Month: April 2010
FCOT – BT
26% jump in FCOT’s Q2 net property income
FRASERS Commercial Trust (FCOT) yesterday posted a net property income of $23.6 million for the second quarter ended March 31 – up 26 per cent from a year ago.
This helped boost total distributable income, which rose 167 per cent over the same period to $14.5 million. Of this, unitholders’ share was $9.8 million, while holders of Series A convertible perpetual preferred units (CPPU) got a share of $4.6 million.
‘The contribution from Alexandra Technopark together with better performance of the Australian properties and lower financing costs contributed to the increase in distribution income,’ said CEO of FCOT’s manager, Low Chee Wah.
FCOT bought Alexandra Technopark in August last year and the property contributed to earnings for the full second quarter. From Down Under, Central Park and Caroline Chisholm Centre brought in more revenue largely as the Australian dollar strengthened.
Distribution per unit (DPU) was 0.32 cents in Q2. This is 56 per cent less than the 0.72 cents a year ago, as the unit base grew from a rights issue in August last year.
Adjusting for the cash call, DPU in Q2 2009 would have been 18 cents, translating to a 78 per cent year-on-year increase.
Distribution per CPPU in Q2 was 1.36 cents.
For the first half ended March 31, FCOT’s net property income was $47.1 million, rising 27 per cent from a year ago. Total distribution available surged 81 per cent to $26.6 million.
DPU in H1 was 0.56 cents, while distribution per CPPU was 2.74 cents. These distributions will be paid out on May 27.
As at March 31, FCOT’s portfolio had a value of some $1.9 billion. The average occupancy rate was 92.4 per cent, down from 92.9 per cent as at Dec 31 last year.
The trust’s gearing as at March 31 was 40.1 per cent, dropping slightly from 40.4 per cent a quarter ago.
FCOT lost half a cent yesterday to close at 14 cents.
MLT – BT
MapletreeLog DPU rises 2% in Q1
Distributable income climbs 8% on lower property expenses and borrowing costs
MAPLETREE Logistics Trust (MLT) yesterday reported an 8 per cent climb in first-quarter distributable income to $30.8 million from $28.6 million a year earlier.
Distribution per unit (DPU) rose 2 per cent to 1.5 cents from 1.47 cents a year ago.
Distributable income rose as the logistics trust lowered property expenses and cut down its borrowing costs by reducing interest costs and lowering the leverage – even as revenue fell year-on-year as portfolio occupancy dipped.
MLT’s gross revenue fell 3.5 per cent to $51.4 million for the three months ended March 31, 2010 from $53.3 million a year ago. Revenue fell due to lower rental revenue from the trust’s Hong Kong and China properties (mostly due to higher vacancies), although this was offset by higher revenue from Singapore and Japan properties (mainly due to the additional properties). Overall portfolio occupancy dipped slightly to 98 per cent from 99 per cent a year ago.
MLT said that the economic environment has shown signs of improvement – but not across the board in all the geographies in which MLT operates. Sentiments remain cautious, the trust added.
‘We think there is still some time for the absorption of the vacant space, especially in Hong Kong, before the rentals can move up,’ said Chua Tiow Chye, chief executive of the trust’s manager. But this could happen for some markets in the second half of this year, he added.
The trust is already making plans to buy more properties. The trust completed the acquisition of two properties in Q1 2010, one each in Singapore and in Japan.
MLT’s sponsor Mapletree Investments and partner Itochu plan to develop logistics projects of approximately US$300-500 million over the next three to five years, which will be offered to MLT on a right of first refusal basis.
‘We are looking to possibly bring some of these assets over in the course of this year or next year,’ said deputy chief executive officer Richard Lai.
MLT’s portfolio comprises 84 properties with a total book value of $3.0 billion. More than half of the properties are in Singapore, while the others are in Malaysia, Japan, Hong Kong, China and South Korea.
MLT also said in an update that it has $1.2 billion of debt as at end Q1, of which around $145 million is due for refinancing over the rest of the year.
MLT’s shares gained 1.5 cents to close at 87.5 cents yesterday.
CMT – OCBC
Encouraging signs of growth
In line with expectations. CapitaMall Trust’s 1Q10 results came in within our expectations. Gross revenue increased 3.4% YoY to S$139.1m, underpinned by higher new and renewal leases, and higher contribution from Sembawang Shopping Centre, where asset enhancement was completed only in late December 2008. Net property income increased 5.7% YoY to S$97.7m. Even though DPU of 2.23 S-cents for 1Q10 fell short of the 2.32 S-cents that we have projected, this was due to the retention of S$9.5m of taxable income this quarter. The higher amount of income retained in 1Q10 was a precautionary move against possible higher operating expenditures, as well as higher interest expense going forward.CMT still remains committed to a 100% payout of its distributable income for FY10.
Rent reversion should remain healthy at portfolio level. Management shared that 60% of leases expiring this year will be due for renewal in 2H10, and some of these rents were signed at the peak of the rental market 3 years back. A further analysis of CMT’s expiring leases shows that Plaza Singapura, Bugis Junction and Lot One are most prone to negative rent reversions this year but we note that expiring leases from these three properties account for just 24% of the current gross rental income from these expiring leases. The remaining portion of the expiring leases should still be able to enjoy positive rent reversions and this should be able to cover the lost income from negative rent reversions.
