Month: July 2011
Starhill Global – BT
Starhill Global Reit’s Q2 DPU increases 14.3%
STARHILL Global Real Estate Investment Trust said yesterday that its second-quarter distribution per unit climbed 14.3 per cent, buoyed by its Malaysian and Australian purchases. The DPU of 1.04 cents compares with 0.91 cents a year ago.
Q2 income available for distribution rose 26.8 per cent year on year to $22.8 million, while net property income was up 23.4 per cent year on year at $35.6 million.
Gross revenue was up 18.9 per cent at $44.24 million.
‘Our acquisitions of Starhill Gallery and Lot 10 in Kuala Lumpur, Malaysia and David Jones Building in Perth, Australia last year have been key contributors to the growth,’ said Francis Yeoh, executive chairman of YTL Starhill Global, which manages the Reit.
Starhill Global Reit’s Singapore portfolio, comprising interests in Wisma Atria and Ngee Ann City on Orchard Road, contributed 62 per cent, or $27.5 million of total revenue.
Starhill Global Reit said that while the take-up rate for office space in Singapore has been healthy, overall rental rates have declined as new and renewed office leases were secured at rental rates which are below the peak levels achieved in 2007.
However, its Malaysia portfolio contributed 17.3 per cent, or $7.7 million, of Q2 revenue. The David Jones Building in Perth contributed 8.3 per cent or $3.7 million to total revenue.
Starhill Global Reit said that the global economic growth will continue to be led by Asia for the rest of this year. As the ongoing debt crisis in Europe and the United States continue to weigh down the economic growth of these advanced economies, IMF projects that Asia’s gross domestic product will expand by 8.4 per cent this year.
Against this backdrop, it is proceeding with the redevelopment of the Wisma Atria property, which is expected to be completed in the third quarter next year.
Its retail properties in Malaysia and Australia have master leases or long-term leases with built-in step-up rents.
‘These will contribute to the stability and sustainability of the income while ensuring organic growth for Starhill Global Reit,’ it said.
Starhill Global Reit closed trading yesterday at 65.5 cents, up half a cent.
Rickmers – BT
Rickmers’ Q2 DPU up 5%; net profit soars
RICKMERS Maritime declared a distribution per unit (DPU) of 0.6 US cent for its second quarter ended June 30, 2011 yesterday, up 5 per cent from its DPU of 0.57 US cent in Q2 2010.
Cash flow available for distribution before payment to debt capital providers stood at US$26.5 million for the quarter, 4 per cent lower year on year. For the first six months of the year, the figure stood at US$51.4 million, a dip of 6 per cent from the corresponding period a year before.
After accounting for payment to the trust’s debt capital providers, US$3.7 million was available for distribution, 70 per cent lower than US$12.2 million in Q2 last year.
For H1 2011, cash available for distribution after paying off the trust’s debt capital providers was US$5.6 million, 80 per cent lower from US$27.5 million the year before.
Revenue for the quarter grew 3 per cent to US$37.6 million, driven by a better net charter rate of US$23,888 per day which the trust had secured for the Kaethe C Rickmers in late March, up from US$8,288 a day in Q2 last year.
The charter lease on the Kaethe C Rickmers expires in March next year.
For the first half of the year, revenue was flat, at US$73.4 million.
The trust’s quarterly net profit surged to US$8.6 million from US$610,000 the year before, driven by a writeback of US$2.9 million on vessel impairment because of the Kaethe C Rickmers.
The trust’s bottom line also fared better relative to 2010 because it had incurred a one-time loan restructuring of US$5.4 million in the second quarter of last year.
On a half-year basis, net profit for H1 2011 was US$17.9 million – almost triple that of H1 2010’s net profit of US$6 million.
Currently, the trust has a fleet of 16 container ships with an average daily time charter rate of US$25,750 per vessel.
Thomas Preben Hansen, chief executive of Rickmers Trust Management Pte Ltd (RTM) – the trust’s trustee manager – said that there are no current plans to add vessels to the fleet.
‘We are always on the lookout, but we’ve really been focused on deleveraging the business,’ he said.
In response to a question about whether the trust was currently able to meet its value-to-loan covenants for which it has a waiver of another one-and-a-half years, Gerard Low, RTM’s chief financial officer, said that there is still uncertainty about the outlook for ship values.
‘The value of the ships had stabilised in the early part of this year but as we approach this period, there has been a big increase in orders for new ships,’ he said.
‘The one (variable) that we can control is the loan value. As we accelerate the repayments, we know that we are bringing down the loan value.’
Last year, as part of a move to solve its funding issues, Rickmers signed a term sheet with its lending banks for a five-year extension of its US$130 million top-up loan facility. Under the terms, the criteria of the value-to-loan ratio had been waived. As a condition of the waiver, the trust’s DPU is capped at 0.6 US cent per quarter.
‘We are also watching this closely. When world trade is increasing and stable, the shipping capacity in under control and we have the resources, only then can we confidently say when we are ready to negotiate directly with the banks to get out of this waiver period,’ said Mr Low.
The trust’s counter closed half a cent higher to 41 cents in trading yesterday, before its results were released.
PST – DBSV
Another stable quarter
At a Glance
• 2Q11 DPU remains steady at 0.809 UScts per unit, payout amounts to ~71% of distributable cash flow
• Expect DPU growth from 4Q11 onwards
• Dividend yield remains attractive at >9%; maintain BUY with higher TP of US$0.44 as we roll over valuations to blended FY11/12 numbers
Comment on Results
Good start to the year. 2Q11 revenue of US$15.4m and operating profit of US$9.3m remained steady on a y-o-y and q-o-q basis, as the existing fleet of 12 container ships continued to generate predictable income levels. Net profit was up 2.3% to US$6.8m, as interest expenses decreased 6.3% on the back of PST’s regular debt repayment schedule. Thus, net distributable cash (after loan amortisation) for 2Q11 came in slightly higher at US$6.7m vs. US$6.5m in 2Q10. The Trust paid out 71% of distributable cash, which amounted to US$4.8m or 0.809 UScts per unit in 2Q11, a 2% increase y-o-y and flat q-o-q.
