Month: August 2011
PLife – Lim and Tan
• What likely justifies yesterday’s new high for the hospital reit is disclosure that the minimum guaranteed rent from the 3 hospitals (Mt E, Gleneagles and East Shore) will rise 5.3% in the Aug 23’11 – Aug 22’12 period over the previous lease period.
• This is as provided under the arrangement with Parkway Holdings when PLife was first set up (and which we would not rule out Khazanah Nasional which now owns Parkway Holdings, “hoping / wanting” to undo at some point). And this in turn makes PLife an “inflation play“.
• Otherwise, there is little new in the June quarter numbers released this morning: Distributable Income rising 13.4% y-o-y (reflecting contributions from acquisitions in 2010) but 0.1% q-o-q. DPU is 2.37 cents or 9.48 cents annualized. Gearing is 34%, allowing for more acquisitions, last being in Japan, where PLife now has 29 nursing homes and 1 healthcare production facility.
• Based on DPU of 9.37 cents for the 12 months to Jun’11, and annualized DPU of 9.48 cents, yield is 4.9% and 5% respectively.
• Given PLife’s unique structure, a BUY can still be justified.
a-iTrust – DBSV
Post NDR take-aways
• Strong S$ erodes underlying earnings growth
• Acquisition/development completions to underpin strong DPU growth profile over FY12-13F
• Maintain BUY, DDM-based TP of S$1.05
Strong S$ had an impact on an otherwise strong operational performance. While Ascendas India Trust (“a-itrust”) performance in INR terms showed growth 11% in topline in 1QFY12, the strong S$, which appreciated against the INR by 10%, eroded its reported numbers, leading to topline and net property income coming in +1% y-o-y and –7% y-o-y to S$31.2m and S$17.6m respectively. Distribution income was also 10% lower at S$11.5m (DPU of 1.5 Scts) due to additional finance expenses incurred for the development of the new buildings (Zenith, Park Square and Voyager), while rental income has yet to be fully recognized as occupancy levels are still being ramped up with a majority of tenants currently doing fit-outs. We moderate our DPU assumptions slightly to account for lower S$-INR exchange rate (1S$ : INR 35.5 from 35 previously) and delayed revenue recognition from its newly completed properties.
Acquisitions and development projects to contribute more significantly. The forward growth picture remains robust given the expected execution of its acquisition and development projects over next few years. This is projected to boost DPU by up to c11% p.a. over FY12-13F. Earnings growth is likely to be driven by: (i) 3 recently completed buildings totaling 1.7m sqft SBA (25% of its enlarged portfolio) which should be fully leased in the coming quarters; (ii) earnings from the expected completion of the acquisition of 2 operating buildings in Hi-City (renamed to aVance Business Hub); and (iii) the planned development of a 500,000 sqft multi-tenanted office development in ITPB.
Maintain BUY, S$1.05 TP. While a strong S$ will likely be a drag on earnings in the near term, we see a-itrust ‘s FY12-13F DPU CAGR of 11% as attractive, with upside risk on execution of acquisition & development pipelines – from 3rd parties and its sponsor – in order to continuing growing its portfolio size in the longer term.
HPH Trust – DBSV
DPU in line; deep value at these levels
At a Glance
• DPU of 14.3HKcts (1.84UScts) for first period in FY11 in line with our estimates and above IPO guidance
• Lower-than-expected revenues offset by lower operating and interest expenses
• FY11 DPU estimate unchanged; Lower FY12 DPU by 3% to reflect economic concerns
• Maintain BUY; TP adjusted lower to US$1.05
Comment on Results
No surprises in DPU. Revenues of HK$3400m for the 3-and-half month period (16 Mar to 30 Jun 2011) was lower than expected on account of disappointing throughput growth at both ports, but net profit and distributable cash was boosted by cost and interest savings. Staff costs and Trust expenses were well contained, and depreciation and amortisation were also lower than expected, though these were offset by higher tax recognition (deferred tax credits). Interest costs came in significantly below estimates as floating interest rates remained much lower than our conservative assumptions. Income from associates and JVs was boosted by better performance at COSCO-HIT, where throughput growth outperformed assumptions.
Recommendation
Slightly lower growth trajectory but combination of yield and growth still attractive. For the period under consideration, throughput growth disappointed, with HIT and Yantian Port registering 4.6% and 2.1% y-o-y growth, respectively, lower than our 6-8% initial estimates. And there is no evidence of a strong peak season as yet, owing to economic uncertainties in the US and EU. As our economist cuts US GDP growth to 1.6% in 2011 and 2.5% in 2012, we revised down our volume growth assumptions in FY11/12 to 4-5%. However, ASP trends remain intact and since cost savings will largely offset volume weakness in FY11. We keep our 2H11 DPU estimate of 2.9UScts unchanged but cut our FY12 DPU estimate by 3% to 6.4UScts.
