Month: March 2012
Yuan REIT – BT
ARA eyeing yuan Reit listing in S’pore
ARA Asset Management Ltd, part-owned by Hong Kong billionaire Li Ka- shing’s Cheung Kong (Holdings) Ltd, said it is considering the listing of what would be Singapore’s first yuan-denominated property trust.
‘One of the opportunities which the company is exploring includes the possible establishment and listing of a yuan-denominated real estate investment trust (Reit) with assets located in the People’s Republic of China,’ ARA said in a stock market filing.
Sources familiar with the deal said Citigroup, DBS Group and Standard Chartered have already started working on the planned listing. Citi and DBS declined to comment while Stanchart could not be reached.
Dow Jones said in a Tuesday report that ARA will inject Chinese properties now held by its unlisted Dragon Fund II into the Reit. — Reuters
CCT – OCBC
DOWNGRADE TO HOLD
•Expect further rental dips in FY12
•Impact on distributable income capped
•Key risks from fair value write-downs
Expect office rentals to dip in FY12
Domestic office rentals peaked in 2H11 and, from our channel checks, we believe that Grade A office rentals has declined a further 3-5% in 1Q12. Given continued macroeconomic uncertainties and an ample office pipeline of 4.2m sqft NLA in FY12-13, we now forecast office rentals to fall 10-15% in FY12.
Downside for distributable income likely limited
That said, we think the downside for CCT’s FY12 distributable income is likely limited. Only 7.9% of CCT’s portfolio gross rental income, primarily at 6BR and One George, is due for renewal in FY12 (29.9% in FY13). Also, despite a forecasted decline in office rentals, we would still likely enter a phase of positive rental reversions in 2H12 as leases signed during the previous trough in 2H09-2H10 are renewed at market levels.
Capital values to face headwinds
However, we believe office capital values could come under pressure with softening rentals expectations, accompanied by cap rates expansion, as major players in the market re-evaluate the office cycle. For CCT’s Grade A portfolio, an average cap rate of 4.0% was used by independent valuers during the latest appraisal in Dec 11, while cap rates in the range of 4.15% to 4.5% were used over Jun 08 – Dec 10 (excluding 6BR, HSBC building). Moreover, we think the recent Twenty Anson acquisition was somewhat aggressive at S$2.1k psf (S$430m) since Capital Tower nearby (also owned by CCT) was valued independently at S$1.6k psf in Dec 11.
Risks from fair value write-downs – DOWNGRADE to HOLD
For CCT’s share price, we see key risks stemming from fair value write-downs as the domestic office sector softens further, though any price downside is likely capped by a currently undemanding valuation (0.7x PB) and a fairly attractive yield (5.7%) for high quality Grade A office exposure. Downgrade to HOLD with a lower fair value estimate of S$1.14 versus S$1.29 previously, to reflect softer cap rate assumptions.
Industrial REITs – OCBC
Expecting firm performance
• Poised for firm results
• Positive asset revaluation likely
• DPU yields remain attractive
Likely to witness healthy quarterly results
Industrial REITs are expected to kick off the reporting season for the financial quarter ending 31 Mar in mid-April. We believe the REITs will continue to post healthy YoY growth in distributable incomes and DPUs, driven by completion of acquisitions, sound occupancy rates and possibly positive rental reversions. On a sequential basis, the financial performances are expected to stay firm, as contributions from new acquisitions are anticipated to be partially offset by higher operating and financing expenses.
Asset revaluation to provide relief on gearing?
Four industrial REITs, namely AIMS AMP Capital Industrial REIT (AAREIT), Ascendas REIT, Mapletree Industrial Trust and Mapletree Logistics Trust (MLT), will also be concluding their financial years. This will likely be accompanied by a revaluation of their investment properties. Looking at the trend of URA rental and price indexes over the past year, we believe the REITs may likely experience revaluation gains in their portfolios. This may in turn provide some relief on their aggregate leverages, which have mostly been rising amid a spate of acquisitions. In fact, we note that MLT had already announced the completion of the valuations of its 98 properties late this week. The aggregate portfolio amount of S$3.9b, which will be reflected in its upcoming results, was 3.1% and 8.4% respectively to the book values of its investment properties QoQ and YoY.
Subsector yield the highest in S-REIT sector; Cache Logistics is our pick We also revisit the valuations and yields of SREITs, following the recent run-up in the general market. Based on Bloomberg consensus estimates and prices as at 19 Mar 2012, we note that the industrial subsector offers the highest current yield (8.1%), compared to 6.1-7.1% for other subsectors and 6.9% for the overall sector average. We are maintaining OVERWEIGHT on the industrial REIT subsector. Cache Logistics remains our preferred pick, given its attractive FY12F DPU yield of 8.5% and robust portfolio.
CDL H-Trust – OCBC
High-end hotels outperform in Jan
• Good visitor arrivals for Jan
• High-end hotels outperform
• CDLHT in right sub-sector
Visitors arrivals on track
Visitor arrivals maintained strong growth of 13.4% YoY in Jan 2012 to reach 1.2m. In that month, arrivals from the three largest countries of origin, namely Indonesia, China and Malaysia, saw solid increases. These countries accounted for 40% of all visitor arrivals last year. Notably, arrivals from China spiked up 52.8% YoY to 201.7k in Jan. While some of the increase could be attributed to Chinese New Year falling in Jan instead of Feb this year, we note that the Jan-12 China number is 34.5% higher than the Feb-11 figure.
High-end hotels outperform in RevPAR, occupancy
According to the STB, average RevPAR for Singapore hotels increased 11.7% YoY to S$209 in Jan. On a RevPAR basis, high-end hotels outperformed budget hotels. The Luxury and Upscale tiers increased by 9.1% and 14.3% respectively while Mid-tier and Economy hotels saw declines of 6.4% and 3.6%. These results support our preference for the high-end hotel sector. The decline in RevPAR for budget hotels comes not from declining average room rates, which actually increased, but from reduced occupancy (down 7 ppt). Many of the visitors from developing countries are not budget travelers.
CDLHT has good positioning
As mentioned previously, we project that the supply of high-end hotel rooms will increase by 3.0% p.a. for 2012-2015 while budget hotel rooms will increase by 5.6% p.a. We estimate that hotel demand will grow by 6.4% p.a., outstripping total hotel room supply growth of 3.8% p.a. On another related note, CBRE has projected that RevPAR for Singapore hotels will increase by 5%-8% in 2012. Given this, our RevPAR growth projection for CDLHT Singapore’s hotels of 5.5% in 2012 is not aggressive.
Maintain BUY
We maintain our BUY rating and our S$2.00 fair value estimate based on a RNAV analysis. With the majority of its revenue coming from high-end Singapore hotels, CDLHT will continue to be a beneficiary of the blossoming tourism industry.
Singapore Reit – BT
DMG Research said on Thursday that February's property sales numbers 'surprised on the upside', with a total of 2,413 units sold by developers in the month.
Analysts see value diminishing in the sector with revised net asset value discount on developers narrowing.
'We also remain less sanguine as stronger than expected continued price appreciation may in turn raise policy risks, leading to sustained sector re-rating unlikely,' said DMG analysts.
The research house remains neutral on developers but reiterates its sell recommendation on SC Global due to low asset turnover and high leverage.
Additionally, suburban retail Reits such as CapitaMall Trust and Frasers Centrepoint Trust are now looked upon more favourably.