Month: March 2010
CDL H-Trust – DBS
Like bees to honey
• Share price weakness not justified for improved portfolio stability post Australian acquisition
• Singapore tourist arrivals projected to increase 20-30% to 11.5 – 12.5m points to robust growth in 2010
• Offers best leverage to burgeoning Singapore hospitality sector, BUY TP S$2.11 based on DDM
Australian acquisition improves earnings stability. CDL HT’s share price has declined 8% vs the S-REIT index (+2%) since the announcement of its Australian portfolio acquisition in Jan’10. We believe that the current share price does not reflect the added stability of the portfolio given its (i) low beta proxy into Australia with its high minimum base rent of A$13.7m p.a secured over 11.3 years, and (ii) higher downside protection – DPU of 4 Scts per share (vs 2.5 Scts previously) backed by the trust’s base rent component. In addition, we see limited downside to earnings as we estimate that a depreciation of 10% in the AUD-SGD exchange rate will result in a 1% decline in distribution.
Best leverage to growth in Singapore’s tourism sector. CDL HT’s exposure into Singapore hospitality sector has not been diluted. The group will continue to benefit from the expected robust growth in visitor arrivals in 2010 given STB’s projection of between 20-30% growth, translating to demand of 10.9 to 11.9m room nights which represents 83-89% of total available room supply.
Opening of Universal Studios on 18th March 2010 to open tourist floodgates. With confirmation of the opening date, we believe that we will start to see visits to Universal studios flow through to strong headline visitor growth numbers from March 2010 onwards.
Fundamentals sound, maintain BUY, TP S2.11. The current share price weakness is an attractive entry point for investors to gain leverage into the stock. CDL HT offers one of the strongest FY09-11F DPU CAGR of c12.0%. Our BUY call and TP of S$2.11 is maintained offering a total return of 35%.
SREITs – BT
Better year ahead for Asian Reits: CBRE
S-Reits seen making better progress in resuming growth compared with their counterparts in the region
THE Asian real estate investment trust (Reit) market picked up in the second half of last year and should continue to improve this year, said CB Richard Ellis (CBRE) in a report yesterday.
In particular, Reits in Singapore (S-Reits) look like they are making better progress in resuming growth, compared with their counterparts in the region.
This year could also bode well for new Reit listings. ‘2010 will probably see the resumption of the initial public offering (IPO) market for Reits,’ reckoned CBRE Research Asia executive director Andrew Ness.
In H2 2009, the total market capitalisation of Asian Reits rose 17.6 per cent, the property consultancy said. Most Reits in the region managed to emerge from the credit crisis relatively unscathed, having raised funds from rights issues or rolled over their debts.
But some Reit markets went through a greater shake-up than others. In Japan, consolidation became the order of the day as four cases of mergers took place. One of these involved the merger of Advance Residence Investment and Nippon Residential Investment, as the latter’s sponsor went bankrupt.
Reits in Singapore and Hong Kong managed to withstand the storm better, even outperforming the main stock indexes in their markets. Between July and December last year, the FTSE ST Reits Index rose some 38 per cent.
‘Generally well managed by professional managers, S-Reits are unlikely to go under,’ CBRE said. ‘While their price movements can be volatile, S-Reits are considered a fairly safe haven in the long term.’
Although stock market conditions in Asia improved in the second half of last year, they were not attractive enough for most sponsors to set up and list a Reit. Just four new real estate funds went public in Thailand, according to CBRE.
But listing activity could return this year – there could be several new S-Reit listings in the pipeline, CBRE said.
Cache Logistics Trust is one that is due to go public soon. ARA Asset Management partnered logistics firm CWT to set it up, and the authorities have given the nod for listing. The Reit will start with six properties worth about $730 million in its portfolio.
ARA also said in December last year that it is working with Regency Group to list a Syariah-compliant Reit in Singapore. The Reit could be listed in the second half of this year and could hold some $1 billion worth of properties, largely from the hospitality sector in Qatar.
The market has also been awaiting the IPO of a commercial Reit by Mapletree Investments. The Reit would hold VivoCity shopping mall, among other assets.
Besides Singapore, Thailand could see more property funds going public this year, CBRE said.
Meanwhile, existing Reits could focus on buying assets and growing distributable income. ‘Further acquisitions are likely in the coming year as Asian Reits look to enhance their portfolio quality ahead of the full recovery of the real estate market,’ Mr Ness said.