Outlook & Recommendation
DPU growth expected from 4Q11. To recap, PST has announced 3 separate acquisition deals in FY10 to drive growth and diversification of the fleet – two new Capesize bulk carriers for delivery in Sep 2011, 2 Multi Purpose vessels for delivery in Sep/Dec 2012 and 5 Supramax bulk carriers for delivery in Nov 2012 – Apr 2013. With the delivery of the bulk carriers in 4Q11, we expect DPU to be stronger, and project overall 5% DPU growth in FY11, followed by 19% DPU growth in FY12.
PST remains our top pick in the shipping trust sector. The Trust has secured a total of US$282m in bilateral financing commitments from six banks to finance the above deals, which implies a high debt-to-value ratio of close to 85% and signals the faith of lenders in PST’s ability to sustain cash flows. We remain positive on PST’s growth and capital management strategies and maintain our BUY call with a higher TP of US$0.44 as we roll over our valuations to blended FY11/12 numbers.
FSL – DBSV
Refinancing risks loom
At a Glance
• 2Q11 DPU maintained at 0.95 UScts
• Proceeds of recent placement used to part-finance the DPU-accretive acquisition of two LR2 product tankers
• Distribution growth expected in FY12, but refinancing of ~US$230m debt looms in April 2012; maintain HOLD
Comment on Results
Spot market for product tanker improves to an extent. These tankers generated bareboat charter equivalent revenue of US$3.2m (inclusive of US$1.6m attributable to 1Q11) in 2Q11 vs. a US$1.1m loss in 1Q11, but the combined 1H11 bareboat revenue of US$2.1m fell significantly short of the US$7.6m bareboat charter revenue that these vessels would have earned in a 6-month period prior to redelivery last year. Cash earnings was thus, up 17% q-o-q to US$13.5m, and after loan prepayment of US$8.0m, net cash available for distribution amounted to US$5.5m, just about sufficient to pay out the 0.95 UScts DPU declared for the quarter. FSL Trust also recorded US$2.5m provisions in 2Q11, given that it lost its case against Daxin Petroleum in the PRC court.
Outlook and Recommendation
NAV dilutive, DPU accretive acquisitions. FSL Trust raised about US$15m via an equity placement last month and along with proceeds from previous round of placements, acquired two product tankers for US$46m each. These will be leased back to Denmark based TORM Tankers, and we estimate each vessel could add about US$6m charter revenue per year. As expected from a new equity issue at a discount to current market price, the placement will be dilutive at the NAV level, reducing end-FY11NAV by about 4.5%, in our estimate. However, given that the vessels will be 50% debt funded, we expect DPU accretion of about 2%/ 9% in FY11/12.
Balance sheet still a worry. Post-acquisitions, net gearing could go up to 1.4x from current 1.2x and the Trust also has a pending refinancing target of close to US$230m debt by April 2012. Our TP of S$0.43 and HOLD rating remain unchanged, pending further clarity on asset values and refinancing plans.
MLT – CIMB
Acquisition-fuelled growth
• In line; maintain OUTPERFORM. At 25% of our full-year forecast, MLT’s 2Q11 DPU of 1.60 Scts (+6.6% yoy) met our and consensus estimates. 1H11 DPU of 3.15 Scts works out to 48% of our full-year estimate. There were no major surprises. The positives were occupancy improvements and upward rental reversions, which offset higher operating costs stemming from repairs in Japan and property conversion in Singapore. Management is actively looking for acquisition opportunities and has identified a local property with redevelopment potential. We incorporate the change in year-end in FY3/12 but keep our S$500m acquisition assumption, DPU estimates and DDM-based target price of S$1.05 (8.6% discount rate) pending the analyst briefing. MLT continues to offer an attractive yield of 7%. We maintain our OUTPERFORM call, with the catalysts being accretive acquisitions and AEIs.
• Net property income (NPI) up 25% yoy and 4% qoq. 2Q11 topline rose 27% yoy, thanks to contributions from newly-acquired assets, partially offset by the FX impact from a stronger S$ though the DPU impact was mitigated by FX hedges. The portfolio also benefited from positive rental reversions and a 0.6% pt improvement in occupancy, driven mainly by Singapore assets. NPI however grew by a more muted 25% yoy due to higher property expenses arising from repairs in Japan and the conversion of a local property in 2Q11. Distributable profit increase 26% yoy but DPU was up by a lower 7% due to an enlarged unit base after its equity fundraising in Oct 10. Management also divested two local properties in the quarter and plans to distribute net gains of S$2.1m (0.09 Scts/unit) over the next three quarters.
• Property acquisition and redevelopments. Management continues its search for acquisition opportunities, with a focus on South Korea, Singapore, Japan, China and Malaysia. It also seeks to extract greater yields from its portfolio through conversion and redevelopments. It is in the midst of seeking authorities’ approval for the redevelopment of a local property with underutilised plot ratios.
• 41% asset leverage. Asset leverage was at 41% as at end-2Q11, still below management’s medium-term target of 40-50%. Management successfully rolled forward S$102m debt (7% of total debt) maturing in 2011 and is in advance negotiations to refinance/extend debt maturing in 2012 (31% of total debt).