Month: July 2010
Suntec – Phillip
2QFY10 Results
• 2QFY10 of $62.9 million, net property income of $47.4 million, distributable income of $45.9 million
• 2QFY10 DPU of 2.528 cents
• Stabilization of occupancy and rents
• Maintain Hold, fair value of $1.34
Suntec REIT recorded 2Q10 revenue of $62.9 million (-3.3% y-y, -0.1% q-q), net property income of $47.4 million (-2.8% y-y, -0.8% q-q) and distributable income of $45.9 million (-3.7% y-y, +1.2% q-q). 2Q10 DPU was 2.528 cents (-15.1% y-y, +0.6% q-q). 2Q10 results were pretty much stable from a quarter ago. In fact there were slight improvements in occupancy rates for both the office and retail portfolio. Management shared that it was the practice to negotiate on renewal of leases 6-9 months ahead of expiry and they are now working on FY2011 leases. Park Mall and Chijmes continue to achieve 100% occupancy rates. Management also dispelled the risk of losing Carrefour as an anchor tenant citing that there will be upside potential in rent since the current passing rent is quite low. Overall, the office portfolio has 97.6% occupancy and the retail portfolio has 98.7% occupancy. Reversionary rent for the office portfolio was $7.13, which was down 2.8% from the last quarter, however management explained that it was due to tenants taking larger spaces which would command lower rates.
Suntec REIT has total debt of $1.752 billion. Gearing is 33.6%.
We think management has done a good job in maintaining occupancy for the retail portfolio and improving the occupancy for the office portfolio. Note that office portfolio occupancy improved from 94.8% in 2Q09. Although reversionary rents probably softened in the wake of this, nonetheless leases were secured and mitigated the risk of tenants migration. The opening of the circle line and adjoining stations are expected to increase the footfall to Suntec City and this should boost the attractiveness of the area. The last tranche of the deferred units (34.5 million) will be issued at the end of the year. We are holding our forecasts and projections and maintain our Hold recommendation with fair value of $1.34.
Suntec – BT
Suntec Reit Q2 DPU falls 15% to 2.53 cents
SUNTEC Reit’s second-quarter distribution income to June 30 slid 3.7 per cent to $45.9 million, from $47.7 million a year back, while distribution per unit (DPU) fell 15.1 per cent to 2.528 cents.
Gross revenue for the quarter slipped 3.3 per cent to $62.4 million, from $64.5 million a year earlier, due to lower office and retail revenue.
The Q2 results brought the Reit’s first-half distribution income to $91.3 million, down 2.9 per cent year on year, and its gross revenue to $124.8 million, down 3.5 per cent from $129.4 million.
First-half DPU was 5.041 cents, a 14.5 per cent drop year on year.
Gross office revenue in Q2 was $29.6 million, 2.3 per cent lower year on year, mainly due to lower rental income from Suntec City offices, which contributed $27.4 million.
The committed occupancy rate for Suntec City office improved to 96.6 per cent. Park Mall offices and One Raffles Quay were fully occupied at June 30, strengthening the Reit’s overall committed occupancy for the office portfolio to 97.6 per cent.
For its retail portfolio, gross revenue fell 4.1 per cent year on year to $32.8 million. Suntec City Mall contributed $26.6 million, while Park Mall and Chijmes contributed $6.2 million.
The overall occupancy rate for the retail portfolio was 98.7 per cent at June 30.
Property operating expenses eased 4.8 per cent in Q2 to $15 million, due to lower property tax and other expenses.
Net financing cost for the quarter was $16.3 million, a decline of $2.4 million or 12.9 per cent year on year. This was mainly due to a net loss of $3.8 million arising largely from the re-measurement of interest-rate swap transactions and convertible bonds.
The Reit’s overall financing cost in Q2 averaged 3.68 per cent and its gearing ratio was 33.6 per cent at June 30.
Suntec Reit’s counter closed one cent up at $1.44 yesterday.
CMT – BT
CMT to invest $150m to spruce up The Atrium
Singapore’s largest Reit posts 7.5% rise in distributable income for Q2
CAPITAMALL Trust (CMT) yesterday posted a 7.5 per cent year-on-year increase in second-quarter distributable income and unveiled plans to invest about $150 million in asset enhancement works at The Atrium @ Orchard. The amount is expected to be expended over a period of about two years.
The first three levels of The Atrium will be converted to retail use and linked to Plaza Singapura to create a seamless shopping experience. A canopy will be built along the open plaza between the two properties to maximise their combined 170-metre-long frontage along Orchard Road.
CMT has appointed RSP Architects Planners and Engineers as architect and Benoy as concept consultant for the asset enhancement works.
However, CMT officials stressed that the plans are still subject to approval from the authorities. ‘One variable is Stamford Canal (which runs below the two properties). Hopefully, there will not be too many technical conditions imposed by the authorities with regard to Stamford Canal,’ Simon Ho, CEO of CapitaMall Trust Management Ltd (CMTML), said at a results briefing yesterday.
Technical plans for The Atrium’s spruce-up have yet to be finalised but CMTML hopes to start work by early next year and complete them in Q3 2012.
Mr Ho also highlighted that CMT hopes to participate in greenfield mall development projects. The shopping centre Reit can potentially undertake development works of up to $800 million or 10 per cent of its $8 billion asset size, the limit for property development set under the Monetary Authority of Singapore’s guidelines for property fund.