Already, some S-Reits have been building up their portfolios. Last month, for example, CapitaMall Trust agreed to buy Clarke Quay for $268 million, and Ascendas Reit said that it would buy three properties for $228.5 million.
FCOT – SGX
Singapore, 5 March 2010 – Further to its announcement dated 9 February 2010 in relation to the non-renounceable offer for sale of 116,789,400 Series A convertible perpetual preferred units in FCOT (units in FCOT, “Units”, the Series A convertible perpetual preferred Units, the “Series A CPPUs” and the non-renounceable offer for sale by FCL Investments Pte. Ltd. (the “Vendor”) of 116,789,400 Series A CPPUs, the “Series A CPPU Offering”), Frasers Centrepoint Asset Management (Commercial) Ltd., as the manager of FCOT (the “Manager”), is pleased to announce that following the close of the Series A CPPU Offering on 2 March 2010, 36,342,116 Series A CPPUs have been accepted and will be transferred to the relevant holders of Units (“Unitholders”) and credited into their respective securities accounts on 9 March 2010 and the Vendor will be retaining 98,157,884 Series A CPPUs (including 80,447,284 Series A CPPUs which were not taken up pursuant to the Series A CPPU Offering). Frasers Centrepoint Limited will, through the Vendor and FCL Trust Holdings (Commercial) Pte. Ltd., hold an aggregate of 306,157,884 Series A CPPUs.
REITs – OCBC
Upgrading view to OW; Ascott & Suntec top picks
4Q CY2009 results review. Five out of the eight S-REITs under our coverage reported earnings in line with our estimates, with quarterly DPU differing 0-4% from our estimates. A- REIT, Mapletree Logistics Trust (MLT), and CapitaCommercial Trust (CCT) beat our DPU estimates by 9%, 9.5% and 17.5% respectively.
Significant activity year-to-date. In the past two months, the S-REIT sector has announced a sizeable S$1,218m worth of acquisitions. These have primarily been funded on the back of proceeds from equity issues completed in 2009 and 2010. K-REIT [NOT RATED] and CDL Hospitality Trusts [NR] made their maiden foray outside of Singapore into Australia. We believe this was primarily motivated by a search for value – distressed or even stressed opportunities are currently more plentiful in regions such as Australia and Japan vis-à-vis Singapore. Meanwhile, CCT agreed to divest Robinson Point for S$203.3m or roughly S$1527 per square feet of net lettable area to a private real estate fund. It also announced it was exploring options to re-develop Starhub Centre and change its use to a mix of residential and commercial. The equity market was also active with Frasers Centrepoint Trust raising S$182.2m to fund the purchase of two retail malls from its sponsor. ARA Asset Management [NR] and CWT Ltd [NR] also announced plans to launch a new logistics REIT. We expect REIT managers to continue down the acquisition path with stressed opportunities emerging as the broader market deleverages and with investors demanding yield growth. In turn, this growth push is likely to require further equity issues due to increased leverage conservatism.
Upgrading sector view. In a volatile market, we believe yield is an increasingly important contributor of overall return. Greater visibility may also drive further price-to-book compression. Ascott Residence Trust continues to be one of our top picks as a proxy to corporate investment and travel. We replace MLT with Suntec REIT as our second top pick on Suntec’s often over-looked retail portfolio and a possible shift in sentiment towards office REITs on increasing leasing activity, active supply management, and a slowing rate of decline in office rents. MLT continues to be a viable investment option, in our view, for investors seeking yield and stability. We upgrade our view on S-REITs to OVERWEIGHT from NEUTRAL. Key risks to our thesis are macro-economic risk, interest rate hikes (more of an issue for big caps REITs that have re-rated strongly, in our view) and an uncertain policy climate (the easy liquidity regime has to end at some point).
Suntec – BT
Suntec, Resorts World to cross-sell
Suntec Singapore and Resorts World Sentosa on Wednesday announced an exclusive partnership that will have the two properties cross-sell each other to create real business opportunities for both venues while growing the international MICE business for Singapore as a whole.
The exclusive agreement between Asia’s leading convention and exhibition centre and Singapore’s first integrated resort allows event planners to offer their clients the opportunity to conduct their exhibitions and day meetings within the Central Business District in Suntec Singapore, and continue with after-hours social functions at Resorts World Sentosa.
Together, the two heavyweights will cross-sell venues through joint sales calls, customised proposals and event concepts to international meeting planners, whose guests and delegates could enjoy seamless transfers between the two venues, as well as exclusive and customised services and experiences.