Month: January 2012
CLT – OCBC
ON CLEAR GROWTH TRAJECTORY
•4Q results spot on with our estimates
•Sound fundamentals intact
•Strong position for growth
4Q11 results well within expectations.
Cache Logistics Trust (CACHE) delivered a good set of 4Q11 results, with DPU growing 8.5% YoY to 2.102 S cents. This brings the total DPU for FY11 to 8.235 S cents, implying an attractive yield of 8.3%. The strong performance was mainly attributable to a 11.8% YoY growth in NPI to S$16.0m, driven by incremental rental income from acquisitions since Mar 2011. Both the quarterly NPI and DPU were spot on with our estimates, though they were slightly ahead of the consensus numbers.
Portfolio fundamentals remain strong.
CACHE remains one of the most resilient REIT in the industrial subsector. Portfolio occupancy as at Dec 2011 was maintained at 100%, with a weighted average lease to expiry (WALE) at 4.65 years. For FY12-13, in particular, we note that less than 2% of its leases (by GFA) are due for renewal. Moreover, its master leases encompass locked-in annual rental escalation of 1.5-2% and a triple-net lease structure for the contracted lease term. This not only provides strong earnings and cash flow visibility, but also limits the downside risks from a market slowdown, in our view.
Maintain BUY.
Looking ahead, we believe CACHE will continue to perform. While its master lease arrangements may appear to limit its growth potential, we expect the REIT to continue to benefit from full-year contributions from its 2011 acquisitions. CACHE is also certainly in a comfortable position to seek growth via asset injection, with its aggregate leverage at a healthy 29.6%. We are keeping our FY12 forecasts largely unchanged for now, as the results were within our expectations. However, as we roll over our valuation to the new fiscal year, our fair value is raised to S$1.19
FCT – CIMB
Festive cheer
Stronger rental reversions and occupancy characterised 1Q12.Backed by resilient suburban retail exposure and a refurbished Causeway Point, FY12 looks like another strong year.
1Q12 DPU meets consensus and our estimates, at 24% of our FY12 estimate notwithstanding retained earnings of S$1.6m. We keep our DPU estimates and DDM-based (disc. rate: 8.4%) TP. Maintain Outperform.
Festive cheer
We expect a strong FY12 on the back of improved occupancy at Causeway Point, with refurbished space progressively coming on stream. 1Q12 NPI was flat qoq as a higher topline was negated by higher operating expenses. Broad trends appear favourable for FCT. Rental reversions were strong at 9.6% over preceding rates (4Q11: 7.9%), led by Northpoint and Causeway Point. Occupancy at all malls except newly-acquired Bedok Point improved, up 2.4% pts overall to 97.5%.
Causeway Point on track
To allow tenants to tap the festive season, we believe that some renovation work had been pushed back at Causeway Point, resulting in a higher 96% occupancy in 1Q12 and in part a 15% increase in NPI qoq. Occupancy should dip to about 90% after Chinese New Year as FCT embarks on its next phase of work. The impact, however, will not be major since work will be on the higher levels (where rentals are lower) with the progressive commencement of business in the refurbished sections. With 80% of the work completed, AEI is on track for completion by end-2012.
Cost of borrowing should drop
Cost of borrowing crept up to 3.1% from 3.0% after FCT refinanced its short-term acquisition facility with a secured loan at a fairly attractive margin of 85bp. We expect interest cost savings when it refinances its S$75m MTN (14% of total debt) in Jun 12, given a high cost of 4.8%. Asset leverage remains a healthy 31%.
CLT – DBSV
Waiting to strike
At a Glance
• 4Q11 DPU of 2.102 Scts in line
• Strong balance sheet for acquisitions
• Maintain BUY and S$1.11 TP
Comment on Results
4Q11 results in line. Rental income and net property income (NPI) rose 14.5% and 11.7% yoy to S$16.9m and S$16.0m, respectively. The higher performance was mainly acquisition driven and from the annual 1.5% rental reversions on its IPO portfolio. 6 Changi North Way APC Districentre and 4 Penjuru Lane in Singapore, and Jinshan Chemical Warehouse in China were purchased in 1H11. Interest expenses were 27% higher due to increased borrowings to fund the acquisitions (all-in rate of 3.89%). Distributable income of S$13.4m (+9.2%) translates to a DPU of 2.102 Scts.
Slight uptick in asset valuations. Cache reported a S$23.1m net increase in valuation of its portfolio, largely from a compression of cap rates taken by valuers. Gearing as a result, decreased slightly to 29.6%.
On the look out for assets, focusing on China and Singapore. Balance sheet remains solid, with a headroom of S$80m before hitting gearing of 35%. Management is keen to grow its portfolio – targeting 3rd party opportunities in the Asia Pacific region namely Singapore & China as key markets. In addition, sponsor CWT and C&P can potentially offer another avenue of growth – 3.5m sqft (81% of current NLA) worth of warehouse space that could be injected in the medium term.
