Month: January 2010
ART – CIMB
Full year in line
• Results in line; maintain Neutral. FY09 results met Street and our expectations (101% of our estimate). Changes in our assumptions, reflecting contributions from asset-enhancement initiatives and more positive REVPAU growth, raise our FY10-11 DPU estimates by 3%. We also introduce FY12 estimates. Following our upgrade, our DDM-based target price rises to S$1.35 from S$1.21 (discount rate 8.3%). We see re-rating catalysts from accretive acquisition announcements.
• FY09 DPU of 7.32cts (CIMB-GK: 7.28cts). 4Q09 and full-year DPU numbers were in line with Street and our expectations. Distributable profit of S$45.2m and DPU of 7.32cts were up 15% and 16% respectively. Full-year gross profit of S$84.6m was down 11% yoy as occupancy and daily rates weakened.
• Portfolio REVPAU down 16% in 2009, to S$122. However, the qoq decline in 4Q09 was much more muted at -7%. The declines were led by Singapore (-33%) and China (-26%). Average length of stay remained stable at seven months.
• Asset enhancement in Singapore and Vietnam. Management has commenced and will continue with the asset enhancement of three assets: Somerset Liang Court (Singapore), Somerset Grand Cairnhill (Singapore) and Somerset Grand Hanoi (Vietnam). Management anticipates 5% and 9% cap rates for its Singapore and Vietnam asset-enhancement works respectively. Some 514 apartment units will be refreshed at an estimated cost of S$24.5m. Completion is expected in 2011. The cost will be funded by operating cash flow and existing bank facilities. As the refurbishment will be carried out in phases, and newly completed units will be priced higher, management anticipates a marginal impact on distribution.
• Sentiment turning positive. Management remains cautiously optimistic on 2010, and guides for moderate yoy growth. Acquisitions are likely to resume this year.
ART – BT
Ascott Residence Trust’s Q4 distribution up 12%
ASCOTT Residence Trust (ART) yesterday said that unitholders’ distribution for the fourth quarter ended Dec 31, 2009, rose 12 per cent to $11.5 million, from $10.3 million a year ago.
The rise was despite a 2 per cent dip in revenue for the three months to $46.1 million mainly due to weaker demand for serviced residences in Singapore. Revenue in Q4 2008 was boosted by the higher rental rates contracted in the earlier months of 2008 before the onset of the global financial crisis, ART said.
But the trust’s gross profit rose 7 per cent to $21.9 million as its direct expenses fell year-on-year. Distribution per unit (DPU) for Q4 2009 rose to 1.87 cents from 1.69 cents for Q4 2008.
ART achieved a RevPAU (revenue per available unit) of $124 in Q4 2009 – a decrease of 7 per cent as compared to 4Q 2008. This came about from a reduction in the average daily rates of its serviced residences, the trust said.
The trust is upbeat about its prospects in 2010 and remains confident of the longer term growth in the markets where it operates.
‘We have seen a continued stability in hospitality demand extending from Q3 2009 into Q4,’ said Lim Jit Poh, chairman of the trust’s manager. ‘We expect improvement in hospitality demand in 2010 in line with the more positive economic sentiments though the extent of the economic recovery is uncertain.’
For the whole of 2009, ART’s distribution to unitholders fell 16 per cent to $45.2 million from $53.7 million in 2008. DPU fell 17 per cent to 7.32 cents from 8.78 cents.
Chief executive Chong Kee Hiong said ART has accelerated asset enhancement plans for selected properties including Somerset Grand Cairnhill and Somerset Liang Court in Singapore and Somerset Grand Hanoi in Vietnam to improve asset yields. ‘We will also seek accretive acquisition opportunities to expand Ascott Reit’s portfolio,’ he added.
ART’s portfolio comprises 38 properties with 3,644 units in seven countries. The stock lost 5 cents to end at $1.28 yesterday.
MapleTree – BT
MapletreeLog eyeing more properties in S’pore, region
It plans to be more careful in funding purchases; Q4 DPU climbed 8.9%
MAPLETREE Logistics Trust (MapletreeLog) is focusing more on growth this year and is looking at acquisitions in Singapore and the region. But it also intends to be more careful in funding purchases and this could affect the timing of cash calls.
The trust said this yesterday as it posted a net property income of $44.9 million for the fourth quarter ended Dec 31, 2009, which was 0.4 per cent less than that a year ago.
Nevertheless, the amount distributable rose 12.3 per cent to $31.8 million. This was boosted by a $2.5 million consideration from Prima Limited for a lease extension at a Singapore property.
As a result, available distribution per unit (DPU) rose 8.9 per cent to 1.59 cents. This came despite a larger unit base from a $79 million private placement in November last year.
‘We think 2010 is a transition year,’ said Richard Lai, deputy CEO and chief financial officer of the Reit manager at a briefing. While the Reit is building up its acquisition pipeline, ‘we will continue to be quite conservative in terms of how we use our balance sheet’.
Mr Lai explained that the Reit is looking to match borrowings and cash calls more closely. ‘What we are saying is that it will be harder to predict when we have to do an equity fund-raising.’
