Month: May 2010
PLife – BT
PLife Reit’s DPU up 9.7% to 2.07 cents in Q1
PARKWAY Life Real Estate Investment Trust (PLife Reit) saw its distribution per unit (DPU) for the first quarter ended March 31 rise 9.7 per cent to 2.07 cents, from 1.89 cents in the previous corresponding quarter.
This translates to an annualised DPU of 8.28 cents and an annualised distribution yield of 6.09 per cent for 1Q10 based on the share price of $1.36 at the market’s close on March 31.
The DPU will be paid on June 9.
In the first quarter, gross revenue rose 14.1 per cent year-on-year to $18.65 million on the back of additional revenue contribution of $1.8 million from eight nursing homes acquired in Japan in 4Q09 as well as higher rent from existing properties.
Property expenses for 1Q10 were around 27 per cent higher at $1.4 million as a result of the newly acquired nursing homes.
PLife Reit owns three hospitals in Singapore and 18 healthcare assets in Japan.
Meanwhile, distributable income was 9.7 per cent higher at $12.5 million. Earnings per unit were 2.01 cents for 1Q10 compared with 1.76 cents a year earlier.
In March, the group issued a $50 million three-year floating rate note (FRN) – under its multi-currency medium-term note programme established in 2008 – and part of the proceeds were channelled towards paying $34 million in bank borrowings due in the second half of 2010. This lengthens the weighted average term to maturity for all of PLife Reit’s debts to 2.48 years as at March 31, 2010.
Meanwhile, the remaining proceeds raised from the FRN will be used for general working capital and funding purposes, it said.
‘Riding on the economic recovery and increasing demand for quality healthcare assets, PLife Reit will continue to leverage on our strong fundamentals to propel acquisitive growth, by actively seeking assets that enhance the overall stability and yield-generating ability of our portfolio,’ said Yong Yean Chau, chief executive of Parkway Trust Management Limited, which manages PLife Reit.
PLife Reit plans to boost its presence in the region by also venturing into other markets that are seeing high growth in the healthcare sector.
PLife Reit closed unchanged at $1.32 in trading yesterday.
FSL – DBSV
Unexpected counterparty issues
• Key customer Groda Shipping reneges on contract, returns product tankers prematurely to cut losses
• Worst case, DPU down 15-18% in FY10-11
• Risk of knock-on effect on other customers, despite the presence of corporate guarantees as recourse
• Downgrade to HOLD, TP reduced to S$0.55
Charterer wants to return 2 vessels prematurely. FSLT has been requested to take immediate re-delivery of two of their vessels by charterer Groda Shipping, much before the scheduled charter expiry of November 2014. The two vessels are product tankers of about 47,000 dwt each and are currently on a back-to-back sub-charter to Russian statecontrolled energy company OJSC Rosneft, under a long-term Contract of Affreightment (“COA”). Utilisation by Rosneft was probably low and high bunker prices rendered the arrangement unsustainable for Groda. FSLT is likely to settle amicably and will receive US$3m security deposit on each vessel, which translates to about 5 months charter-hire.
Impact cash flow significantly. The two charters are currently fixed at US$20,700 per day each and contribute about 15% to FSLT’s topline. The ships are still employed by Rosneft and FSLT could go into a direct contract with them. However, the COA revenue should be significantly lower than the current bareboat charter rate, and FSLT would have to assume operating risks as well. The other option for FSLT is to scout for 3rd party employment, but current charter rates could be around 40% lower than the existing bareboat rate.
Quarterly DPU could fall to 1.1UScts from 1.5UScts in the near term. Assuming a conservative 50% cut in income from the Groda vessels, our DPU estimate for FY10-11 is reduced by 15-18% to 4.8-5.3UScts from 5.6-6.5UScts earlier. Pending further clarity on negotiations with Groda and how the trustee manager employs the ships in future, we downgrade the stock to HOLD at a TP of S$0.55 (higher peg of 12% target yield to reflect increased risk of charter renegotiations by customers). Impact on DPU could be lower if part of the U$6m security is channeled into distributions.
CDL H-Trust – CIMB
REVPAR growth beyond 2010
• In line; maintain Outperform; target price raised to S$2.20 (from S$2.01). 1Q10 results were broadly in line with Street and our expectations. DPU of 2.32cts (after deducting income retained for working capital) forms 21% of our full-year estimate and 22% of consensus, which we consider to be in line due to seasonal weakness. Revenue and DPU rose 18% yoy on maiden contributions from Australian hotels acquired in February, and a 16% increase in REVPAR from Singapore hotels. We believe the opening of Resorts World will change demand structurally, and increase our REVPAR assumptions for Singapore hotels for 2010-11. Our DPU estimates increase by 5-6% for FY11-12, while our DDM-based target price rises accordingly to S$2.20 from S$2.01 (discount rate 8.6%). CDLHT offers a prospective total return of 19.9% from potential price upside of 14% and forward dividend yields of 5.9%. We see catalysts from continued REVPAR growth beyond 2010.
