Month: April 2011
CLT – CIMB
Backend-loaded contributions expected
• In line; maintain Outperform. 1Q11 DPU of 1.95 Scts met expectations, forming 21% of our FY11 estimate and 24% of the Street’s. This translates to an annualized DPU of 7.92 Scts for an 8.4% yield. We expect backend-loaded contributions with S$220m of debt-funded acquisitions assumed for FY11. No change to our DPU estimates or DDM-based target price of S$1.32 (discount rate 8.4%). We continue to like Cache for its quality portfolio and scalability. Balance sheet is one of the strongest among S-REITs, leaving it with debt headroom for accretive debt-funded acquisitions from sponsor CWT and third parties. Cache trades at 1.05x P/BV and offers a prospective FY11 DPU yield of 10%. We see catalysts from accretive acquisitions.
• 1Q11 DPU up 0.7% qoq. Cache’s portfolio remains fully leased, with a long WALE of 5.5 years. NPI was up 0.5% qoq in 1Q11 from rental step-ups though it missed management’s forecast by 1% due to timing differences for rental step-ups. Distributable income (+0.8% qoq) and DPU (+0.7% qoq), however, met management’s forecasts on lower financing costs.
• Maiden third-party acquisitions in 1Q11. Cache completed the acquisition of 6 Changi North Way on 31 Mar and is in the process of completing the acquisition of 4 Penjuru Lane. The latter comes with development potential with an un-maximised plot ratio of 0.63 (vs. maximum plot ratio of 2.5). We expect backend-loaded contributions from these two and look forward to more third-party acquisitions to expand its portfolio and dilute tenant concentration risks for sponsor, CWT.
• Acquisition catalysts. Asset leverage is expected to climb to 27.6% after the completion of the above two acquisitions, leaving Cache with debt headroom for S$84m before breaching its gearing cap of 35%. We continue to assume S$220m of acquisitions (inclusive of S$40m of acquisitions announced recently) for FY11, believing Cache will be able to obtain a rating to gear up to 60% on a full ramp-up of its acquisitions.
CDL H-Trust – DMG
Tourist arrival booster continues
1Q11 DP U rose 2.6% YoY. CDL Hospitality Trusts (CDLHT) reported DPU of 2.38S¢ (+2.6% YoY; -14.4% QoQ), representing 20% of our FY11 DPU estimate. Stripping out the one-off exchange gain in 1Q10, DPU for 1Q11 grew 23.5% YoY. Gross revenue grew 21.4% YoY in 1Q11 (-3.1% QoQ) mainly due to 1) full three-month contributions from the Australia Hotels acquired in Feb 2010 (vs 41 days of contributions in 1Q10), and higher RevPAR for Singapore Hotels at S$195 (+12.1% YoY; +0.8% QoQ). We expect the acquisition of Studio M Hotel to be completed in May 2011 and this will boost CDLHT’s DPU in subsequent quarters. Maintain BUY and unchanged TP of S$2.46, based on DDM (COE: 8.4%; TGR: 3.0%).
Tourist arrival growth expected to remain strong. The Singapore Tourism Board projects tourist arrival numbers to grow 7.9%/year to 17.0m in 2015. In addition, the recent nuclear crisis in Japan could potentially boost Singapore’s tourist arrival further in FY11. Given the positive outlook, we believe CDLHT will continue to benefit from high occupancy rate as well as rising ARR. AOR and ARR for CDLHT’s Singapore hotels in 1Q11 are 85.7% (+1.7ppt YoY; -4.3ppt QoQ) and S$228 (+10.1% YoY; +6.0% QoQ) respectively.
Studio M hotel acquisition to boost DPU in subsequent quarters. The EGM for the acquisition of Studio M will be held on 29 Apr 2011. Based on assumed debt cost of 3.5% and net property income yield of 6.1%, we estimate the new addition will contribute 0.3-0.4S¢ to FY11-12 DPU respectively.
Post acquisition gearing of 26.9% implies debt headroom of ~S$240m. Based on 1Q11 total asset of S$1.8b and target gearing of 40%, we estimate CDLHT is able to take on another S$240m worth of debt to bolster its cash pile for further acquisitions or AEI following the acquisition of Studio M Hotel which will be fully funded by debt.
CLT – DBSV
Awaiting the acquisition kicker
At a Glance
• 4Q10 DPU of 1.95 Scts accounted for 23% of FY estimates
• Completion of recent acquisitions to drive earnings growth in coming quarters
• BUY, TP maintained at S$1.11
Comment on Results
1Q11 results in line. DPU of 1.95 Scts formed 23% of our full year forecast. Cache Logistics Trust (“Cache”) reported topline and net property income (“NPI”) of S$14.8m and S$14.4m respectively, which were slightly below IPO forecasts due to timing differences in revenue recognition for the purchase of its initial properties and pro-rated monthly income. Distributable income of S$12.4m exceeded forecast by 0.2%, largely due to loans obtained at cheaper rates, translating to a DPU of 1.95 Scts (+0.6%).