MapletreeLog is also looking to undertake build-to-suit projects in Singapore and abroad.
MapletreeLog’s leverage ratio as at Dec 31 was 36.7 per cent, down from 38.5 per cent year-on-year. Around $204 million or 19 per cent of its total debt is due for refinancing this year and it has received firm refinancing offers from banks.
The trust’s portfolio comprised 82 properties with a book value of around $2.9 billion as at Dec 31. It was revalued downward by $16.5 million in FY2009. The portfolio occupancy rate was 98.1 per cent, down from 99.6 per cent a year ago.
For FY2009, MapletreeLog reported an amount distributable of $117.9 million, 21 per cent higher year-on-year. DPU was 6.02 cents, down 16.9 per cent.
MapletreeLog gained half a cent yesterday to close at 79 cents.
PST – OCBC
No surprises at 4Q results
No surprises at 4Q results. Pacific Shipping Trust (PST) recorded a 7.6% YoY increase in 4Q09 gross revenue to US$15.6m and a 10% YoY increase in cash earnings to US$11.3m. The gains were due to full revenue contributions from CSAV Lauca, which was acquired mid-way in 4Q08. On a QoQ basis, revenue was flat, while cash earnings rose 1.2%. FY09 revenue and cash earnings were within 0-4% of our estimates. PST will pay out 0.827 US cents per unit to investors, which translates to an annualized yield of 12%.
Reduced payout continues. Distributed income rose 1.1% QoQ but fell 11.1% YoY to US$4.9m. This is as PST has lowered its distribution payout level from 3Q09 onwards. The current payout is equivalent to 69.6% of income available for distribution (4Q08: 87.4%) or 43% of cash earnings (4Q08: 53%). PST has paid off US$17.1m in loans this year, and holds another US$17.9m in cash as of 31 Dec. The trust is geared at 0.9x debt-to-equity at year end. The manager reiterated plans to use the retained cash towards acquisitions that diversify the trust out of the sickly container sector.
Rate cut discussions with charterer are still ongoing. PST has two vessels leased to CSAV. The trust said it was “encouraged” by recent events at CSAV: the liner recently completed its second equity fund-raising and it obtained shareholders’ approval for its third equity offering. While CSAV’s situation is stabilizing, it remains to be seen whether that will make the operator any more yielding when it comes to discussions with PST. Our view is that renegotiations are a broader industry issue and rate cuts will be hard to avoid.
No major changes to our views. There has been some positive news in the container markets as of late with liners attempting to increase rates on key routes. It remains to be seen if and when the industry can climb back to profitability with order books and US consumption still major overhangs. Nevertheless, the default cycle is expected to only peak roughly a year from when shipping markets hit bottom and we are still UNDERWEIGHT the shipping trust sector. 2010 could be an interesting year for the trusts as we believe they could get caught up in a broader de-rating of the alternative ship financing industry. Our US$0.23 fair value estimate for PST – kept unchanged – is pegged at a 30% discount to our discounted FCFE valuation of the trust (13% discount rate). Maintain HOLD.
MLT – CIMB
Competition heating up
• Beat expectations; but maintain Underperform. FY09 results exceeded consensus and our expectations (107% of our estimate). We change our assumptions to reflect acquisitions requiring debt and equity funding, and lower our cost-of-debt assumptions. Our FY10-11 DPU estimates fall by 3-4%. We also introduce FY12 estimates. Following our adjustments, our DDM-target price falls to S$0.74 from S$0.79 (discount rate 8.6%). Maintain Underperform as we expect competition in the industrial space to intensify in 2010. Possible re-rating catalysts may come from the acquisition of significantly accretive assets.
• Full-year distributable income of S$117.9m and DPU of 6.02cts exceeded Street and our expectations, though EBITDA was below our expectations (93% of FY09 forecast). This was attributed to the inclusion of an exceptional S$2.5m consideration from Prima Limited for an extension of its lease along Keppel Road in distributable income. Full-year net property income of S$180.8m was up 12% yoy, mainly on contributions from 11 acquisitions completed in 2008. Only one property (7 Penjuru Close) was acquired in 2009. Portfolio occupancy improved to 98.1% from 97.1% in the last quarter.
• Asset revaluation. MLT’s 82 properties were valued at S$2.9bn as at Dec 09. This was down a marginal S$16.5m, or 0.6% of its asset size. Its book value dipped to S$0.85/unit from S$0.89/unit in Dec 09.
• Expect acquisitions and intensifying competition in 2010. Management is ready to acquire this year after a hiatus in 2008. Last November, we estimated S$200m worth of acquisitions for 2009-10. Only S$43m was used to acquire 7 Penjuru Close. We bring forward the remainder S$157m to FY10, and now assume a 60:40 debt to equity ratio. We also lower our cost-of-debt assumption to 3% (from 3.5%) given improved credit conditions and MLT’s unencumbered balance sheet. Our DPU estimates fall by 3-4% for FY10-11. Both the business and credit environment has improved for the logistics and warehousing sector, auguring well for MLT’s properties. However, the same should also attract more competition from listed and unlisted property funds and trusts. We believe acquiring overseas assets could be more accretive than acquiring in Singapore.