Month: July 2011
MCT – BT
MCT’s maiden distribution beats forecast
DPU of 0.9564 cent 8.7% higher than forecast 0.8795 cent
MAPLETREE Commercial Trust (MCT) yesterday announced a distribution per unit of 0.9564 cent for the period April 27 (its listing date) to June 30, beating its own IPO forecast of 0.8795 cent by 8.7 per cent.
This translates into an annualised distribution yield of 6.1 per cent, at yesterday’s closing price of 88.5 cents per unit.
MCT achieved net property income of $22.7 million, 2 per cent above its forecast, while gross revenue came up to $32.7 million, 0.9 per cent above forecast.
MCT attributed this to higher turnover rent, carpark income and advertising and promotion revenue from VivoCity, which was offset slightly by lower rental income from PSA Building, as carpark income fell slightly due to ongoing construction at Alexander Retail Centre.
Income available for distribution for April 27 to June 30 was $17.8 million, 8.7 per cent higher than forecast, mainly due to higher net income and lower interest costs on borrowings. Since its IPO, the manager has hedged 85 per cent of its total debt of $1.1 billion, achieving actual all-up interest costs of 1.96 per cent, better than the forecast 2.43 per cent.
As MCT only completed its acquisition of PSA Building and Merrill Lynch Harbourfront Building on its listing date, April 27, there are no comparative figures for the year-ago period.
But VivoCity, with close to 100 per cent occupancy, has seen both tenant sales and shopper traffic grow 16 per cent and 12 per cent respectively year-on-year, for the three months ended June 30.
For its office portfolio of Bank of America Merrill Lynch HarbourFront and PSA Building, MCT achieved an occupancy level of 92.8 per cent as at June 30, higher than URA’s fringe office occupancy rate of 91.7 per cent for Q2.
Alexandra Retail Centre (ARC), the section of PSA Building now being upgraded, is also likely to open by March 2012, three months ahead of schedule. Construction is on track for completion by December this year, and one-third of the space has been pre-leased, MCT said.
CLT – BT
Cache’s Q2 DPU surpasses forecast
Logistics Reit clocks 7% q-o-q rise in DPU to 2.086 cents
Distributable income for the second quarter came in 7.1 per cent higher at $13.3 million, compared with Q1’s $12.4 million, and also beat the Reit’s earlier Q2 projection of $12.4 million by 7.4 per cent.
On the back of upward rental adjustments across the portfolio and contributions from new acquisitions, Cache’s net property income (NPI) for Q2 surpassed forecasts by 6 per cent, coming to $15.5 million. Quarter-on-quarter, NPI also improved by more than 7 per cent, exceeding Q1’s NPI of $14.4 million.
Combining the first two quarters, Cache outperformed its first half (1H2011) distributable income and NPI forecasts by 3.8 per cent and 2.5 per cent, with numbers coming in at $25.7 million and $29.9 million respectively.
In response to Cache’s growth plans in the local logistics space, Daniel Cerf, chief executive officer of ARA-CWT Trust Management said in an interview with BT yesterday: ‘This is our backyard, we will continue to grow here (Singapore) as much as we can.’
However the industry has been getting rather ‘crowded’ of late, making it increasingly difficult to acquire ideal logistics properties.
The logistics Reit recently completed the acquisition of three new properties, bringing its logistics portfolio to a total of nine high quality logistics warehouses located in the Asia-Pacific region, amounting to a total portfolio value of $805.1 million.
‘We are pleased with our performance and the fact we have exceeded the $800 million mark in assets under management. We will continue to pursue growth from within the portfolio as well as through external growth by way of acquisitions that are conducive to the portfolio,’ commented Mr Cerf in relation to Cache’s portfolio.
As at end-June, all of the warehouses in Cache’s portfolio are 100 per cent occupied, with tenants on triple-net master leases and multi-tenancy leases.
Gearing also remains at a healthy level of 29.1 per cent with about $231.2 million in borrowings as at end-June.
When asked whether investors can expect Cache’s DPU to continue on an uptrend, Mr Cerf declined comment, though he did hint that the Reit was ‘on track’ in that aspect.
Mr Cerf shared with BT that to him, driving Cache’s stock price is not as much of an issue as ensuring healthy distributions. After all, he said, ‘I know if I’m doing the right thing, people will do the right thing and buy the stock.’
Cache’s stock closed half a cent lower at 97.5 cents yesterday.
Rickmers – DBSV
Exit from waiver period not in sight
At a Glance
• DPU payout for 2Q11 maintained at 0.60UScts as accelerated repayment of loans continues
• Covenant waiver period likely to continue as container shipping fundamentals weaken, further raised uncertainty in future asset values
• Maintain HOLD with TP of S$0.37 as DPU cap stays
Comment on Results
Cash flows up slightly in 2Q11. RMT recorded revenues of US$37.6m in 2Q11, 3% higher y-o-y, owing to the higher charter rate received from employment of vessel Kaethe C. Rickmers, which is now fixed at US$23,888 per day compared to US$8,288 per day in 2Q10. This also resulted in a write-back of vessel impairment of US$2.9m for Kaethe C. Rickmers, but was more than offset by an impairment of goodwill charge of US$4.1m on another vessel as internal WACC for impairment check was raised from 7.28% to 7.52%. These items are, however, non-cash in nature and distributable cash flows increased 8% q-o-q to US$17.5m.
