Month: September 2010
ART – BT
Ascott Reit raises $453m from private placement
ASCOTT Residence Trust (Ascott Reit) has concluded one part of its equity fund-raising exercise, collecting $453.2 million from a private placement of 419.7 million new units.
The new units were priced at $1.08 apiece – at the lower end of the $1.07-$1.13 range indicated on Monday.
Of the 419.7 million new units placed out, 203.2 million went to CapitaLand, parent of the Reit’s sponsor The Ascott Ltd.
The remaining 216.5 million units for institutional and other investors were three times subscribed. Demand came from investors in Asia, Australia and Europe.
The placement has enabled Ascott Reit to enlarge its institutional investor base, said Lim Jit Poh, chairman of Ascott Residence Trust Management Ltd, the Reit’s manager. The new units are expected to start trading on Sept 22 at 2pm.
The second part of the equity fund-raising exercise involves a non-renounceable preferential offering that could raise $72.6 million. Ascott Reit will issue 67.9 million new units at $1.07 each – at the lower end of the indicated $1.07-$1.11 range. The offer, on the basis of one new unit for every 10 existing ones, opens on Sept 24 and closes on Sept 30.
CapitaLand will subscribe for new units in the preferential offering. This, together with the subscribed 203.2 million placement units, will enable it to maintain its pre-preferential offering stake of 47.74 per cent in the Reit.
Ascott Reit units, in which trading was halted on Tuesday, resumed trading yesterday, closing two cents up at $1.17 on a ‘cum trading’ basis. Today is the last day of the cum trading for the preferential offering and an advance distribution (estimated at 1.6 cents per existing unit), which the trust manager intends to declare in conjunction with the equity fund-raising.
The entire equity fund-raising exercise could bring Ascott Reit $525.8 million – to part-fund its $969.6 million purchase of 28 service residence properties in Europe and Asia from The Ascott Ltd.
According to Reuters yesterday, UOB-Kay Hian has maintained its ‘buy’ rating and share price forecast of $1.40 for Ascott Reit.
ART – Lim and Tan
Equity Fund Raising Completed
• The placement tranche, comprising 419.66 mln units, has been priced at $1.08 a unit. This compares with:
– the indicative range of $1.07-1.13 as per the offer document;
– $1.15 that management had used for illustration when announcing the major deal with CapitaLand on Aug 20th; and
– $1.07 for the 1-for-10 non-renounceable preferential offering, comprising 67.858 mln units, to existing unit-holders.
• The discount to the last traded price is 6-7%.
• This: pricing and discount, is fair given:
– the 1.5x subscription rate, taking into account the 203.168 mln shares taken up by CapitaLand to maintain its percentage holding at 47.74% (3x excluding CapitaLand’s); and
– the estimated 1.6 cents DPU only the existing units would be entitled to for the period starting from July 1st to Oct 7th, the issuance date of the new units.
• The new units will commence trading on Friday Oct 8th.
• Although the news is likely “neutral” to ART’s unit price, we are maintaining our BUY call.
StarHill Global – OCBC
Compelling from both yield & P/NAV perspective
Shoppes cannibalization fears overdone. New retail space at The Shoppes at Marina Bay Sands has begun to open. We believe cannibalization concerns for retail landlords such as Starhill Global REIT may be exaggerated as 1) Orchard Road is likely to remain a key shopping destination in its own right; 2) the product range / price tiers available in, for instance, a Chanel store in The Shoppes and one in Takashimaya are expected to be fairly different. In fact, the increased tourist arrivals led by the re-making of Singapore should more than offset such concerns, in our view. Driven by new attractions such as the Integrated Resorts, visitor numbers have jumped 23% YoY to 6.6m arrivals in the seven months to Jul.
