Month: February 2012
HPH Trust – BT
Hutchison Port trust’s Q4 profit in line with forecast
HUTCHISON Port Holdings (HPH) Trust posted net profit attributable to unitholders of HK$608.2 million (S$98.5 million) for the three months ended Dec 31, 2011, in line with the HK$592.9 million forecast. The local bourse’s heftiest listing last year also announced distribution per unit (DPU) of 23.4 HK cents for the July-December 2011 period.
As for the full-year period – starting on constitution date Feb 25 – the trust’s net profit attributable to unitholders was HK$1.97 billion, 4.8 per cent higher than projections of HK$1.88 billion.
Full-year DPU was 37.7 HK cents, higher than the 37.4 HK cents projected in the IPO prospectus.
HPH’s fiscal 2011 effectively began on March 16 as acquisition of its assets and business undertakings were completed then.
While HPH hit its distribution targets, its topline lagged behind its targets, affected by the economic slowdown in the US and Europe last year.
Revenue for the October-December period was HK$3.1 billion, against the expected HK$3.2 billion. Similarly, for the fiscal year, HPH’s revenue was HK$9.7 billion, about 5 per cent lower than the $10.2 billion set out in the IPO prospectus. At the same time, HPH Trust managed to increase throughput at its ports by 4 per cent year-on-year.
In the final quarter, its Hong Kong terminals did the heavy lifting, with throughput 3.5 per cent higher than forecast due to the longer-than-expected peak season.
Yantian’s throughput, however, was 9.4 per cent below projections as the port is more reliant on the US and European market.
As a result of softer demand from Europe and the US, the chief executive officer of HPH’s trustee-manager, Hai Chi-Yuet, said the trust will focus on increasing volume growth on transshipment, intra-Asia trade and certain high-growth trade routes out of the Middle East, Oceania, Central and South America and Africa.
‘We are trying to get business out of these routings and we are in discussions and negotiations with shipping lines,’ she said in a teleconference yesterday.
In 2012, Ms Hai expects the portfolio ports to do well in the face of more mega-sized vessels being deployed this year and shipping lines entering into vessel-sharing agreements. ‘The consolidation and bigger vessels mean that shipping lines use less vessels with capacity remaining largely same. It is good for us because we like to handle less vessels, but each vessel with more boxes,’ she said.
HPH Trust ended yesterday a cent lower at 74.5 US cents.
Charities Support – 2012
Attention to Reader of Singapore REITs
Gobi March, a 250km self-supported desert footrace over 7-days will be held in Taklamakan Desert, China.
Kwan is participating the Gobi March in aid of the Student Advisory Centre(SAC). Please visit the fund raising website by clicking this link.
Thank you.
LMIR – OCBC
POISED FOR FURTHER GROWTH
•Consistent set of results
•Demand for retail space to stay strong
•Well-positioned for growth
4Q11 results within expectations
Lippo Malls Indonesia Retail Trust (LMIRT) reported NPI of S$24.6m (+16.8% YoY) and distributable income of S$11.4m (-5.1% YoY) for 4Q11. This is in line with our quarterly forecasts of S$23.7m and S$12.7m respectively. DPU for the quarter (post rights issue) came in at 0.53 S cent, lower than 4Q10 DPU of 1.11 S cents but still consistent with our projection of 0.58 S cent. For FY11, NPI grew by 7.9% to S$92.0m and distributable income fell 0.9% to S$47.4m. DPU, on the other hand, was down 13.0% to 3.85 S cents. However, this translates to a still attractive FY11 yield of 9.9%.
Optimistic outlook from management
Moving forward, LMIRT reiterated that its retail malls are likely to continue to benefit from Indonesia’s robust economic growth and strong domestic consumption. Management also highlighted that there is a demand-supply imbalance for quality retail space, which is likely to keep the demand for its malls strong. We note that its portfolio occupancy rate as at 31 Dec 2011 remained healthy at 94.1% (97.8% in prior quarter), well above Indonesia’s retail industry average of 87.6%. The Dec 2011 Retail Sales Survey by Bank Indonesia also showed that retail sales is expected to remain strong throughout 1H12. Hence, we concur with LMIRT that its financial performance in the coming quarters is likely to remain favorable, especially with full-quarter contributions from recently-acquired Pluit Village and Plaza Medan Fair going forward.
