Month: April 2010
CRCT – JPM
1Q10 results review
• 1Q10 results slightly ahead of expectation, with trust announcing DPU of S$0.0214/unit, annualizing 7% yield based on Friday’s closing price. The better than expected earnings was a result of lower than expected interest expenses. Note that the trust pays dividend on a semi-annual basis.
• Capital management a big focus this year. Whilst the trust has extended S$88million term loan for another two years to 2012, CRCT has yet to refinance S$283.5million worth of debt (68.2% of total borrowings), comprising S$200.5million term loan due Dec-10 and S$83million short-term money market line. With expectation of RMB appreciation at high level, we see upside risk for the trust to refinance at a better than expected rate. Current gearing for CRCT is 33.8% with average cost of debt at 2.4%.
• Operating performance to turn around in 2H10, in our view. Whilst net property income grew 7.5% in RMB term, the increase is largely a result of new contributions from Xizhimen Phase 2. Net property income for initial portfolio grew only 1% Y/Y due to still challenging Beijing retail market as well as the repositioning of Qibao Mall in Shanghai. That said, as tenant sales started to increase with 9% sequential growth and the new commitment at Qibao Mall to be started in July, we see potential turn around in underlying performance in 2nd half this year.
• We retain our Neutral rating, with Dec-10 DDM based price target at S$1.25/unit. Key risks to our rating and price target include surprises on operating fundamentals both on the upside or downside, and the uncertain timing of the introduction of China REIT code, which is likely to support or even lift up the valuation of the trust.
FCT – CIMB
Asset enhancement on the way
• DPU meets expectations; maintain Outperform. 2QFY10 results met Street and our expectations. 2HFY10 DPU was 54% of our full-year forecast. FY11 growth should be driven by asset enhancement at Causeway Point which could start within the year. We continue to like FCT for its resilient income streams and ability to grow organically and via acquisitions. We maintain our estimates, DDM target price of S$1.73 (discount rate 7.9%) and Outperform rating. We see stock catalysts from organic growth after Causeway Point has been enhanced.
• YTD DPU of 3.97cts met our expectations despite the retention of S$1.1m of distributable income in 2QFY10. YTD net property income of S$36.3m grew strongly by 31.8% yoy, boosted by maiden contributions from North Point 2 and Yew Tee Point in 2Q10.
• Healthy rental reversions. Average rental reversions were positive at 4.5% over preceding rents for the 50,852sf (or 6.4%) of net lettable area renewed in 1HFY10. Reversions were better in the second quarter with a 6.6% increase from the first half of 4.5%. Occupancy was almost full at 99.4%, gaining ground from the 98.6% in Dec 09.
• Upward reversions for Causeway Point from lease expiries and asset enhancement. FCT has only 3.2% of NLA from 36 leases left for renewal in this financial year. However, next year’s leases renewals would be chunky at 30% of NLA. About half of these leases, or 167,342sf, will be from Causeway Point. Separately, the manager is preparing for asset enhancement work at Causeway Point. Announcements should come before the end of 3QFY10. We believe both events represent good upward-reversion opportunities as the occupancy cost of this asset is considerably low at 12% vs. FCT’s weighted average of 14.2%.
• Bedok Mall due for completion in 4Q10. One of the key assets in the pipeline from the sponsor, Bedok Mall, should be completed by 4Q10. With an estimated 1-year gestation, we believe this asset could be ready for injection into FCT by end-CY11, likely after the completion of asset enhancement work at Causeway Point. Management guides that debt and equity will be used for this acquisition.
FCOT – Phillip
2QFY10 Results
• 2Q10 revenue of $29.8 million, net property income of $23.6 million, distributable income available to unitholders of $9.8 million.
• 1Q10 DPU of 0.32 cents.
• Maintain Buy, fair value $0.18
Things have stabilized
FCOT recorded 2Q10 revenue of $29.8 million (+24.3% y-y, +0.4% q-q), net property income of $23.6 million (+26.5% y-y, +0.5% q-q) and distributable income available to unitholders of $9.8 million (+81.6% y-y, +33.0% q-q). 1Q10 DPU was 0.32 cents (-55.6% y-y, +33.3% q-q). The y-y better performance is mainly due to the revenue contribution from Alexander Technopark as well as the favourable AUD exchange rate. As can be seen from the q-q results, 2Q10 results have stabilized from 1Q10 (Fig 1 and Fig 2). Revenue contribution from Singapore, Australia and Japan are 51%, 35% and 14% respectively.
Average portfolio occupancy rate is 92.4%. Occupancy for the Singapore and Australia properties remained high at 95.2% and 96.3% respectively. The strong occupancies are backed by master leases. 36.3% of revenue is backed by master leases of Alexandra Technopark and China Square Central. Whereas for Australia, 27.5% of total revenue includes blue chip tenants with long leases. The single biggest is the Centrelink property at 9.5% with a long term lease expiry at 2025. The Japan properties average occupancy rate was 74.2%, effectively adversely affected by the Cosmo Plaza master lease tenant who is in financial difficulty. Effective occupancy of the building is only 23.2%. FCOT has already classified Cosmo Plaza as a divestment asset and will be looking to sell the asset. The portfolio weighted average lease expiry (WALE) is 4.2 years
Capital management
FCOT has no near term refinancing needs. It has total debt of $829.7 million which is due in 2012. Gearing is at 40.1%.
