Month: October 2010
MLT – BT
MapletreeLog’s Q3 DPU rises 4.1%; income up 8.1%
ACQUISITIONS have boosted Mapletree Logistics Trust’s (MapletreeLog) results for the third quarter ended Sept 30.
The trust yesterday posted a net property income of $47.6 million – up 8.1 per cent from a year ago. Amount distributable rose 9.5 per cent to $31.5 million.
As a result, the available distribution per unit (DPU) increased 4.1 per cent to 1.54 cents from 1.48 cents.
MapletreeLog bought 10 properties in Singapore, Japan, Korea and Vietnam in the past year, growing the book value of its portfolio by 16 per cent to $3.4 billion as at Sept 30 from $2.9 billion last year.
More acquisitions could come.
‘Singapore remains our key priority market; we believe it will continue to give us good investment opportunities with quality customers,’ said Richard Lai, CEO of MapletreeLog’s manager. ‘We are also continuing our expansion in markets such as Japan, South Korea, Malaysia and China.’
MapletreeLog might also go into new markets.
‘We are currently exploring several possibilities across Asia,’ Mr Lai added.
The occupancy rate for MapletreeLog’s portfolio as at Sept 30 was 98 per cent, up a notch from 97 per cent a quarter ago.
The trust’s aggregate leverage ratio as at Sept 30 was 39.9 per cent, rising from 38.8 per cent as at June 30.
MapletreeLog launched an equity fundraising exercise on Sept 21 to support its expansion, raising gross proceeds of $305 million.
Following this, instead of declaring a distribution for the period July 1 to Sept 30, it will declare a distribution for the period July 1 to Oct 14 – which was the day immediately before the date on which the new units were issued and listed. It will announce the cumulative DPU for this period later.
MapletreeLog gained two cents yesterday to close at 90.5 cents.
CCT – BT
CCT distributable income up 7.9% in Q3
But revenue slides on sale of Robinson Pt, StarHub Centre
CAPITACOMMERCIAL Trust (CCT) has reported a 4.7 per cent year on year drop in third-quarter gross revenue on account of the sale of Robinson Point and StarHub Centre. But it still managed a 7.9 per cent year on year rise in distributable income, thanks to lower property tax and interest savings as a result of lower borrowings.
The trust now had cash and cash equivalents of $730.9 million at end-September – more than double the $312.5 million at Dec 31, 2009. The increase was on the back of $577 million of net proceeds from the sale of the two buildings this year. CCT has not distributed the sales proceeds, saying it intends to retain them for growth opportunities and/or to repay debt.
‘The trust will continue to extract value from the portfolio through pro-active asset enhancement initiatives,’ said Richard Hale, chairman of CapitaCommercial Trust Management Ltd (CCTML).
‘We are actively sourcing for good quality assets that will complement our existing portfolio. We will also maintain a disciplined approach towards using the divestment proceeds, with careful consideration to the impact on the trust’s balance sheet and yield, and unit-holders’ returns.’
Standard Chartered Bank said in a report yesterday that after divesting the two non-core assets, CCT has $2.3 billion of unencumbered assets plus the $730.9 million of cash. ‘We believe CCT can invest around $2 billion without issuing new equity,’ said Stanchart. ‘Potentially, CCT could redevelop Market Street carpark for about $1 billion, which could provide a yield on cost of 5.5-8 per cent. CCT may also buy assets in Singapore, including 50 Collyer Quay for $1 billion or Asia Square for $2.2 billion, without issuing equity. These could be yield-accretive given current low interest rates of about 2.5 per cent versus a prime office capitalisation rate of 3.5 per cent.’
CCT’s gearing ratio has fallen – from 32.8 per cent in Q2 2010 to 31.5 per cent in Q3 2010. ‘We have completed all refinancing due in 2010 and are already exploring options to refinance the borrowings due in future years,’ said CCTML’s CEO Lynette Leong. CCT has total gross debt of about $1.9 billion, including $850 million due next year and $713 million due 2012.