Recommendation
Maintain BUY and S$1.11 TP. Backed by a healthy and stable stream of cashflows, Cache offers attractive FY11-12F yields 8.6-8.7%. Target price of S$1.11 translates to a potential 18% total return.
CMT – DBSV
Expect a better second half
At a Glance
• FY11 DPU was 3% below our estimates, after a $5.1m income retention
• Completion of JCUbe and positive rental reversion to offset lower occupancies
• AEI works at Clarke Quay to yield 13% ROI
• Maintain BUY at a lower TP of S$2.05
Comment on Results
Full year DPU is 97% of our forecast. 4Q11 gross revenue rose by 4.3% y-o-y to S$157m. However, a faster increase in opex by 18.5% y-o-y dragged NPI by 2.6% to $98.8m. DPU was 2.3cts after $5.1m was retained. Operationally, the trust renewed 503 leases in FY11 with a positive rental reversion of 6.4% y-o-y on the back of 6.3% increase in tenant sales. However, occupancy fell 1.2 ppts q-o-q to 94.8% due to malls undergoing AEI.
Still a positive rental reversion picture, tapping into more low hanging fruits. Going forward, the trust will enjoy positive reversion, as 26.5% of the leases are due for renewal this year. Most of these leases were signed during the 2009 GFC. In addition JCube is on track to open its doors in 2Q12. Pre-commitments have reached >90%. This should mitigate further downside in occupancies (before picking up in 2H12) as the AEI works intensifies at The Atrium and Iluma. Meanwhile, the trust has announced AEI at Clarke Quay at a worth $15.6m, which will generate a decent 13% ROI. The AEI will commence in 2Q12, to be completed within a quarter.
Gearing at 38.4%, balance sheet remains strong. With S$145.8m revaluation surplus largely from a 15bps cap rate compression, net gearing ratio remained at 38.4%. Funding for the remaining AEI works including project financing for its development project at Westgate have been secured.
Recommendation
Maintain BUY, expect better 2H. We have cut our FY12/13 DPU by 6- 9% to 9.8cts/10.5cts to reflect the frictional vacancies during the upgrading works at its malls. As a result, our TP is cut by 1.5% to $2.05. We continue to like the retail sector and CMT as a market leader in this space is well positioned to weather any economic slowdown.
CLT – BT
Cache Logistics reports 8.5% jump in Q4 DPU
Distributable income up 9.2% for the quarter, boosted by acquisitions
CACHE Logistics Trust posted a fourth-quarter distribution per unit (DPU) of 2.10 cents, up 8.5 per cent from the previous corresponding period’s 1.94 cents.
Boosted by accretive acquisitions completed last year, the logistics real estate investment trust’s distributable income for the three months ended Dec 31, 2011, came in 9.2 per cent higher at $13.4 million, compared with $12.3 million a year back.
Increased revenue contributions from the acquisition of investment properties since March last year also pushed net property income (NPI) up 11.8 per cent year-on-year to $16.05 million for the final quarter.
On a full-year basis, the NPI and distributable income rose 49.7 per cent and 48.1 per cent to $61.9 million and $52.5 million respectively, from $41.4 million and $35.4 million for the period Feb 11 (date of constitution of the trust) to Dec 31, 2010.
Cache officially commenced operations on April 12, 2010, which is also its listing date.
Full-year DPU was 8.24 cents, giving an annualised yield of 8.7 per cent based on Cache’s closing price of 95 cents as at Dec 31, 2011.
As at the end of 2011, all of the warehouses in Cache’s portfolio continue to be fully tenanted, with a weighted average lease to expiry of 4.6 years.
Gearing remains a healthy 29.6 per cent, leaving more than sufficient debt headroom for future acquisitions.
As at Dec 31, Cache’s total portfolio of investment properties was valued at $842.8 million.
On when the Reit would hit a portfolio size of $1 billion, Daniel Cerf, chief executive officer of ARA-CWT Trust Management (Cache), the manager of Cache, remained tight-lipped, but said he would rather it be ‘sooner than later’ as ‘size does matter’.
However, with the increasing prevalence of bearish takes on the industrial segment, Mr Cerf would prefer to be ‘cautiously optimistic’ going forward.
On the acquisition front, Mr Cerf highlighted that the Reit will continue to seek attractive growth opportunities in the Asia-Pacific, in particular in Singapore and China.
‘Pockets of opportunities remain and we believe that with sound prudent asset and capital management practices, we are well positioned to achieve sustainable, yield-accretive returns going forward,’ said Mr Cerf.
In the longer term, he remains confident that the Reit would be able to ride through the influx of warehousing space in late 2013 and 2014, as most of Cache’s master leases are up for renewal only in 2015.
Yesterday, the industrial trust closed half a cent higher at 99 cents.