Month: January 2012
MIT – DBSV
New moves for Dragon Year
• 3Q12 results exhibited strong resilience
• Maiden asset enhancement programs to be embarked over next two years
• BUY, with slightly higher TP of S$1.26
Results in line. Gross rental and net property income of S$65.7m and S$45.6m were 23% and 24% above IPO forecasts respectively. This strong growth was largely due to full quarter contribution from the new acquisitions. Organic performance remained healthy with occupancy at a high c.95.1% (vs 94.5% in 2Q12), while rental rates inched up to est. S$1.56, ex acquisition portfolio. As a result, distributable income beat forecast by 28%, translating to a DPU of 2.16 Scts (+15% due to an enlarged share base).
Operational data still positive. Reversions remained at a strong c26-31% above passing levels for most sub-sectors. However, its business parks saw a slight downward reversion of c10% due to a higher base effect, which we believe is tenant specific.
New asset enhancement plans. MINT will embark on its maiden AEI works (starting 2Q11 till end 2013) to build an additional c200k of GFA as well as enhance the façade of its Toa Payoh North 1 & Woodlands clusters to meet growing demand for space at the respective clusters. The manager targets an IRR of c9% for both AEI projects when completed in 2H13.
BUY with revised TP S$1.26. Supported by strong earnings stream from a diversified portfolio, MINT is expected to deliver a stable set of results in the coming quarters. In view of the new AEI plans, we have raised our
FY14F DPU slightly by 1.1% to 8.6 Scts. As a result we adjusted our target price to S$1.26. Current price offers a FY12-14F yield of 7.5-8.1%.
CRCT – DBSV
Waiting for catalysts
At a Glance
• Full year DPU was 2.4% higher than our forecast
• Rental reversion likely to increase at a more sustainable pace in FY12
• Possible AEI works are key re-rating catalysts
• Maintain Hold and S$1.31 TP
Comment on Results
Slightly ahead of expectations. In SGD terms, 4Q11 gross revenue and NPI grew by c.20% y-o-y to $36.4m and $22.8m respectively, partly due to contribution from Mingzhongleyuan, which was acquired in June 2011. Stripping that off, NPI growth was still a healthy 12% on the back of strong rental reversions, higher tenants sales and stronger RMB vs SGD. Consequently, distributable income came in 21% higher y-o-y at S$15.7m but a smaller 10% on a DPU basis (2.28cts) due to an enlarged unit base. Portfolio occupancy remained robust at 98.1%.
Improving occupancy, strong rental reversions. Post its AEI works in various malls, the trust continued to enjoy higher rental reversion of 11.5% y-o-y over preceding rents. Shopper footfalls at Xizhimen have also risen by c.10% since the opening of the linkway between the mall and subway station in 4Q11. While we still expect positive rental reversion for its FY12 leases (28.3% of the leases in term of revenue), rents are likely to grow at a more sustainable pace of 5-7%. Meanwhile, we see more opportunities to optimize Mingzhongleyuan and Wangjing NPI yields via asset enhancement works and tenant re-mixing. The trust could tweak the tenant mix at Mingzhongleyuan and at the 7-storey office tower block at Wangjing to drive footfalls in the medium term.
Gearing is healthy, no major refinancing needs in 2012. Net gearing declined from 31.4% to 28% due to revaluation gain of S$96m. Separately, the trust has also secured refinancing for 88.2% of its loans due in 2012.
Recommendation
Maintain Hold. We like CRCT’s pro-active leasing strategy and ability to drive rental renewals and occupancies. However, we are maintaining our HOLD call till more clarity and guidance are given on the possible AEI works, which are potential re-rating catalysts for the stock. The stock is currently trading at FY12 DPU of 7.5%.
FirstREIT – OCBC
UNDAUNTED BY VOLATILE MACROECONOMIC ENVIRONMENT
•4Q11 results in line
•Acquisitions likely debt funded
•Resilient and robust fundamentals
4Q11 results within expectations.
First REIT (FREIT) reported its 4Q11 results which were within our expectations. Gross revenue surged 82.0% YoY to S$13.9m while distributable amount to unitholders jumped 122.9% to S$12.1m. This was partly due to a special distribution of S$2.2m arising from FREIT’s recent divestment of the Adam Road property. For FY11, gross revenue increased 78.4% to S$54.0m and was just 0.2% higher than our full-year projection. Distributable income to unitholders rose 105.8% to S$43.9m, in line with our forecast of S$41.9m if we exclude the special S$2.2m distribution in 4Q11. DPU for FY11 was 7.01 S cents, versus 6.63 S cents in FY10 due to additional distributions from the asset divestment as highlighted earlier and a 5-for-4 rights issue in Dec 2010. This translates into an attractive yield of 9.1%. We think that the remaining S$4.4m from the S$8.7m gain on the divestment could be distributed to unitholders in two tranches in 1Q12 and 2Q12, although usage of these funds would be at the full discretion of FREIT’s Manager.
