Sabana – Phillip

Full Year Results

Company Overview

Sabana REIT is a Singapore-based REIT with a mandate to invest in income-producing industrial real estate and real estate-related assets in Singapore and Asia with compliance to Shari’ah investment principles.

• 4Q11 (FY11) revenue $18.1m ($76.9m), NPI $17.0m ($73.1m), distributable income $13.8m ($60.6m)

• 4Q11 (FY11) DPU of 2.17 cents (9.53 cents)

• Maintain Buy recommendation with target price revised up to $1.05

What is the news?

Gross revenue and net property income rose 3.8% and 2.6% q-q to $18.1mn and $17.0mn in 4Q11 respectively. Distributable income was $13.8mn, 1.4% q-q higher than preceding quarter. The increase in top- and bottom-lines was due to the contribution from the new properties. The interest cost for the credit facilities used to fund the new purchases was financed at 3.4%-3.9%, lower than the 4.8% of IPO tranche. DPU for the reported quarter was 2.17 cents, bringing DPU for FY11 to 9.53 cents. This constitutes c.94% of our FY11 DPU estimates.

How do we view this?

Having the average all-in financing cost moderated down to 4.4%, this would translate to additional cost savings and would further boost the DPU. FY11 DPU of 9.53 cents was much in-line with our expectation. As the transactions of the new properties were completed in the middle and end of 4Q11, we would expect full quarter contribution in 1Q12.

Investment Actions?

To reiterate, we assume occupancy to drop in 2013 as the head tenant may not renew the contract when the bulk of the master leases expired. Hence, FY13 DPU will slide down but recover in FY14 and FY15. As Sabana REIT’s FY ended in Dec, we rollover and include FY16 estimates to our forecasts. With impending leases only to expire in 2013, we maintain our BUY recommendation with the target price revised up a clip to $1.05.