Month: April 2011
CDL H-Trust – BT
CDL Hospitality Trusts posts healthy Q1 results
SURGING visitor arrivals and acquisitions helped boost results for CDL Hospitality Trusts (CDLHT) for the first quarter ended March 31. CDLHT – a stapled group made up of CDL Hospitality Real Estate Investment Trust (H-Reit) and CDL Hospitality Business Trust – saw gross revenue jump 21.4 per cent from a year ago to $32.3 million.
It benefited from improved performance at its hotels in Singapore, and a full quarter’s contributions from hotels in Australia it bought in February last year. Net property income rose 21.8 per cent to $30.1 million. Income available for distribution to holders of stapled securities (after deducting income retained for working capital) was $22.8 million – up 17.4 per cent. From this, income available for distribution per stapled security was 2.38 cents – 2.6 per cent higher.
CDLHT’s hotels in Singapore enjoyed a good first quarter as visitor arrivals continued to grow. The average occupancy rate in Q1 was 85.7 per cent, which not only exceeded last year’s 84.3 per cent, but is also the highest recorded for CDLHT in the first quarter of a financial year. The room revenue per available room in Q1 also rose 12.1 per cent year on year to $195.
CDLHT is optimistic about prospects for hotels here. ‘Upcoming new tourism demand drivers in 2011 should continue to contribute to accommodation demand in Singapore,’ said Vincent Yeo, CEO of H-Reit’s manager.
The counter lost one cent on the stock market yesterday to close at $2.04.
HPH Trust – DBSV
Attractive mix of yield & growth
• Dominant container port player in HK and Shenzhen
• Stable 60% EBITDA margin business to support 100% payout policy, with room to grow
• Currently trading at attractive annualized FY11 yield of 6.3%; 10% DPU CAGR expected over FY11-13
• Initiate with BUY, US$1.15 TP based on DCF (7.2% WACC) with FY12 implied yield valuation of 5.8%
Top container port operator in HK and Shenzhen. Hutchison Port Holdings Trust (HPHT) is the largest container port player in HK and Shenzhen, handling 21.2m TEUs in 2010 or 54% of the entire volume handled at deep-water ports in this area. It is sponsored by Hutchison Port Holdings Limited, the world’s top container port operator by gross throughput.
Predictable and growing cash flows. As the market leader in an oligopolistic environment, and operating on a large scale in one of the China’s most important trade hubs, HPHT’s operations are highly efficient and profitable, with a stable and predictable cash flow stream. HPHT is also expanding its capacity in Yantian Port in East Shenzhen to capture the projected continued growth in trade flows into and out of Southern China, a vital economic region of the country. These factors should underpin the Trust’s ability to generate EBITDA margins of close to 60% and grow distributions by about 10% CAGR over FY11-13.
Attractively trading at FY11F annualised yield of 6.3%, growing to 7.1% in FY12F, compared to S-REITs, which are trading at 6.0-6.3% FY11/12F average yield. Our target price of US$1.15 is based on a 3-stage DCF model with a WACC of 7.2% and terminal growth of 1%. Key concerns include HPHT’s vulnerability to global trade cycles and various foreign currency fluctuation risks for HPHT and its unitholders.
FCOT – OCBC
2Q11 annualised DPU yield of 8%; Maintain BUY
2Q11 Annualised DPU Yield of 8%. Frasers Commercial Trust (FCOT) posted it 2Q11 results on Thursday, which was in line with our expectation and street estimates. 2Q11 gross revenue was flattish YoY but rose 2.2% QoQ to S$29.6m. This was due to higher revenue contribution achieved from Central Park and KeyPoint as a result of an increase in occupancy rates, which was offset by the loss of revenue contribution from Cosmo Plaza following its divestment on 18 Jan 2011. This also increased its NPI by 1% YoY and 3.9% QoQ, as Cosmo Plaza has been generating negative NPI since 4Q10. We are also witnessing an improvement in NPI margin, which rose from 78.9% in FY10 to 80.5% in the quarter. Distributable income is up 2.4% YoY and 27.6% QoQ. 2Q11 DPU is 1.61 S-cents, representing an annualised yield of 8%. Gearing also edged down 2% from 1Q11 to 37.8%.
Portfolio Performance. Overall portfolio occupancy grew by 5.9 pp to 97.7% from last quarter. This was boosted by the rise in occupancy for both Singapore and Australia portfolio plus the divestment of Cosmo Plaza. In particular, Australia portfolio has achieved 100% occupancy rates led by new leases by Jones Lang LaSalle and Hamersley Iron. In Singapore, portfolio occupancy rates grew from 97% to 97.4% driven by the commencement of new leases for both 55 Market Street (55MS) and KeyPoint which include Gabriel Law Corporation, Corporate Serviced Offices and L’Oréal. However, 55MS is still experiencing negative rental reversions, with FY11 average passing rent at S$10.50 psf pm while new leases are signed at S$6-S$6.50 psf pm. According to our estimates, 55MS is likely to rise out of negative territory only after 2013. Keypoint is also undergoing negative reversions, albeit at a lesser magnitude with average passing rent and spot rent at S$5.40 psf pm and S$5.10 psf pm respectively; but management expects a turnaround by end of the year.
