Month: March 2011
CMT – BT
CMT plans to boost earnings from Iluma
CAPITAMALL Trust (CMT) intends to boost the occupancy, average rents and net lettable area (NLA) at its newly acquired Iluma shopping mall in Bugis.
The real estate investment trust, which is a unit of CapitaLand, on Monday said that it has agreed to buy the mall from private property group Jack Investment for $295 million.
Speaking to analysts and reporters yesterday, CMT chief executive Simon Ho said that the trust is likely to invest in asset enhancement works to boost the net property income from Iluma.
But the amount of investment that will be required has not been determined yet, he added.
Iluma is located at Victoria Street opposite Bugis Junction, which is one of CMT’s existing properties. The mall has a net lettable area of 185,190 square feet and is connected by a link to the second storey of Bugis Junction.
Iluma’s current occupancy stands at 83.7 per cent, lower than Bugis Junction’s 100 per cent. Average rents for prime retail space in Iluma also range from $15-$19 per square foot per month (psf pm). At Bugis Junction, average rents for prime space range from $16-$29 psf pm, CMT said.
Iluma has an NLA efficiency (ratio of NLA to gross floor area) of around 62 per cent, lower than CMT’s portfolio average of about 68 per cent, said Mr Ho. He plans to boost the NLA efficiency.
DMG & Partners Securities said in a report yesterday that CMT, through its retail management expertise, would be able to raise Iluma’s current occupancy from 83.7 per cent to match Bugis Junction’s current 100 per cent. The firm has a ‘neutral’ call and a target price of $2.00 on the stock.
CMT shares rose five cents to close at $1.86 yesterday.
StarHill Global – DBSV
Starhill Global Reit enhancing Wisma Atria, no surprise
Starhill Global Reit has proposed to embark on some asset enhancement plans for Wisma Atria. The exercise will involve enhancing the mall facade, featuring double-storey storefronts on the second and third storey to showcase the latest flagship stores of international retailers. Pedestrian footpath spanning the facade of Wisma Atria will be widened. Strategically located ramps and walkways leading to the new shop fronts will also be included to improve accessibility from the surrounding malls and the Orchard Road MRT station. To minimize disruption to Wisma’s operation, the AEI will be carried in phases over 1Q/2011 to 3Q/2012. Estimated capex of $31m will be funded internally and yield a ROI of 8.0% or $2.5m additional NPI. Minimal impact on gearing of c. 31% post AEI works.
While the impact is yield accretive, it is likely to be felt in the medium term when the enhancement works are completed. We see this move to tap low hanging fruits from its existing portfolio as positive as it allows them to boost the mall’s visibility along Orchard Road and intensify shoppers’ experience. We have previously assumed a larger scaled AEI plan in our numbers and have now adjusted our estimates to reflect the updated AEI plans unveiled by the manager. FY11 and FY12 DPU estimates of 4.28cts and 4.46cts respectively have been lowered marginally to account for the vacancy of 3% during the AEI period. We expect the impact of additional income to be felt post FY13, upon completion and stabilization of the AEI.
Maintain buy with a slightly lower TP of $0.73
CMT – BT
CMT inks deal to buy Iluma for $295m
CapitaLand unit CapitaMall Trust (CMT) has agreed to buy Iluma, a shopping mall in Bugis, for $295 million.
Iluma is located at Victoria Street opposite Bugis Junction, which is one of CMT’s existing properties. The mall has a net lettable area of 185,190 square feet and is connected by an overhead link-bridge to the second storey of Bugis Junction.
CMT is buying the mall from Jack Investment, a private local property development and investment company. Previous media reports have put Jack Investment’s investment in Iluma at around $160 million.
With the acquisition of Iluma, CMT’s portfolio increases to 16 shopping malls. CMT is the largest real estate investment trust (Reit) in Singapore by asset size. Its portfolio is valued at around $8.1 billion.
