MIT – CIMB

Decent quarter

4Q12 results were decent in terms of DPU growth and rental reversions. While there was a qoq dip in portfolio occupancy, DPUs should remain stable, underpinned by occupancy and positive rental reversions.

4Q12/FY12 DPU slightly beat our estimates from higher-than-expected rental and margins (28%/106% of FY12) but met consensus expectations. We fine-tune our DPU estimates but keep our DDM target price (discount rate: 8.6%) and Outperform rating pending an analysts’ briefing.

Positive rental reversions

4Q12 NPI was up 23% yoy on increased contributions from acquisitions, higher occupancy and positive rental reversions. DPU was up a lower 14% yoy due to an enlarged equity base following an equity issuance to part-fund its previous acquisition from JTC. Qoq, DPU was up 3%, thanks to positive rental reversions. Rental reversions remained strong: Flatted Factories (+27%), Stack-Up/ Ramp-Up Buildings (+29%) and Warehouses (+15%) over preceding leases. We are slightly concerned about a 9% qoq dip in rentals for new flatted factory leases to S$1.75psf, which could suggest pressures in pushing rents and we would be seeking more clarification from management. Overall occupancy was flat at 94.9%, albeit with some dips from business parks and warehouses.

Strengthened balance sheet

Asset leverage inched down to 38% from 3Q12’s 39% on revaluation gains. During the quarter, management refinanced part of its 2012 loans by issuing a S$125m 7-year 3.75% fixed-rate MTN. Following this, average term to debt maturity has lengthened to three years from 2.5. Weighted average all-in funding costs were up only marginally to 2.3% from 2.2%.

Revaluation gains

A revaluation gain of S$94.1m was recognised from investment properties from higher rental revenue and occupancy, leading to NAV/unit growth of 6.3% qoq.