acquire upon completion of construction in fourth quarter 2009. NAV per unit fell from $1.29 in FY2008 to $1.09 in FY2009.
MIREIT got a second extension on its debt to repay $201 million, extended to 31 Dec 2009 with an interest margin of 5%. It has another 1.5 billion JPY due on 18 Dec 2009. Furthermore it still requires funding of $91 million for the IBP building. Current gearing is 41%. If the IBP building is to be debt-funded, gearing will rise to 47%.
Although MIREIT has gotten an extension on its debt, the funding need is still present and pressing. Other than obtaining a straight bank loan, the other alternatives would be divesting assets or a equity fund raising. Selling assets in a value declining environment would not value eroding. We believe a rights issue is imminent and although highly dilutive, is the best solution to its funding needs from a long-term viewpoint. We estimate MIREIT would need to raise $100 million to fund its IBP acquisition. Gearing would also be lowered to 35%, which is a comfortable level. In our calculation, we assume a 1-for-1 rights, which would approximately doubles the issued units.
MIREIT has maintained an occupancy rate of 98.6% as at 31 March 2009. We retain our top line assumptions, however we adjusted our borrowing cost to reflect the higher margin. We adjusted down our DPU forecast for FY2010F from 8.59 cents to 8.28 cents. If MIREIT raises equity through a rights offer, DPU would be diluted to 4.24 cents. MIREIT’s share price has recovered in-line with the market, however we feel investors are still unclear of the refinancing plan and that will bog down investment sentiments in the REIT. We retain our Hold recommendation with a revised fair value of $0.39 as we lower our beta and increase cost of debt assumptions. We believe a re-rating is due for the REIT sector as most REITs had resolved their short term funding needs.
CCT – DBS
Equity overhang removed
• $828.3m 1-for-1 rights at $0.59 each
• Financial metrics strengthened, gearing of <31%
• DPU adjusted c37%, ex-rights yield of 8.7-8.2% over FY09-10
• Upgrade to Buy, post rights TP of $0.93
A long anticipated exercise. CCT has finally announced a $828.3m fully underwritten and renounceable rights exercise via a 1-for-1 issue of 1403.9m units at $0.59 each. The rights price is at a 44.3% discount to the last close of $1.06 and a 60.9% discount to the ex-rights book NAV of $1.51. Proceeds are earmarked primarily for reducing borrowings, with the balance for capex, asset enhancements and working capital. CapitaLand has undertaken to fully subscribe for its pro rata 31.4% share.
Strengthening financial metrics. Post rights issue, gearing would drop to 30.7%, which is at the lower end of their target gearing range of 30-45% through the cycle, putting the group in a good position to navigate through the challenging operating environment. More importantly, even with a further 30% depreciation of asset values from hereon, in line with our peak/trough projection, gearing would rise back to the higher end of its stated range. Financial flexibility is maximized with higher interest cover of 3.1-3.4x and together with the recent refinancing exercises, the group would have $2b of unencumbered assets and $665m of unutilized credit lines from its MTN programme.
Ex rights yield of 8.7%. FY09-10 DPU will adjust by 37% to 7.2cts and 6.8cts due to expansion in share capital offset by interest savings. Based on the TERP of $0.825, yield works out to be 8.7% and 8.2% respectively. Our DCF backed target price is revised to $0.93 or a 14% upside from TERP. With the removal of the equity overhang we believe investors would refocus on the core strength of its portfolio backed by its blue chip tenants with long leases, which makes up 50% of income. Upgrade to BUY.
IndiaBulls – BT
Indiabulls Reit posts net property loss of $568,000
INDIABULLS Properties Investment Trust (IPIT) has posted a net property loss of $568,000 for the period May 7, 2008, to March 31, 2009, instead of the net property income of $103.3 million it had forecast for the April 1, 2008, to March 31, 2009, period in its listing prospectus.
The real estate investment trust (Reit) also booked a $1.01 billion impairment loss on development properties and a $232.1 million loss due to changes in fair value on investment property. These two items have not impacted on the trust’s cashflows or credit facilities.
Inclusive of a $284 million income tax credit due to reversing deferred tax liability in tandem with the reduction in portfolio valuation, the trust posted a net loss of $960.1 million for the latest period, against a $52.8 million net income forecast in its prospectus.
‘The trustee-manager is always in the process of evaluating various sources of funding and other means of effective capital management for IPIT, including carrying out a rights issue, though no firm decision has been taken to proceed with any specific means of fund-raising,’ Indiabulls Property Management Trustee Pte Ltd said.
IPIT’s gearing as at March 31 was 10 per cent.
The trust closed 0.5 cent lower on Friday at 31 cents.
Net asset value per unit at March 31 was 73.77 cents.
The Reit was listed on the Singapore Exchange in June last year with two properties in its portfolio, both uncompleted at the time of the trust’s flotation. Its units were then priced at $1 each.
One Indiabulls Centre Tower 1 has since been completed, with the second tower also completed except for the top floors for which the relevant regulatory approvals are pending. Also, Tower 1 of Indiabulls Finance Centre has been completed to initial plans.
The board has decided to stick to its earlier plan to include a residential component at One Indiabulls Centre, and the plan is to launch the residential project shortly, according to the latest results statement issued on Saturday.
In its Q3 FY2009 results statement, the Reit’s trustee-manager had said that leasing was expected to remain slow in the near term and the accelerated decline in demand for office space in its key target markets of the banking, finance, security and insurance sectors might result in the trust being unable to lease the properties at the forecast rates.
‘During the fourth quarter of FY2009, the trustee-manager has begun to see tentative signs of stabilisation in leasing activity,’ it added, with clients starting to make decisions regarding their real estate needs.
The trustee-manager has waived its entitlement to the management fee of about $2.2 million for Q4 ended March 31 to ‘demonstrate its commitment to manage the trust in the best interest of unitholders’. In all, the trustee-manager has waived total management fees of $7.3 million since the trust’s listing.