At Funan, CMT has obtained outline planning permission to build an extension with about 300,000 square feet gross floor area of office space but there are no immediate plans to embark on the project as it may not be viable just yet.
CMT revalued its portfolio of properties at end-June 2010, which showed a $92.7 million fall compared with end-2009.
The slide was caused by a $127 million or 17.8 per cent fall in the valuation of The Atrium – understood to be due to lower office rental reversion assumptions. As a result, adjusted net asset value per unit (excluding distributable income) fell from $1.54 at end-2009 to $1.50 at June 30, 2010.
However, the fall in value of properties does not affect CMT’s distributable income to unitholders, which was $73.05 million for Q2 this year, up 7.5 per cent from Q2 last year. In addition to higher rental rates for new and renewed leases, lower property operating expenses also boosted distributable income.
Distribution per unit (DPU) for Q2 2010 was 2.29 cents, reflecting a 7.5 per cent year-on-year improvement as well as 1.4 per cent increase from the forecast based on CMT’s circular dated March 24 this year.
Gross revenue rose 2.8 per cent year on year to $142.5 million in Q2 2010. Net property income increased 5.3 per cent to $98.8 million.
For the first half, distributable income to unitholders improved 10.4 per cent year on year to $144.2 million on the back of 3.1 per cent growth in gross revenue to $281.6 million.
CMTML has retained about $9.5 million income in Q1 as a precautionary measure, given that 365 leases are due for renewal in the second half. But this will be distributed to unitholders by full year.
DMG & Partners Securities said in a report: ‘…We believe the retained earnings would be paid out in 2H 2010 to smoothen out any probable decline in DPU as a result of weaker rental reversions (in second half).’
For the 323 leases that were renewed in H1, CMT achieved 6.3 per cent average positive rental reversion.
CMT has completed refinancing its borrowings due this year and will now explore options to trim its $1 billion refinancing exposure for next year.
Total capital expenditure for asset enhancement works at JCube (formerly Jurong Entertainment Centre) is now projected at $165 million, down from $200.3 million originally, due to lower construction costs.
FSL – BT
FSL Trust files writ against Daxin Petroleum
FIRST Ship Lease (FSL) Trust has filed a writ of summons against Daxin Petroleum and its affiliated companies Mesino Shipping and Rovina Shipping.
Three Daxin representatives – Gary Geller, Ngiam Tee Chiang and Per Sanfrid Landin – were also named in the writ filed on Tuesday this week. Daxin was sued after it arrested two FSL Trust ships – Nika I and Verona I – in ports in Japan and China. Daxin detained them early last month, saying its charterers Mesino and Rovina had not been paid for bunkers supplied to the vessels.
FSL Trust has since recovered both vessels after posting bail of US$1.6 million for Verona I in Japan and US$2.8 million for Nika I in China.
Singapore-listed FSL Trust is claiming damages for all losses incurred and for arrest-related damages. It is also seeking declatory relief and ‘for an account to be taken of monies withdrawn from the bareboat charterers’ accounts’.
FSL Trust also wants legal action against the two vessels in Japan and China dropped. Its two wholly owned subsidiaries, FSL-18 and FSL-19 are currently defending claims made against the vessels in Japan and China.
FSL Trust is represented by Allen and Gledhill in the proceedings.
When contacted yesterday, Daxin declined to comment.
CMT – DBSV
Gunning all engines
• 7.5% y-o-y growth in 2Q bottomline expected
• Organic growth, AEI to underpin mid term profits
• Maintain Buy. Slightly higher TP $2.09
Achieved 48% of full year forecast. CMT reported 2Q bottomline of $73.1m and DPU of 2.29cts (up 7.5% yoy, +2.3% qoq) on 2.8% rise in revenue to $142.5m, helped by higher rental rates. Expense ratio also dipped to <31% on lower maintenance charges. The group took a net revaluation deficit of $112m on its portfolio, largely coming from The Atrium, which had been written down to $1584psf. Cap rates remained largely unchanged. With the robust economic growth and rising retail sales, CMT was able to achieve 1H10 rental growth of 6.3% over preceding levels (2.3% in 2009) for the 323 leases (12% of total NLA) renewed in 1H10. Going into 2H10, we expect the group to enjoy positive rental reversions for the remaining 0.7msf (17% of NLA) due this year.
AEI at JCube and Atrium to complete 2011/12. Apart from AEI works at Raffles City, completing by Oct this year, asset enhancement at JCube has commenced and is scheduled to complete by end 2011. Cost of rebuilding this complex is 18% lower than earlier budgeted at $165m, translating to a higher ROI of 9.7%. The renovation timeline for Atrium in now slated to begin in 1Q11 and complete in 3Q12. The $150m exercise to decant office space into retail area will provide a seamless integration with Plaza Singapura on the first 3 floors, thus maximizing the use of Orchard Rd frontage. Apart from organic expansion, these activities are likely to significantly boost income from 2012 onwards.
Revving up growth drivers. We continue to like CMT for its multi-pronged growth drivers. Following the acquisition of Clarke Quay, the group is also exploring development projects, which are likely to give higher returns, albeit at slightly higher risk. Balance sheet remains healthy at 34.8% geared. We maintain our Buy call with a slightly higher TP of $2.09, translating to a total return of 10%.