‘The acquisition of Iluma is exciting as we see a lot of opportunities to integrate it with our Bugis Junction,’ said Simon Ho, chief executive of the trust’s management team. ‘The two malls are already connected by an overhead link-bridge and we see scope to create an enlarged and seamless shopping destination that will appeal to locals and tourists.’
Bugis Junction, with its direct connection to the Bugis MRT station and central location, already attracts strong shopper traffic of more than 3.2 million per month, Mr Ho said.
The integration of Iluma with Bugis Junction will create a combined shopping destination with net lettable area of more than 606,000 sq ft, about the size of CapitaLand’s Ion Orchard mall on Orchard Road.
At the price of $295 million and based on the current rental rates, occupancy of 83.7 per cent and entry yield of just under 4 per cent, the acquisition is yield accretive to CMT’s current portfolio, Mr Ho explained.
He added: ‘With its prime location next to Bugis MRT station and planned integration with our Bugis Junction, we are confident that the occupancy of Iluma can match Bugis Junction’s occupancy of 100 per cent and its property yield can be boosted to be in line with the other malls in our portfolio.’
CMT shares gained three cents to close at $1.81 yesterday.
HPH Trust – BT
Port spin-off may give Hutchison US$5.8b booster
But distributions in HK$ may be a downside for local investors
Hutchison Whampoa’s port unit is set to raise anywhere from US$4.91 billion to US$5.83 billion from the initial public offering (IPO) of Hutchison Port Holdings Trust (HPH Trust), the trust’s preliminary prospectus showed yesterday.
The offering – South-east Asia’s largest – will be backed by Temasek Holdings, one of its cornerstone investors. The trust will sell about 3.9 billion units to the public and institutional investors, priced within a range of US$0.91 and US$1.08 apiece.
On top of that, about 1.5 billion units will be parcelled out to eight cornerstone investors that will subscribe for US$1.62 billion worth of trust units, in total.
Aranda Investments Pte Ltd, of which Temasek Holdings is the ultimate controlling shareholder, has committed a subscription amount of US$100 million. Capital Research and Management Company will lead the group, investing US$634 million. Paulson & Co, which is managed by John Paulson, will take a US$350 million stake and Lone Pine Capital LCC has pledged US$186 million.
Based on the maximum offer price of US$1.08, the cornerstone investors will hold 17.2 per cent of the trust. The trust’s sponsor – Hutchison Port Holdings Limited – will own a 38 per cent stake. PSA International holds an effective 20 per cent stake in the sponsor. At that price, the trust will have a market capitalisation of about US$9.41 billion.
The sponsors have estimated annualised distribution yields of 5.5 per cent and 6.1 per cent for 2011 and 2012, respectively, based on the maximum offer price. The 2011 period is a nine-and-a-half month period running from Mar 16 to the end of the year. Kenneth Ng, head of CIMB-GK Research, deemed the yield ‘fairly decent’.
With the distributions being declared in Hong Kong dollars, however, local investors might face an accompanying downside, said Phillip Securities analyst, Alfred Low. ‘If it’s in Hong Kong dollars – which is tied to the US dollar – then if the Sing dollar appreciates next year, it’s bad,’ said Mr Low.
The timing of the IPO might work against it as well, as investors have displayed skittishness in response to the turbulence in the Middle East.
‘The equity markets are doing so badly, with all the IPOs underperforming. Based on the mid-point of the price range, I would not subscribe,’ said Mr Low.
Other market watchers, however, believe that the turmoil in the Middle East will make this region look like a safe haven for investments, in comparison. The merits of the trust could also make it an outlier, according to CIMB’s Mr Ng. ‘It’s a business trust or a Reit-like structure marketed as a yield-providing instrument, so even in jittery markets, there should be demand for such issues,’ he said.
HPH Trust’s portfolio will include Hongkong International Terminals (HIT) and Cosco-HIT Terminals, along with the Yantian terminal in the Shenzhen Port. Last year, total throughput for all the container terminals in the trust’s portfolio stood at 21.17 million twenty foot-equivalent units (TEUs), up from 18.08 million TEUs in 2009.