Proactive asset management. New acquisitions yet to kick in. Management remains proactive in managing its properties – securing additional commitment from an existing tenant at Commodity Hub while embarking on AEI opportunities to boost rental income, albeit marginal increase in income. Recent acquisitions of 6 Changi North Way APC Districentre and 4 Penjuru Lane will underpin earnings growth in the coming quarters.
Lowly leveraged balance sheet; Cache has the firepower to execute on further acquisitions. At a modest 26.4%, Cache remains one of the lowest geared S-REITs. We continue to see acquisitions as potential catalysts given visible pipeline of properties from sponsors CWT and C&P on top of 3rd party opportunities regionally. We have moderated our estimates slightly as we adjusted contributions from new acquisitions to start only from end-2011.
Recommendation
BUY call, TP maintained at S$1.11. Cache remains attractive for its FY11-12F yield of 8.5-9.0%, which is 230-270 bps above peers’ average of 6.0% – 6.3%.
CLT – BT
Cache posts $12.4m Q1 distributable income
DPU of 1.952 cents is 0.6% higher than document forecast
CACHE Logistics Trust, which listed in April last year, has posted distributable income of $12.4 million in its first quarter, only slightly pipping projections by 0.2 per cent.
Its distribution per unit (DPU) was 1.952 cents, about 0.6 per cent higher than the 1.94 cents forecast in its introductory document.
However, both gross revenue and net property income retreated about one per cent from what were projected. They stood at $14.8 million and $14.4 million, respectively.
ARA-CWT Trust Management, Cache’s manager, said the difference from the projections was ‘due to timing variance of rental step-ups’.
The real estate investment trust (Reit) has recently completed the acquisition of 6 Changi North Way, bringing its portfolio to a total of seven logistics properties in Singapore.
All of them are 100 per cent occupied, with tenants on triple-net master leases and multi-tenancy leases.
What stood out in its first-quarter results were ‘other trust expenses’, which more than doubled to $562,000 from $250,000.
The sharp rise was due to set-up costs in a multi- currency medium-term note programme under its subsidiary Cache-MTN that was not budgeted for in the introductory document.
Cache-MTN was incorporated on Feb 14 to provide treasury services to Cache.
However, these costs will not impact DPU as expenses are not tax-deductible. Cache’s net asset value per unit is currently 90 cents.
It said that it is actively seeking accretive acquisitions in the Asia-Pacific region to continue delivering sustainable distributions and growth to its unitholders. Its gearing stands at 26.4 per cent with about $208.3 million in borrowings as at March 31.
‘With a strong balance sheet and a conservative gearing ratio, Cache is on a strong footing to execute this strategy,’ said the Reit in its financial results yesterday.
Cache’s counter closed unchanged at 94.5 cents yesterday.
StarHill Global – BT
Starhill Global’s Q1 DPU rises to record 1.07 cents
STARHILL Global Reit’s Australian and Malaysian buys last year helped buoy first-quarter income distribution to unitholders.
Income available for distribution grew 27.9 per cent to $24 million. Of this, $20.8 million is for distribution to unitholders, a rise of 13.1 per cent. Another $2.4 million goes to convertible preferred unit (CPU) holders.
Distribution per unit (DPU) to unitholders was a record 1.07 cents, up 12.6 per cent from 0.95 cents last year.
DPU to CPU holders was 1.36 cents.
In January 2010, Starhill Global acquired David Jones Building in Perth. It then added Starhill Gallery and Lot 10 in Kuala Lumpur to its retail portfolio in June 2010.
Starhill Global’s gross revenue and net property income for its first quarter increased 21.9 per cent and 27.2 per cent to $45.8 million and $37.1 million, respectively.
The group said the higher revenue from its properties in Australia, Malaysia and China helped offset dips from Singapore and Japan.
Revenue from its Singapore properties still made up a significant proportion of its portfolio at 60 per cent or $27.6 million.
However, net property income from Wisma Atria and Ngee Ann City edged down 2.4 per cent to $22 million as new and renewed office leases were secured at rates below 2007 peak levels.
In contrast, Starhill Global’s Renhe Spring Zongbei property in Chengdu, China recorded a 27.9 per cent rise in net property income year on year to $3.2 million.
David Jones’ and Starhill Global’s Malaysian malls contributed $2.9 million and $7.6 million, respectively, to net property income.
The Reit’s gearing level was ‘prudent’ at 30.2 per cent, said YTL Starhill Global, the Reit’s manager. It has outstanding debts of $804.4 million with a weighted debt maturity profile of about 2.9 years.
Starhill Global ended half a cent up at 63 cents yesterday.