Month: October 2010
Suntec – BT
Suntec Reit Q3 distribution per unit falls 14.3%
Distribution income falls 3.2% to $46.2m on 2.1% rise in gross revenue
SUNTEC Real Estate Investment Trust (Suntec Reit) has reported lower distribution income for the quarter ended September 30, 2010, compared to the year-ago period, and expects to face ongoing challenges in the office and retail sectors even amidst a recovery there.
Suntec Reit owns Suntec City Mall, certain office units in Suntec Towers One, Two and Three, and the whole of Suntec Towers Four and Five. It also owns Park Mall, Chijmes, a one-third stake in One Raffles Quay and a fifth of a joint venture that owns Suntec Singapore International Convention & Exhibition Centre.
Suntec Reit’s manager, ARA Trust Management (Suntec) Limited (ARA), reported yesterday that the Reit’s distribution income fell to $46.2 million, down 3.2 per cent from a year ago.
Its distribution per unit fell 14.3 per cent to 2.5 cents, from 2.9 cents the year before.
Its gross revenue was up 2.1 per cent to $63.2 million, while its net property income was up 7.6 per cent to $50.6 million.
ARA said Suntec Reit’s gross revenue was higher, thanks mainly to the higher office revenue achieved during the quarter. Its gross office revenue for the quarter was $30 million, 4.6 per cent up from the year before, mostly from the higher rental income from its Suntec City offices.
It also said that the committed occupancy of its Suntec City offices, as at September 30, had improved further to 98.1 per cent, from the quarter before. The committed occupancy of its Park Mall offices and those at One Raffles Quay stood at 97.5 per cent and 100 per cent, respectively. With this, Suntec Reit’s overall committed occupancy for its office portfolio strengthened to 98.5 per cent, as at September 30.
ARA chief, Yeo See Kiat, said, ‘I am encouraged by the further strengthening of the Singapore office market. In the nine months of 2010, we have renewed and signed more than 580,000 sq ft of office leases, leaving less than 1 per cent of our office portfolio expiring in FY 2010.’
Suntec Reit’s gross retail revenue was $33.2 million, or $28,000 lower than the year before – with Suntec City Mall contributing the bulk of the revenue. The committed occupancy of Suntec City Mall stood at 98.0 per cent, as at September 30, and the committed occupancy at Park Mall and Chijmes stood at 100 per cent and 90 per cent, respectively. That put the trust’s overall committed occupancy for its retail portfolio at 97.6 per cent, as at September 30.
Mr Yeo added, ‘On the capital management front, we have put in place a new $700 million term loan facility at a significantly lower interest margin, which will further improve Suntec Reit’s overall financing cost and strengthen our debt maturity profile.’
Looking ahead, ARA expects further strength for the property sector for the rest of the year, believing that the pickup in confidence seen in Singapore’s business climate will continue to buoy the office market.
‘However, the Singapore retail sector overall continues to experience rental pressure during the quarter, as the demand and supply situation in the industry is still finding its equilibrium. The manager expects ongoing challenges to the office and retail sectors notwithstanding signs of positive recovery in both sectors,’ Suntec Reit’s results statement said.
Suntec Reit shares closed 2 cents up at $1.56 yesterday.
FCT – BT
FCT slated to buy Bedok Point next year
FRASERS Centrepoint Trust (FCT) will buy Bedok Point from parent company Fraser and Neave by the second quarter of next year, the trust’s chief executive, Chew Tuan Chiong, said yesterday.
FCT, which owns four suburban malls in Singapore, paid $290 million for two malls – an extension to Northpoint at Yishun and YewTee Point at Choa Chu Kang – from Fraser and Neave’s property arm, Frasers Centrepoint, in January this year.
It paid for those malls by issuing new units and taking on more debt. Dr Chew said that Bedok Point would probably be financed in the same way.
He added: ‘We are also quite keen to increase the liquidity of the stock because it (FCT) is quite tightly held.’
BT understands that Bedok Point could cost around $120-140 million but the final price has not been fixed. The mall, which is now 99 per cent leased, is waiting to receive its Temporary Occupation Permit (TOP).
FCT yesterday announced a distribution per unit (DPU) of 2.16 cents for Q4 2010, up 6 per cent from 2.04 cents in Q4 2009. This takes total DPU for FY2010 to 8.2 cents, a 9 per cent increase over the previous financial year.
Total distribution to unitholders rose 29 per cent for the three months ended Sept 30, 2010 to $16.5 million from $12.8 million a year ago.
Revenue was boosted by the accretive acquisitions of the Northpoint extension (Northpoint 2) and YewTee Point as well as the successful revamp of the older portion of Northpoint.
Portfolio occupancy stood at 98.1 per cent as at end-September. Over the financial year, leases for 8.6 per cent of the portfolio’s net lettable area were signed, achieving average rental reversions of 7 per cent over preceding rents.
FCT also recognised a revaluation surplus of $42.5 million for FY2010, with all four properties recording higher valuations.
During the year, FCT also started the refurbishment of its Woodlands mall, Causeway Point. The enhancement programme is expected to cost $72 million and span 30 months and net property income is targeted to increase by about 20 per cent after that.
Dr Chew is upbeat about the outlook for Singapore’s suburban retail market.