Financial position remains strong
As at 31 Dec 2011, LMIRT’s aggregate leverage was at low 8.7% (10.1% in 3Q), boosted by a positive 5.7% YoY revaluation of assets (excluding acquisition assets) and rights issue. In addition, approximately S$931m (60.4%) of its assets are unencumbered. This gives LMIRT the financial flexibility and capacity to realize its growth plans. Maintain BUY with unchanged fair value of S$0.45 on LMIRT.
CDL H-Trust – OCBC
RIDING MULTIYEAR HOTEL INDUSTRY GROWTH
•Hotel demand will outstrip supply
•REIT structure, leases & AEI
•Debt headroom for acquisitions
Strong demand growth for 2012-2015
Given that ~80% of CDLHT’s revenues come from Singapore, its key driver will be the performance of the local hotel industry. The hospitality sector is actively supported by the government and the STB has a target of 17m annual visitor arrivals by 2015, up from 13.2m in 2011. We believe that hotel room demand will grow at a CAGR of 6.4%, outstripping overall supply increases (CAGR: 3.8%) for 2012-2015. Specifically, the high-end hotel subsector, which CDLHT is in, will fare better with a room supply CAGR of 3.0% versus 5.6% for budget hotels. As a liquid high-end local hotel play, CDLHT offers a fairly unique way to capitalise on the multiyear growth of the local hotel industry.
REIT structure and dividend policy
CDLHT consists of a REIT and a dormant business trust. The REIT has master leases on its four- and five-star hotels, with minimum rents for all contracts. The Singapore hotel leases grant CDLHT 20-30% of revenue and gross operating profit as rent. The trust has guided that dividend payout ratio will be in the low 90 percentile range this year to help fund upgrades to the chiller/heater systems and ballroom in Novotel Clarke Quay, with a view to enhancing operating margin and asset value. Asset enhancement initiatives for last year consisted of the refurbishment of rooms in Orchard Hotel and Novotel Clarke Quay.
Debt headroom to pursue acquisitions
We are comforted by the high interest coverage of 8.9x for FY11 and the fact that no debt is due this year. With a gross gearing of 25.2%, there is ~S$520m in debt headroom to finance yield-accretive acquisitions. Going by its track record, the management will likely make prudent acquisitions that will serve as price catalysts.
Initiate with a BUY
We initiate with a BUY rating and a S$2.00 fair value estimate based on a Revalued Net Asset Value (RNAV) analysis. CDLHT represents a solid way to capitalise on the continued robust growth in tourism, while its REIT structure provides the comfort of consistent dividends.
FCOT – OCBC
ACQUIRES 50% INTEREST IN CAROLINE CHISHOLM CENTRE
•12.6% discount to valuation
•Accretive to DPU
•Enhance lease expiry profile and stability
Details of acquisition
Frasers Commercial Trust (FCOT) yesterday announced the proposed acquisition of the remaining 50% interest in Caroline Chisholm Centre (CTL) for AUD83.0m (S$112.6m). The purchase consideration was at a 12.6% discount to the last valuation of AUD95.0m (S$121.3m) of its existing 50% stake in the property, carried out on 30 Sep 2011. Management intends to finance the acquisition via bank borrowings and internal funds.
Benefits likely from investment
We are positive on the acquisition as CTL is fully leased to the Commonwealth Government of Australia, represented by Centrelink, with a balance lease of ~13.5 years and 3.0% annual rent increment. This will likely enhance FCOT’s portfolio lease expiry profile and provide stability in income growth. According to management, the portfolio weighted average lease to expiry is expected to improve from 3.4 years (31 Dec 2011) to 4.4 years, while the percentage income from master leases and blue-chip tenants is likely to increase from 43.1% to 48.3%. We also believe the move will give FCOT greater control and flexibility as the group will own the entire property upon completion of the transaction.
Maintain BUY
Based on FY11 NPI of AUD8.5m (S$10.9m) and valuation of FCOT’s present interest in CTL, we note that NPI yield of the property was at 8.9%. This compares favorably to the FY11 implied portfolio NPI yield of 4.9%. Assuming the acquisition was financed by bank borrowings and internal funds, management guided that it is expected to add 0.32 S cents or 5.6% to its DPU. In our view, FCOT appears poised to produce a good set of performance in the current financial year, given the better expected rental terms on China Square Central, potential interest savings from refinancing and current investment. Our DDM based fair value is now lifted to S$0.94 from S$0.87 previously, after factoring in the acquisition. Maintain BUY on FCOT.