Forecasts
We hold our view that FCOT is still on the rebuilding process. We think the injection of Alexandra Technopark was a prudent decision and it has proven to be so, having a stabilizing effect on total revenue. The overseas properties have also fared respectably, especially the Australia properties, with long WALE and high occupancies. Coupled with the rebound in the AUD dollar, contributions to total revenue are strong. The Japan properties continue to be a drag on the portfolio, stemmed mainly from Cosmo Plaza. Our main concern now is on how soon FCOT managed to divest Cosmo Plaza and also the AWPF investment, since these are not contributing effectively to the revenue. It would be a plus to use the divestment proceeds to pare down debts, therefore lowering gearing and we think that would be a re-rating catalyst. Maintain our buy recommendation and fair value of $0.18.
FCT – BT
Frasers Centrepoint Trust posts Q2 distributable income of $15.9m
FRASERS Centrepoint Trust (FCT) yesterday posted income available for distribution of $15.9 million for its second quarter ended March 31, 2010, an increase of 31 per cent from a year ago.
FCT’s Q2FY10 distribution per unit rose 11 per cent to 2.06 cents. It said $1.1 million of Q2 income will be retained for distribution in the second half of FY2010.
Chew Tuan Chiong, chief executive officer of the trust’s manager, Frasers Centrepoint Asset Management, said: ‘FCT achieved record quarterly gross revenue and net property income of $28.3 million and $20.4 million respectively this quarter.’
He added: ‘In addition to existing assets all achieving higher revenues, this excellent financial performance was made possible by the accretive acquisitions of Northpoint 2 & YewTee Point. These acquisitions achieved our strategic aim to enlarge FCT’s asset base, thereby allowing us to reap the benefits of scale and income growth.’
FCT acquired Northpoint 2 & YewTee Point in February 2010, with total assets growing 26 per cent to $1.5 billion as a result.
The trust said net property income was supported by topline growth and tight cost controls. Portfolio occupancy rose to 99 per cent as the existing and the newly acquired malls registered full or close to full occupancy.
‘As we continue to build upon the strong foundations of FCT’s portfolio, we will announce in due course our plans to revamp Causeway Point, with a view to capitalising on the recovery in Singapore’s economy and retail sentiments,’ said Mr Chew. ‘By improving its retail mix and amenities, a rejuvenated Causeway Point would better serve the needs of the 300,000 residents living within its trade catchment.’
First REIT – BT
First Reit posts 1.3% rise in distributable income in Q1 to $5.25m
FIRST Real Estate Investment Trust (First Reit) has posted a 1.3 per cent year-on-year rise in distributable income for its first quarter to $5.25 million, its manager Bowsprit Capital Corporation said yesterday.
Distribution per unit (DPU) for the quarter ended March 31 rose 1.1 per cent to 1.9 cents from 1.88 cents a year earlier.
Using an annualised DPU of 7.71 cents, distribution yield for the quarter is 8.9 per cent based on the Reit’s closing price of 86.5 cents on April 21. First Reit will close its books at the end of the trading day on May 3 and pay out the distribution entitled to unitholders on May 27.
Its gross revenue increased 0.6 per cent to $7.5 million, while net property income inched up by 0.3 per cent to $7.34 million from the year-ago period.
Bowsprit Capital said that the marginal increase in gross revenue resulted from the deferment of rental income from its Adam Road Hospital property, which is undergoing redevelopment for a cancer centre under the name Pacific Cancer Centre @ Adam Road. This partly offset the higher rental income that was received from First Reit’s Indonesia properties.
Including the deferred rental income, the Reit’s gross revenue would have increased by 4.6 per cent to $7.7 million, said Bowsprit in a statement.
Late last month, Bowsprit said that it will expand its investment policy to include, among other things, medical clinics, pharmacies, laboratories and diagnostic facilities. It will also include real estate and real estate-related assets that are used in areas like healthcare research, education, lifestyle and wellness management, manufacture, drugs and other healthcare goods and devices. Its current investment policy is to own and invest in real estate and real estate-related assets in Asia that are primarily used for healthcare and healthcare-related purposes.
The expanded policy will come into play from May 2.
Said Bowsprit’s chief executive Ronnie Tan on the expanded investment policy: ‘The broader mandate will enable us to invest in a wider range of income-producing assets within the healthcare sector. The increased spread and diversity will enable us to improve the stability of returns to First Reit’s unitholders.’
On top of the expansion of its investment policy, Bowsprit is looking to create more value-add for unitholders by making more investments in Indonesia.
‘We also look forward to more investment opportunities from our sponsor, Lippo Karawaci, which has a pipeline of healthcare assets in Indonesia. Some of these may prove to be suitable and yield-accretive acquisitions for First Reit,’ said Dr Tan.
He added that First Reit is unlikely to jump into China even though it is a market that offers vast opportunities.
‘China is another market that offers much potential. But presently it looks like any healthcare asset acquisition there will require more evaluation and restructuring work for it to be able to meet First Reit’s criteria.’
First Reit’s current portfolio is made up of eight properties located in Indonesia and Singapore. In Indonesia, it has three hospitals under the Siloam Group name and a hotel. Its Singapore properties are made up of three nursing homes and the Pacific Cancer Center @ Adam Road, which will be completed by the middle of next year.
First Reit will keep to its payout policy of 100 per cent of distributable income for FY2010.
Yesterday, First Reit shares rose 0.6 per cent, or half a cent, to 87 cents.