Encouraging operating statistics. We are seeing encouraging signs of growth from CMT’s operating statistics. Its malls turned in positive rent reversion of +6.2% in 1Q10, sharply higher than the +2.3% achieved in FY09. More trade categories are seeing increase in their gross turnover in 1Q10. While the portfolio occupancy rate fell to 99.4% at the end of 1Q10, this was attributable to the termination of a mini-anchor tenant at Plaza Singapura – Barang Barang, which filed for voluntary liquidation in Feb. CMT has already received offers from several interested parties for the vacated space.
Downgrade to HOLD on valuation ground. We are not making any changes to our forecasts and we maintain our fair value at S$1.93, which is pegged at parity to RNAV. The outlook remains positive and we continue to like CMT for its strength in capital management, retail asset management and enhancement. But with the recent increase in share price, projected total return has fallen to 9.6%. As such, we are now downgrading CMT to HOLD on valuation ground, with a view to accumulate at more attractive levels of S$1.75-S$1.80.
FSL – OCBC
Asset values edge up versus October
DPU in line. FSL Trust (FSLT)’s 1Q10 DPU of 1.5 US cents was flat QoQ but fell 38.8% YoY because of a lower payout policy and a larger unit base post-placement. Guidance for 2Q10 DPU is flat at 1.5 US cents, offering an annualized yield of 13%. The manager quite emphatically stated it would not return to the days of a 100% payout; it prefers a “fixed dividend + incremental growth” strategy that will allow it to retain some excess cash.
Acquisition plan hits the “homestretch”. FSLT has yet to deploy the US$28.3m net proceeds from its Sep 2009 placement; so for roughly seven months, the larger unit base has not been offset by additional income or lower expenses – creating a shortfall between cash generated and cash paid out. The manager is now saying an announcement is likely in “a matter of weeks / possibly in a month of two”. FSLT reiterated its target asset yield of 15% and its plan to further diversify into a previously untapped vessel sub-sector (for example, offshore). A significant change in guidance is that FSLT is “now hopeful of lifting acquisition projects over and above” the placement proceeds because of increasing access to capital.
Asset values edge up. In a Mar 2010 charter-free revaluation of its portfolio, FSLT recorded a 5.5% gain in asset values versus Oct 2009. The current value-to-loan (VTL) coverage of 129% is comfortably above the current reduced 100% VTL requirement but below the 145% threshold required after end-2Q FY11. Assuming asset values remain stable and taking US$8m quarterly repayments into account, FSLT can touch 140% coverage by Jun 2011. Cash in hand and the planned unencumbered acquisition adds further cushion. Still, FSLT is taking no chances and may opportunistically issue unsecured debt (the manager guided that BB- high yield debt in Asia is attracting pricing of 10-13% at present). The trade-off versus secured debt (costing roughly 6% today) is large, but this may be a necessary evil to remove the VTL covenant overhang, once and for all.
Valuation. We have revised FY10 estimates to reflect an assumed acquisition completion date of 01 Jun (prev: 01 Jan). In light of increased stability in FSLT’s operating environment, we are 1) lowering our discount rate from 13% to 11.5%; and 2) now derive our fair value estimate using a 20% discount to this discounted FCFE value (prev: 25%). But balance sheet issues are not eliminated completely, and we maintain our HOLD rating with revised S$0.59 fair value [prev: S$0.53].
Cambridge – DBSV
One step at a time
• Portfolio restructuring on track – additional S$70m of assets earmarked for sale
• Gearing could head down towards 38% post restructuring
• Maintain BUY, TP S$0.54, offers total return of 16%
1Q10 results in line. Cambridge REIT (“CIT”) declared a 1Q10 DPU of 1.274 Scts, amounting to 25% of our full year forecast. Revenues grew 1.2% yoy to S$18.6m as a result of higher rentals from rental escalation from selected assets offset by the income vacuum from the divestment of 2 properties. Net property income likewise rose 1.2% to S$16.3m as a result of stable operating margins.
Divestment strategy on track – earmarking additional S$70m of assets. In 1Q10, CIT divested additional 32 strata units in Enterprise Hub, bringing in S$21.5m in proceeds. The manager has earmarked an additional S$70m worth of assets to be sold during the course of this year. Cash received from the divestment are earmarked for debt repayment or can reinvested into new assets. Incorporating the first scenario and assuming debt repayment at the end of FY10, we estimate that (i) impact from the loss on contributions on earnings in FY11 is minimal at -3% and (ii) gearing levels is projected to improve towards 38% in FY11.
Evaluating asset enhancement opportunities. Management also shared that they are exploring several opportunities to enhance a couple of its properties, where plans could include (i) minor works to raise gross NLA or (ii) intensifying current plot ratios at a couple of its properties. While no firm details have been finalized, we believe that the execution of these opportunities could present re-rating catalysts for the stock.
Attractive 10% yields. We like the asset and financial management initiatives by CIT’s, which will result in a stronger balance sheet going forward. The stock currently trades at 0.85x P/bv, below its industrial peers who are trading in the 1.0x – 1.2x P/bv range and offers a stable FY10-11F DPU yields of c10%.