For Q3 ended Sept 30, 2010, gross revenue fell 4.7 per cent year on year to $97.8 million. Net property income dipped one per cent to $76.3 million, but distributable income rose 7.9 per cent to $56.2 million. Distribution per unit (DPU) for Q3 works out to $1.99 – a year on year rise of 7.6 per cent.
On an annualised basis, the Q3 DPU translates to a distribution yield of 5.5 per cent based on CCT’s Oct 20 closing price of $1.44 per unit. The counter closed one cent higher at $1.45 yesterday. There is no distribution payment for Q3 as the trust distributes semi-annually.
CCTML said it signed new leases and renewals for about 138,000 sq ft in Q3, taking the figure for the first nine months to 560,000 sq ft. New tenancies sealed in Q3 included Ai Mien Bar Holding, which will operate a chic Chinese restaurant featuring seasonal and regional flavoured noodles on the ground floor of Capital Tower, and AXA Rosenberg Investment Management Asia Pacific, at One George Street.
Lease renewals in Q3 included Neste Oil Singapore and Orix Investment & Management, at Raffles City, and Robert Walters (Singapore) at Six Battery Road.
CCTML said asset enhancement works for Six Battery Road will kick off next month, with the main lobby getting a face-lift first. Growth in demand for prime and Grade A office space is expected to continue into the current quarter and 2011, it said. ‘As a result, there is less concern that large volumes of secondary stock will be left unoccupied when some major tenants relocate to newer buildings in the Marina Bay area.
‘Pre-leasing for the newer office space scheduled for completion in 2011 remains strong, indicating that the overall positive momentum in the Singapore office market will likely be sustained even with the increase in office stock from the completion of the new office buildings.’
For the first nine months, CCT posted a 0.1 per cent year on year drop in gross revenue to $299.8 million. Net property income rose 3.6 per cent to $228.1 million, while distributable income increased 14.2 per cent to $166.3 million. DPU rose 13.7 per cent to 5.89 cents.
CCT – DBSV
Waiting for acquisition catalyst
• 3Q10 distribution income up a marginal 1.0% qoq, within expectations
• Portfolio occupancy to remain high with limited rental reversion upside
• Maintain Hold with TP S$1.47
Within expectations. CCT reported a marginal 2.4% qoq decline in topline to S$97.8m in 3Q10 despite loss of income from Starhub Centre, sold in mid Sept 2010. Performance was underpinned by robust leasing activities in its remaining properties, which boosted portfolio occupancy by 2.6% pt qoq to 98.2% with an additional 138,000sf of new take up. NPI increased by 2.8% to S$76.3m due to lower property expenses (-17.2% q-o-q) and distributable income remained stable, rising by 1.0% to S$56.2m (DPU: 1.99Scts) on reduced borrowing costs (-6.3% q-o-q). For the 9M, the group achieved DPU of 5.89Scts.
18.3% leases expiring in 2011. While leasing activities had focused on newer properties in 1H10, we believe that rental attention could shift back to existing prime buildings, as the next wave of new developments would only be ready late next year. As such, going forward, we think that CCT's high portfolio occupancy would remain intact. Although rental rates have started to strengthen, CCT's rental revenue is likely to see limited reversion upside as leases expiring in 2011(18.3%) were transacted at about $11-16 psf pm vs current prime rents and Grade A at S$7.4 psf pm and S$9 psf pm respectively. Asset enhancement activities for 6 Battery Rd will commence in Nov 2010 and be carried out in phases till 2013. Upgrading works will coincide with StanChart's plan to downsize their space occupation by 70ksf and some potential replacement candidates have already been identified.
Maintain Hold. We are revising our DCF-backed TP to $1.47 as we roll our numbers forward into FY11. Meanwhile, asset divestments have lowered gearing to 31.5%, putting them in good position to undertake new acquisitions. However, we think rising capital values could post a hurdle to making immediately accretive purchases. With no near term catalysts, we maintain a Hold call with TP of $1.47
PST – DBSV
Growth, diversification plans on track
At a Glance
• 3Q10 DPU of 0.83UScts in line with our expectations
• Existing cash flows look stable, diversification and growth plans remain on track with recent acquisition of 2 Multi Purpose Carriers for delivery in late 2012
• Trading at about 11% FY11 yield, maintain our BUY call at higher TP of US$0.39 (9% target yield on FY11 DPU)
Comment on Results
DPU of 0.83UScts was declared for the quarter, which is 5% higher than 2Q10 DPU but similar to the payout in 3Q09, when PST first started conserving 30% of distributable cash. 3Q10 revenue of US$15.6m held steady, and net profit was up 9% q-o-q to US$7.2m. After regular loan amortisation payment of US$4.3m, net cash generated for 3Q10 amounted to US$7.0m, of which approximately US$4.9m will be distributed to unitholders and the remaining US$2.1m retained for future working capital purposes.