• Singapore REVPAR up 16% yoy despite 1,350 new rooms from Resorts World. The increase in REVPAR came from a 9.5%-pt improvement in occupancy to 84.3%, and a modest 3% yoy increase in room rates. This was also the first qoq increase in average room rates since they started to decline in 3Q08. Occupancy was buoyed by higher visitor arrivals for the Singapore Airshow in February and International Furniture Fair in March. Visitor arrivals have been breaching records in the four consecutive months since Dec 09, following the opening of Resorts World Sentosa. Management guided that April REVPAR improved 38% for Singapore hotels, with improvements in traditionally-weak weekend occupancy. We believe occupancy and room rates for the rest of the year will continue to strengthen with the opening of Marina Bay Sands this month.
• Changes in assumptions. We increase our REVPAR assumptions for Singapore hotels by 11-14% (from 5%) for FY11-12 in the belief that structural changes in demand for weekend stay in Singapore hotels will sustain occupancy above 85%.
ART – CIMB
Operationally stable
• In line; upgrade to Outperform from Neutral. 1Q10 results were broadly in line with Street and our expectations. Although DPU of 1.66cts forms only 20% of our full-year estimate and 21% of consensus, we consider it to be in line due to seasonal weakness in the first quarter. Operationally, ART remained stable with gross profits improving 1.4% yoy. Our estimates and DDM-based target price of S$1.35 (discount rate 8.3%) are intact. We upgrade ART to Outperform after a 15.5% ytd underperformance. We believe upcoming catalysts also include potential apartment rate increases for Singapore in 2H10. ART offers a prospective return of 19.4% from potential price upside of 12.5% and forward dividend yields of 6.9%. ART is one of the few REITs still trading below book value (0.9x vs. sector average of 1.0x)) while prospective yields are in line with the sector average.
• Operationally stable. Gross profit was S$20.1m, up 1.4% yoy. Strong growth from Australia (+33% due to strong A$ and stronger contributions from high-margin F&B component), China (+17%, attributed to Beijing and Shanghai properties) and the Philippines (+18%, strong corporate demand) was diluted by weakness in Indonesia (-15% due to rectification work for earthquake damage), Japan (-8%, weakening occupancy in rental housing) and Singapore (-3%, additional property tax due to reassessment of property annual values by IRAS). Qoq, there was an 8% decline on seasonal weakness.
• RevPAU flat; Singapore should shine in 3Q. Portfolio RevPAU was S$120/day, flat from one year ago. Although occupancy improved in all countries except Indonesia, average rates remained flat or even declined moderately as there was a differing pace in economic recovery. The Singapore market is expected to grow strongly this year, with 1Q10 REVPAU of S$180/day up 7% yoy mainly thanks to improved occupancy. Other than the one-off property-tax reassessment, ART’s Singapore assets are also being refurbished, which took out 15% from its inventory. Completion is anticipated at end-2Q10. We expect strong apartment rates and an occupancy recovery in 3Q.
CDL H-Trust – DBSV
More than you can imagine
• Stunning 38% yoy spike in RevPAR for April 2010 paves the way for a robust 2Q10
• Acquisitions offer upside to earnings, potentially add 13 Scts to our target price.
• Maintain BUY, TP revised to S$2.20
A steady start to FY10. 1Q results were in line. Improved portfolio-wide performance, plus partial contribution from its newly acquired Australian portfolio lifted gross revenue by 18% y-o-y (1% q-o-q) to S$26.6m. 1Q RevPAR grew to S$174 (+16% yoy, 9% qoq). Income available for distribution came in at S$19.4m (DPU of 2.58 Scts), before retained income for working cap purposes.
April’s RevPAR spikes 38% yoy. 2Q10 is set to deliver even stronger earnings with RevPAR reported up 38% yoy in April’10, even as the industry faces new room supply from the 2 integrated resorts. We note that increase in room demand in Singapore continues to outpace supply. Come 2011, room supply remains tight with only 500 rooms (+1% of room supply) completing. Anticipating higher occupancies and room rates in 2011, we raised FY11 numbers by 2%.
Acquisitions could add up to 13 Scts to our target price. CDL HT trades at an implied yield of 5%, which allows it to acquire assets accretively. The manager remains on a lookout for acquisition opportunities, even in Singapore. Assuming a long-term gearing ratio of 40% (vs 30% currently), we estimate an accretion of S$113m or 13 Scts to our target price.
BUY, TP adjusted to S$2.20. We believe that we are at the beginning of a multi-year secular recovery in the local tourism sector. Execution on its acquisition growth engine could yield an additional 13 Scts to our target price.