‘We think that the rental levels are going to be sustained and there will even be rent increases together with Singapore’s economic growth and population growth,’ he said.
In FY2011, 241 leases that account for 30 per cent of FCT’s net lettable area will expire and Dr Chew expects good rental reversions on the back of the improving market.
FCT shares fell three cents to close at $1.50 yesterday.
ART – CIMB
Asian growth less than ideal
• Below expectations; downgrade to Underperform from Outperform. 3Q10 results were below Street and our expectations with DPU of 1.93cts (excluding new placement units) forming 23% of our FY10 forecast (we had expected 26%) due to lower-than-expected growth in REVPAU. YTD DPU forms only 65% of our estimate. We factor in equity fund-raising, contributions from its European portfolio and moderated REVPAU assumptions for the Philippines and Vietnam. As a result, we cut our DPU estimates by 7-10% for FY10-12. We also roll over our target price to end-CY11. Our DDM target price (discount rate 8.3%) falls to S$1.24 from S$1.35. Although ART does not appear too expensive at about book value (proforma NAV S$1.28) and dividend yields are in line with the SREIT average, we downgrade it to Underperform, recommending a switch to SREITs with more Singapore-centric assets as: 1) Asian growth (other than Singapore) has not been as strong as anticipated; 2) the addition of its European portfolio will dilute the growth impact from Asia; 3) forex risks and tax leakages have increased; and 4) limited price upside. These are expected to provide de-rating catalysts.
• YTD distribution falls short with fewer non-tax deductible items. 3Q10 DPU of 1.93cts (excluding new units) was not strong enough to pull up YTD DPU as we had expected a strong quarter to make up for 1H10. 9M10 DPU of 5.46cts (excluding new placement units) forms only 65% of our FY10 forecast which had not accounted for its European portfolio. Fewer-than-anticipated non-tax deductible items and higher-than-expected taxes were the main reasons. Actual DPU to be paid taking into account new units issued would be 5.38cts for 9M10.
• Expect higher taxes from Europe. Compared to our forecast of 8.35cts in our last report dated 23 Aug following its European acquisition, our DPU forecasts have been cut by 5% on higher assumptions of corporate taxes for its European portfolio (estimated at 28%).
FCOT – Phillip
•4Q10 revenue of $29.3 million, net property income of $23.2 million, distributable income of $9.5 million
•4Q10 DPU of 0.31 cents
•Full year revenue up 21%, DPU up 29%
•Maintain Hold, target price $0.18
Spot-on DPU forecast
FCOT recorded 4Q10 revenue of $29.3 million (+14.1% y-y, +0.2% q-q), net property income of $23.2 million (+16.4% y-y, +2.3% q-q) and distributable income available to unitholders of $9.5 million (+54.6% y-y, +23.0% q-q). 4Q10 DPU was 0.31 cents (+55.0% y-y, +24.0% q-q). Full year results for the period 1 Oct 2009 to 30 Sep 2010 also improved correspondingly. Full year revenue was $117.9 million (+21.0% y-y) and DPU for the full year was 1.12 cents (+29.0% y-y) which was spot-on with our own forecast.
Favourable AUD, stabilization effect of Alexandra Technopark
The improved y-y performance is mainly attributed to the contribution from Alexandra Technopark, which was acquired in Aug 2009, as well as favorable exchange rate of the AUD. Revenue breakdown by country is Singapore: 51.7%, Australia: 35.2%, Japan: 13.1%.
All round improvement; Japan still the drag
Generally occupancy improved for the Singapore and Australia portfolio except for the Japan portfolio. Portfolio occupancy for 4Q10 was 90.8%. Occupancy by country is Singapore: 96.1%, Australia: 98.8%, Japan: 55.5%. Cosmo Plaza continues to be the drag on overall occupancy. Excluding Cosmo Plaza, Japan portfolio occupancy would be 93.5%.
CMT – Kim Eng
Consistency is key
Event
• CapitaMall Trust (CMT) reported a 7.1% yoy increase in its net property income to $101.2m for 3Q10, due in part to its acquisition of Clarke Quay. The result is in line with our expectations. A DPU of 2.36 cents a share was also announced, taking year‐to‐date DPU to 6.88 cents a share. The consistent performance looks set to last as more organic growth is expected in 2012 and 2013. Maintain BUY.
Our View
• CMT continues to enjoy positive rental reversions with an average growth of 2.1% in rents from renewals or new leases signed so far this year. Its portfolio occupancy rate remains a robust 99.6%, dragged down only slightly by the newly acquired Clarke Quay.
• In addition to active lease management, asset enhancement initiatives at JCube and The Atrium@Orchard will propel organic growth in 2012 and 2013, respectively. We believe this should more than offset the marginal increase in financing costs, assuming that the convertible bonds are put back by holders in 2011.
• The retail industry in Singapore should continue to post stable performance as consumer confidence strengthens. The Retail Sales Index showed that retail sales, excluding motor vehicles, grew by 6.2% in August, marking the tenth consecutive month of yoy growth. As long as this continues, it should augur well for CMT’s tenants.
Action & Recommendation
While we continue to expect CMT to deliver similarly steady performance in the future, further positive catalysts may come from its possible participation in greenfield development projects, in partnership with its sponsor CapitaMalls Asia. Maintain BUY with a DDM‐derived target price of $2.27.