Outlook & Recommendation
Following its earlier plans to acquire two new capesized bulk carriers for delivery in Sep 2011, PST has announced further growth plans and diversification into MPP vessels, with an order for 2 vessels worth US$60m for delivery in Sep/Dec 2012. The vessels will be chartered out for 10 years to COSCO Xiamen, a subsidiary of the COSCO Group. Pre-delivery payments for these ships will be supported by advances from sponsor PIL, and hence financing requirements will be back-loaded. To recap, the payment schedule for the bulk carriers are back-loaded as well, with 85% to be paid on delivery. Thus, while there is no immediate DPU accretion, there are no immediate funding needs as well.
Management is content to wait for better financing deals as they believe the market for ship financing is improving (it is possible to obtain more than 60% Loan-to-Value currently). Given the current cash buffer, we thus push back our equity fund raising assumptions to 2012, as we believe at least the bulk carrier deal can potentially be financed without raising additional equity. Maintain BUY, TP revised up to US$0.39, as we roll over valuations to FY11.
MLT – OCBC
3Q10 in line; still a compelling play
3Q10 in line. Mapletree Logistics Trust (MLT) reported 3Q10 gross revenue of S$54.5m, up 7.4% YoY and 4.9% QoQ. Net property income of S$47.6m rose 8.1% YoY and 4.0% QoQ. Distributable income of S$31.5m was up 9.5% YoY and 2.2% QoQ. Results were boosted by positive contributions from recent acquisitions and lower vacancy rates. Distributable income was just 2% shy of our S$32.3m estimate.
Occupancy improves. As at 30 Sep, MLT recorded portfolio occupancy of 98%, up from 97% three months ago. This was due to lower vacancies in Hong Kong (+500 basis points) and Malaysia (+300 bps). Recall that in 2Q10, the manager had chosen not to renew leases of certain single-tenanted buildings because of unsatisfactory rent negotiations. Instead it increased its weighting to multi-tenanted buildings with three assets converted from single-user assets to multi-tenanted buildings in 2Q10 (two in Malaysia and one in Singapore).
Still in acquisition mode. MLT recently raised S$305m through a non-renounceable preferential offering to existing unitholders as well as a private placement. Excluding the S$145m of assets acquired on the back of the Nov 09 private placement, MLT has announced approximately S$447m worth of acquisitions this year. The gross proceeds from the equity issue are intended to partially finance these purchases, and are also expected to take MLT's leverage down from about 46% (assuming all acquisitions were debt-funded) to approximately 38%. This is lower than MLT's 45% mediumterm leverage strategy and will allow it to continue to acquire third-party and sponsor-owned assets.
DPU mechanics. Because of the recent private placement, MLT has already declared a "cumulative distribution" estimated at ~1.73 S cents for the period from 01 Jul to 14 Oct (the day immediately prior to the issue of the private placement units). This cumulative distribution will be paid on or around 29 Nov. The next DPU payout will be for the period from 15 Oct to 31 Dec (the "adjusted 4Q10 distribution").
Still compelling. 4Q10 income is likely to be boosted (in our opinion) by contributions from recent acquisitions, offset by an increased equity base post-equity fund raising. MLT has a proven track record in executing a virtuous cycle of accretive acquisitions and competitive fund-raising; we believe more accretive acquisitions are likely in the coming months. After adjusting our valuation inputs to price in a higher possibility of positive rental reversions over FY11 (as per more optimistic guidance from manager), our fair value estimate increases from S$0.90 to S$0.97. Maintain BUY (14% estimated total return).