Maintain BUY with revised DCF-based TP of US$1.05 (lower DPU CAGR of 7% over FY11-15). Management re-iterated their commitment to pay out 100% of distributable income. Current valuations – ~8% dividend yield is even higher than what some infrastructure and shipping trusts are trading at – look unjustifiably low given HPH Trust’s superior asset profile, earnings quality, balance sheet strength and organic growth potential.
PLife – CIMB
Defensive yields
• In line; maintain Outperform. 2Q11 DPU of 2.37cts meets Street expectation and our expectation (23% of FY11 estimates). 2Q11 DPU was up 13.3% yoy on revenue contributions from Japanese properties acquired in 2010-11 and higher rentals for Singapore assets. Management announced a minimum guaranteed rent increase of 5.3% (1.73% in previous year) from Aug 11, and a lower all-in cost of debt of 1.65% (from 1.96%). We retain our assumption of S$200m acquisitions, but defer the bulk to FY12. Factoring in higher rental growth and lower interest costs, we adjust our FY11-13 DPU estimates by -2/+5%. Accordingly, our DDM target price rises to S$2.11 (discount rate: 7.2%) from S$1.98. We continue to like PLife for its defensive qualities and good inflation hedge. We anticipate stock catalysts from asset enhancement and earlier-than-expected acquisitions.
• Increase in minimum guaranteed rent. Under its CPI + 1% rental revision formula for Singapore assets, their minimum guaranteed rent has been increased by 5.3% for the year commencing 23 Aug 11. This is higher than the prior year’s increase of 1.73%, on the back of rising inflation in the preceding 12 months.
• Lower all-in cost of debt. Management has extended interest-rate swap hedges for an average of 3.5 years on 45% of its loan portfolio to lock in low interest rates. Annual interest savings are estimated at S$1.5m (S$0.6m for FY11), or 2% of distributable profit. This lowers the REIT’s all-in cost of debt to 1.65%, the lowest among SREITs.
• Still awaiting acquisition catalysts. Management has identified Malaysia as a place for acquisitions, but remains cautious because of global uncertainties. We expect more headway in its negotiations with sponsor Khazanah on the potential acquisition of Pantai’s healthcare assets towards late 2011. We understand that management is still looking out for assets from the sponsor and third parties and thus defer part of our assumed acquisitions to 2012. Low asset leverage of 34% still offers debt headroom of S$261m to management’s mid-term gearing target of 45%.
HPH Trust – BT
HPH Trust posts HK14.3cents DPU
It reports net profit attributable to unitholders of HK$653.7m for Feb 25 – June 30
HUTCHISON Port Holdings (HPH) Trust posted a net profit attributable to unitholders of HK$653.7 million (S$101.2 million) for the period Feb 25 (when HPH was constituted) to June 30.
It also announced a distribution per unit (DPU) of 14.3 HK cents.
Compared to the forecast net profit of HK$577.6 million in the trust’s initial public offering (IPO) prospectus, the actual profit figure is 13.2 per cent higher. This works out to earnings per unit of 7.51 HK cents.
Including minority interests, net profit was HK$1 billion, 10 per cent higher than the forecast HK$915.8 million.
Although the results announced yesterday – its first since its listing on March 18 this year – were for the period Feb 25 to June 30, its operating activities were recorded from March 16 onward because the acquisition of the assets and business undertakings of its initial portfolio was only completed on March 15.
Operating profit for the period was HK$1.23 billion, 4 per cent more than had been forecast for the same period.
Revenue and other income for the period stood at HK$3.39 billion, 3 per cent lower than the HK$3.49 billion forecast in the prospectus.
Container throughput at Hongkong International Terminals (HIT) and Yantian International Container Terminals (Yantian) – which are in the trust’s portfolio – came in 2.1 per cent and 2.6 per cent below forecast.
This was attributed to ‘throughput growth being weaker than expected, particularly in the Europe and US trade lanes’, the trust said in a statement yesterday.
On a year-on-year basis, however, the trust saw throughput for HIT and Yantian up 4.6 per cent and 2.1 per cent, respectively.
Yesterday, HPH Trust’s unit price closed 3.9 per cent down, with 52.4 million units changing hands, from 76.5 US cents to 73.5 US cents before the release of the results.
A reason for its price downtrend has been market worries over weak volume growth and the trust’s exposure to the weak US dollar.
A report by UBS Investment Research that was issued on Monday gave the trust a ‘buy’ rating with a target price of US$1.10.
‘We find current yield attractive at more than 8 per cent in 2012E, while we believe it is not likely for dividends to miss although volume missed,’ the report said.
A Bank of America Merrill Lynch report, however, cut the trust’s earnings forecast by 11 per cent for 2011 and by 12 per cent for 2012 – with an ‘underperform’ rating and a 70 US cent target price on the stock, according to Reuters.
Since the trust listed on the Singapore Exchange in March with an offer price of US$1.01 in a US$5.5 billion IPO, its price has trended lower.
Against its first-day closing price of 95 US cents, the business trust has shed almost 23 per cent of its unit price to date.