In 2009, Hong Kong and Shenzhen topped global container throughput lists with a combined throughput of about 39.2 million twenty foot-equivalent units.
Revenue from the trust’s deep-water port business accounted for more than 90 per cent of HK$11.56 billion in total revenue last year.
The trust will also have a claim on the economic benefits derived from the three river ports of Jiangmen, Nanhai and Jiuzhou. These three ports brought in HK$70.9 million in economic benefits last year.
As Intra-Asian trade explodes and an increasingly large proportion of it begins to revolve around the mainland, the trust will focus on developing and investing in deepwater container ports lining the Pearl River Delta.
The proceeds from the offering will partially pay off the HK$102.9 billion price tag on the assets when the trust acquires them from the sponsor. The rest of the acquisition will be funded by a three-year US$3 billion debt facility and an issue of consideration units.
DBS, Deutsche Bank, and Goldman Sachs are joint bookrunners and issue managers.
TCT – BT
TCT sees at least 25% rise in net property income
TREASURY China Trust (TCT) is expecting at least a 25 per cent jump in net property income this year, thanks to its recent acquisition of two shopping malls in Shanghai and Qingdao. It is now looking to acquire retail malls in Xi'an through its tie-up with Hong Kong retail group Ginwa Investment this year.
'We are seeing about 25 per cent increase in net property income as a result of those two acquisitions,' TCT chief executive Richard David told BT yesterday. 'On every front, we expect 2011 to be very strong,' he said, pointing to TCT's existing development pipeline which is fully funded, continued strong economic underpinnings in China and income accretion from the two latest acquisitions.
TCT's current portfolio comprises completed office/ retail properties Central Plaza, City Centre and Treasury Building in Shanghai. It is building 74,000 sq m space in Beijing International Logistics Park and adding 88,000 sq m in City Centre, where it expects strong pre-leasing commitments this year. Its recent stake acquisitions in two retail malls in Qingdao and Shanghai, to be completed by April, will add a further 225,000 sq m of retail space to TCT's portfolio and double TCT's development pipeline to more than 330,000 sq m.
The enlarged portfolio is estimated to yield net property income of 302.3 million yuan (S$58.5 million) for fiscal 2011, up from 238.6 million in fiscal 2010, a 26.7 per cent increase.
TCT yesterday posted a net profit of $20.9 million for the fourth quarter ended Dec 31, 2010, 8.5 times its forecast, and a net profit of $39.6 million for the full year, 16 times its forecast, on the back of a $33 million fair-value gain in investment properties. Net property income for the fourth quarter was $12 million, 5.8 per cent lower than forecast, while that for the full year was $22.6 million, 4.1 per cent below forecast. TCT has declared a distribution per unit of 2.5 cents for the fourth quarter, representing annualised yield of 5.7 per cent.
There are no comparative figures from a year ago as TCT was listed only last June by way of introduction, after taking over China Real Estate Opportunities (CREO) that was formerly listed on London's Alternative Investment Market. Mr David said TCT is looking at a number of retail properties in Xi'an with its partner Ginwa, where TCT will take up majority ownership of 55 per cent. TCT had in December agreed to acquire a 55 per cent stake in Sanyang Property Development Co Ltd, which owns Central Avenue Retail Mall in Qingdao, at 476.85 million yuan – its first investment made in partnership with property developer TRIO Group. It also agreed to acquire 100 per cent of a firm which owns the Huai Hai Mall (formerly referred to as Retail Mall) in Shanghai at 575 million yuan.
These two acquisitions will raise TCT's retail exposure from 28 per cent of its total portfolio's gross floor area to 56 per cent. Mr David said TCT will continue to expand its retail exposure, given the segment's growth potential supported by strong double-digit retail sales growth in China.
'We would also expect the strategic partnership agreement with the TRIO Group, having already identified one acquisition in Qingdao, to also identify more in the years to come,' Mr David said. TCT has zero debt maturing by end-2012 and a cash hoard of $104 million as at Dec 31.