Singapore retail still a key component. We are positive on the retail property sector not only as tourism and increasing consumer confidence drive spending, but also relative to the residential sector, which has significant policy overhang. We note that while Starhill is classified as a diversified REIT, about 66.4% of its asset value stems from Singapore. In addition, we estimate that Singapore retail contributes roughly 51.9% of Starhill’s FY10F gross revenue and 47.6% of FY11F gross revenue (the slight dip reflects the full-year contributions from the recent Malaysia and Australia acquisitions).
Compelling from both yield and NAV perspective. Market chatter on S-REITs has been primarily focused on the high yields relative to benchmarks including the 10-year government bond yield. Starhill certainly delivers on this front with estimated FY10F and FY11F yields of 6.6% and 6.8%. This is just a tad shy of the S-REIT sector average of 6.8% (FY10F) and 7.0% (FY11F). But what makes Starhill particularly compelling to us is that it trades at a significant 35% discount to book value vis-à-vis the meager 4% discount-to-book offered on average by the broader S-REIT sector. We believe this discount is unjustified considering Starhill’s high-quality assets, healthy balance sheet and its strong sponsor.
Valuation. Our DDM-derived fair value estimate of S$0.65 (6.7% discount rate, 0.5% terminal growth rate) is intact; this is equivalent to a fairly reasonable (in our opinion) 0.72x priceto-book. With an estimated total return of 17.7%, we maintain our BUY rating on Starhill. Starhill is also one of our top picks for the S-REIT sector. Key risks to our view include macroeconomic headwinds, foreign exchange risk and changing regulatory and taxation regimes.
ART – BT
Ascott Reit to raise up to $550m from new units
ASCOTT Residence Trust (Ascott Reit) is looking to raise up to $549.5 million by issuing 487.5 million new units.
It lodged its offer information statement with the Monetary Authority of Singapore yesterday, after getting unitholders’ approval for the equity fund-raising exercise early this month.
There are two parts to the exercise. Ascott Reit will issue 67.9 million new units at $1.07-$1.11 apiece through a non-renounceable preferential offering. Unitholders stand to receive one new unit for every 10 existing ones held.
The trust closed unchanged at $1.15 yesterday. Based on this price, the preferential offering issue price carries a discount of 3.5-7.0 per cent.
Ascott Reit will also issue 419.7 million new units at $1.07-1.13 each in a private placement to institutional and other investors.
Based on the range of issue prices indicated, Ascott Reit could raise $521.6 million to $549.5 million in total. Credit Suisse and DBS Bank, the joint lead managers, bookrunners and underwriters, will determine the final issue prices after a book-building process.
Ascott Reit is seeking funds to support the purchase of 28 properties in Europe and Asia from its sponsor, The Ascott Limited. The latter is CapitaLand’s service residence arm.
Apart from issuing new units, Ascott Reit also plans to take on more debt to fund the acquisition.
PLife – CIMB
More legs to run
• Maintain Outperform with higher target price of S$1.91 (from S$1.57). PLife’s CPI-pegged Singapore assets are set to benefit from rising inflation, upcoming asset enhancement and overseas acquisitions. We factor in an additional S$200m of acquisitions for 2011, higher CPI assumptions, lower cost of debt and a longer lag time for contributions from 2010 acquisitions. Our DPU estimate dips by 5% for 2010 before rising by 4-20% for 2011-12. Our DDM target price rises accordingly to S$1.91 from S$1.57 (discount rate 7.2%). Earlier-than-anticipated announcements of acquisitions could provide stock catalysts, in our view.
• Singapore inflation to reach 3%. With the Singapore economy expected to expand 13-15% this year, inflation risks remain, auguring well for PLife’s Singapore portfolio, whose rental growth is pegged to CPI +1% in the base case. Our house predicts 3% inflation for Singapore this year.
• Organic growth in 2011. We believe asset enhancement at East Shore Hospital and Mount Elizabeth will start next year. Although details have not been released, we believe the AEI would centre on pockets of low-yielding space which could be converted to higher-yielding ward space, operating theatres or space for specialised use such as a cancer centre. We anticipate accretion for ROI in the region of 10% vs. its current NPI yields of 5%.