Acquisitions likely in FY12.
Management has reiterated its focus on Indonesia, given rising demand for quality healthcare services there and visibility from the strong pipeline of hospitals from its sponsor Lippo Karawaci. We reckon that any acquisitions in the near term are likely to be debt funded, since FREIT’s gearing ratio of 14.8% (end FY11) provides ample debt headroom of S$89.8m-S$143.4m before reaching its comfortable gearing ratio range of 25%-30%.
Maintain BUY.
We opine that FREIT has showcased its resilience amid the current volatile economic environment, underpinned by healthy industry fundamentals and its stable master lease structure. Maintain BUY with a revised RNAV-derived fair value estimate of S$0.89 (previously S$0.84) as we roll forward our valuations and lower our terminal capitalisation rate inputs for some of its properties. We also apply a smaller discount rate to its Indonesian assets given improving fundamentals of the country.
PLife – Phillip
Full Year Results
Company Overview
PLife REIT is one of the largest listed healthcare REITs in Asia by asset size. Its mandate is to invest in income producing real estate and/or healthcare-related assets primarily used for healthcare and/or healthcare-related
purposes in Singapore and Asia.
• 4Q11 (FY11) revenue $22.8mn ($87.8mn), NPI $20.8mn ($80.3mn), distributable income $14.9m ($58.1mn)
• DPU for 4Q11 (FY11) at 2.47 cents (9.60 cents)
• Incorporate 95% payout ratio from 2012 to2016
• Upgrade to ACCUMULATE though with a lowered target price of $1.880
What is the news?
PLife REIT delivered another spectacular report card for FY11, with DPU grew 9.2% from 8.79 cents to 9.60 cents. The key performance indicators – gross revenue, net property income, and distributable income for FY11,
together rose in the range of 9.1%-9.6% to $87.8mn, $80.3mn and $58.1mn respectively compared to the preceding year.
How do we view this?
DPU was largely in-line with our expectations, amounting to 99.5% of our full year estimates. The increase in DPU was mainly due to: (1) yield-accretive acquisitions made in 2010/11, (2) upward rental revision of Singapore properties and (3) lower financing costs.
Investment Actions?
High inflationary environment has prompted us to raise our CPI rental review assumption for FY12 from 2.5% to 6% with respect to Singapore properties. While the retention distributable income to take effect in FY12 will net off the gains in the rental growth. FY12 DPU is expected to dip first before heading north in the following years. We rollover our estimates to FY16 and arrive a lower target price of $1.88. Nevertheless, it would be good to accumulate PLife REIT against the backdrop of global uncertainties and high inflationary environment given its resilient and sustainable model.
a-iTrust – DBSV
Loss in translation
At a Glance
• Strong underlying results in 3Q12, forming 72% of full year forecasts
• New developments seeing robust pre-commitments; quarters ahead to record incremental growth
• Maintain BUY, TP of S$0.87 maintained
Comment on Results
16% appreciation of S$ against INR eroded topline growth to a mere 2% y-o-y. Ascendas India Trust’s (a-itrust) reported revenue and net property income (NPI) of S$30.6m (+2% y-o-y) and S$17.5m (+3% y-o-y). In INR terms, underlying operational performance was robust, with topline/NPI each growing by 19% yo-y to INR 1.23bn/INR 0.7bn. Progressive recognition of rental income from new buildings (Zenith, Park Square ad Voyager) was the major contributor. Organically, a-itrust’s portfolio has exhibited resilience with occupancy remaining a healthy 95% supported by strong tenant retention rates of c79%, while renewals remained stable. Distributable income was lower by 12%% y-o-y to S$11.6m (DPU of 1.5 Scts), due to a stronger S$ and higher interest expenses incurred for its developments. Compared to 2Q12, performance was relatively flat.
Park Square opened to a fanfare; Zenith/Voyager seeing positive take-ups. a-itrust officially launched Park Square in Dec11and lease commitments are strong at c.87% – with major anchors to start operations soon. Its other 2 office buildings – Zenith and Voyager – are seeing pre-commitments of 82-98% and should head towards full occupancy soon. Looking ahead, we expect stronger earnings growth as tenants complete their fit-outs in the ensuing months. In addition, we look forward to the impending completion of the two planned operating buildings at aVance Business Hub by March 12. All these point towards a stronger start to FY13. Post acquisition, gearing is estimated to head towards 29%, still comfortable in our view.
Recommendation
BUY with S$0.87 TP based on DDM. While management continues to execute strongly, the strong S$ continues to undermine its ‘true operating performance’. The recent strengthening of the INR-S$, if sustained, should be a bright spot for 4Q results. a-itrust offers attractive FY12-13F prospective yields of 9.5-9.8%.