DPU stays at 0.6SUScts, loan repayments continue. The Trust repaid about US$11.2m of borrowings in 2Q11 – ahead of scheduled repayment of about US$8m – and distribution to unit holders remained steady at US$2.5m for 1Q11, translating to a DPU of 0.6UScts, at the upper end of the DPU cap imposed by lenders.
Outlook & Recommendation
DPU cap could stay for a while. The Trust will continue to use its cash reserves of about US$50m to pay down debts in excess of scheduled repayments in 2H11. However, the Trust’s DPU cap is likely to be in place as long as the Value-to-Loan ratio on the IPO facility and subsequent top-up facility (about US$411m of which is outstanding currently) is below the covenant limit of 133%. According to our estimates, the market value of the 10 vessels which are encumbered could be around US$480m currently, which implies a coverage ratio of only 117%. And with container shipping likely heading towards a potential down cycle, asset values could come under further stress. Thus, we maintain our HOLD call on the stock, and our TP remains unchanged at S$0.37.
Starhill Global – DBSV
A brightening star
• In line with expectation; 1H DPU accounts for 49% of our forecast
• Rental reversion and stronger portfolio performance are expected to offset the vacuum for Wisma Atria AEI
• Maintain BUY, S$0.73
In line with expectation. Gross revenues and NPI were higher by 18.9% yoy and 23.4% yoy to S$44.2m and S$35.6m respectively. This was mainly attributed to new contribution from its enlarged portfolio offsetting lower earnings from negative rental reversions and weaker Japanese assets’ performances. On a q-o-q basis, gross revenue and NPI dipped marginal by 3.5% and 4.0% respectively. Distributable income (net CPPU holders) was S$20.2m (+14.3% yoy, -2.8% qoq), which translated to a DPU of 1.04 Scts. 1H forms c.49% of our full year estimates.
Operations on track. Pre-commitment of the additional prime space at the 2nd and 3rd level at Wisma Atria is well ahead of the 2Q12 completion date, with almost 75% taken up by existing tenants and new-to-market retailers at higher rents (in excess of 50%) and the remaining 25% currently under negotiation. Meanwhile, office demand remained healthy with office occupancy at Wisma Atria and Ngee Ann City strengthening to 92% and 96.6% respectively, and monthly signing rents at S$9.0 – S$10.0 psf per mth, up from S$8.5 – 9.0 psf a quarter. New tenants in the 1H include Chanel, H&M & Sea Folly. Going forward, additional rental revenue from the completed AEI works at Starhill Gallery, improving office occupancies and the upward rental reversion of David Jones lease in August should offset the expected erosion in retail revenue of Wisma Atria as the AEI works intensify towards 4Q11/1Q12.
Maintain BUY, TP S$0.73. The stock offers FY11/12F yields of 6.6-6.9%, translating to a total return of 19%. Gearing remains healthy at 30.9% with no major refinancing needs till 2013. DPU for FY11/12 was nudged down marginally to account for the lower occupancies at Wisma Atria retail space. Re-rating catalyst will come from potential new acquisitions that are currently not factored in our numbers.
Starhill Global – CIMB
Meeting the mark
• In line; maintain Outperform. 2Q11 DPU of 1.04cts (+14% yoy) meets our estimate and consensus, at 25% of our full-year number. 1H11 DPU forms 50% of our forecast, Positives were improving occupancy and achieved rents for its office portfolio though rental reversions were expectedly negative. Starhill has secured 75% pre-commitments with good reversions for space under AEI in Wisma Atria and could beat its ROI target of 8%. Legal proceedings against Toshin are still ongoing. We continue to like the stability afforded by its master and long leases, low asset leverage and well-located assets. Downside should be limited by current valuations
of 0.7x P/BV and forward yields of 6.5%, the highest for retail REITs while re-rating catalysts could come from improving office occupancy, positive rental reviews for Toshin leases, higher-than-expected returns from AEI and accretive acquisitions. No change to our DPU estimates or DDM target price of S$0.74 (discount rate 8.4%).
• Improving occupancy. Continued negative rental reversions for offices were mitigated by improving occupancy at both Wisma Atria and Ngee Ann City, where occupancy improved qoq by 1.7% pts and 1.2% pts respectively. Demand for office space by fashion and other retailers remained healthy, with leases signed at S$9-10.50psf. With rents picking up, management expects negative rental reversions to stabilise by 3Q-4Q12.
• AEI at Wisma Atria well-received. Starhill has secured 75% pre-commitments, with good reversions for space under AEI in Wisma and appears on track to beat its ROI target of 8%. Its AEI has been well-received and aided in rental negotiations and reversions for nearby leases. The worst-hit quarters should be 4Q11 and 1Q12, though work disruptions could be minimised by a 2-phase TOP and the relocation of tenants to temporary holding units. With the bottoming out of prime retail rentals, Starhill appears poised to capture rental upside on completion of the AEI in 3Q12.
• Rent reviews for 2011 underway. Legal proceedings between Starhill and Toshin over a rental review mechanism for the Toshin lease are ongoing. Rental step-up of about 6.1% on its David Jones long lease will kick in in Aug 11.