Looming Dent on Japan Assets. FCOT’s Japan assets account for 9.6% of its gross revenue. We noted that 100% of the leases for the Azabu building in Tokyo and 65.5% for Galleria Otemae in Osaka are expiring by FY12. We remain wary of the prospects in Japan, as office rentals are unlikely to see further uplift after the earthquake episode. Furthermore, some occupiers have postponed or are reassessing their office strategies, which will likely delay the market recovery. In fact DTZ has forecasted Grade A office rents for Tokyo to decline further, only showing growth in 2013. Maintain BUY with a reduced fair value of S$0.89.
MLT – DBSV
Acquisition-led growth story
• 1Q11 DPU of 1.55 Scts in line
• Acquisitions to power earnings growth in 2011, gearing of 39% is optimal as a cross-border REIT
• BUY and DCF-TP of S$1.07 maintained
DPU of 1.55 Scts in line. Mapletree Logistics Trust (“MLT”) reported a 21% and 19% growth in rental income and net property income to S$62.2m and S$54.7m respectively, largely attributable to contributions from new asset acquisitions completed during 2H10. Portfolio occupancy improved to 98.3% (from 98% in 4Q10) with increased take-up rates in Singapore & HongKong. NPI margins compressed slightly to 87.8% (vs 89% in 1Q10) owing to an enlarged portfolio and expenses incurred from the conversion of certain properties from single to multi-tenanted leases. Distributable income came in at S$37.5m (+22% yoy), translating to a smaller 3% yoy increase in DPU to 1.55 Scts due to enlarged share base.
Gearing of 39.4%, though higher than peers, is optimal in our view for its cross border exposure. MLT’s higher gearing of 39.4% compared wit S-REIT peers’ average c34% is justifiable, in our view, given its multi-jurisdiction exposure. The manager has taken higher debt levels overseas, acting as natural hedges against currency fluctuations and for tax efficiency purposes.
Manager expects to acquire from sponsor’s pipeline in FY11. More acquisitions are likely to feature in the coming months and will be the main earnings growth driver in FY11-12. Management is looking at a myriad of acquisition opportunites, deriving from possible sponsor’s injection on top of 3rd party assets. At current implied FY11 yield of 6.6%, any future acquisitions are likely to be value accretive. We have assumed S$300m worth of acquisitions in 2011, to be funded on a 35-65% debt-equity ratio.
BUY, DCF-based TP S$1.07 maintained MLT continues to offer an attractive growth story with strong tenant links and sponsor support from Mapletree Investments. Given its large cap status with visible growth pipeline, we find MLT’s premium FY11-12 yield of 7.3-7.5% attractive.
Suntec – DMG
Improving office segment offset by weak retail
1Q11 res ults in-line with expectations. Suntec REIT (Suntec) reported 1Q11 DPU of 2.388S¢ (+3.1% QoQ; -5.0% YoY), which represents 25% of our FY11 estimate. Net property income fell 2.4% YoY (-1.2% QoQ) mainly due to lower rental income from retail space (Suntec City Mall and Chijmes). Meanwhile, dividend income from JV rose 123% YoY to S$6.5m (+94.3% QoQ) due to maiden full three-month income contributions from MBFC during 1Q11 following the completion of the acquisition of a 33% stake in MBFC in 9 Dec 2010. At its current price, Suntec is trading at 6.2% yield and 3.7% spread, which is higher than pre-crisis mean spread of 2.4%. Maintain BUY with unchanged TP of S$1.76, derived based on DDM (COE: 8.4%; TGR: 3.0%).
Retail rental growth remains sluggish due to new supply in city centre. In spite of strong retail sales and tourist arrivals, retail rental growth has been sluggish in the prime city centre due to 1) new supply of retail space injected during the last two years, and 2) negative retailer sentiments towards rising inflation and hence, higher operating costs. However, we expect the retail rental to remain stable in the quarters ahead, underpinned by visitors’ arrivals which are expected to stay strong. For 1Q11, retail revenue accounted for 53% of total gross revenue excluding the 33% interest in ORQ and MBFC.
Office leases buoyed by higher occupancy and average rent. During 1Q11, Suntec City office space saw an increase in occupancy rate to 99.5% (+0.4ppt QoQ, +4.0% YoY), significantly higher than core CBD occupancy rate of 94.1%. In addition, Suntec City office space saw a higher average rent for leases secured during 1Q11 at S$9.22 psf (+13% QoQ; +30% YoY). This is in line with the strong growth of Grade A office rents which averaged S$9.90 psf in 1Q11 (+10% QoQ; +22% YoY).