Month: April 2012
A-REIT – BT
A-Reit full-year DPU up 2.5%
Amount available for distribution in Q4 rises 19% to $72.9 million
A SET of decent results for its final quarter capped off an eventful financial year for Ascendas Real Estate Investment Trust (A-Reit).
Gross revenue for the quarter ended March 31 jumped 19 per cent year on year to $134.4 million, mainly due to the acquisitions of Cintech I, Cintech II and Cintech III & IV in March this year, as well as new projects such as FoodAxis@Senoko that were completed.
Consequently, net property income rose 13.2 per cent over the same period to $95.1 million.
The total amount available for distribution rose 19 per cent to $72.9 million, translating to a distribution per unit (DPU) of 3.50 cents.
For the full year, gross revenue climbed 12.4 per cent from the previous year to $503.3 million, with net property income rising 8.5 per cent to $368.3 million.
This resulted in a 13.6 per cent spike in the total amount available for distribution to $281.7 million. DPU for the 12 months ended March 31, 2012 rose 2.5 per cent to 13.56 cents from a year ago, translating to a distribution yield of 6.7 per cent when placed next to the Reit's closing price of $2.02 on March 30, 2012.
The counter ended trading yesterday at $2.01, up 1.5 cents, or 0.8 per cent.
Said Tan Ser Ping, CEO and executive director of the Reit's manager: "This year has been an active year for A-Reit with nearly $1 billion worth of new investments made, concluding the year with 102 properties and a total asset of about $6.6 billion. Even so, A-Reit was able to maintain an aggregate leverage of 36.6 per cent as at March 31, 2012 as a result of proactive and prudent capital management."
However, the industrial Reit – which has been on an active acquisition trail over the past financial year, purchasing a total of seven properties (including its maiden acquisition in Beijing, China) – expects a slowdown in such activities in the coming year.
Said Mr Tan: "The situation during the last financial year was unusual where we had quite a number of opportunities which we took advantage of. We do not think the same kind of volume would be taking place again this year."
The manager also priced the issuance of 10 billion yen (S$154.9 million) in 2.55 per cent per annum Notes (due in 2024) yesterday, for the purpose of refinancing A-Reit's existing borrowings. The issuance, which is expected to be completed by the end of this month, will extend the Reit's weighted average term of debt to 4.20 years from 3.49 years as at the end of the last financial year, with a weighted average borrowing cost of around 3.04 per cent.
Commenting on the outlook, Mr Tan said: "It's not as bad as imagined to be six months ago . . . We are not seeing businesses failing, and we are seeing renewals and rental growth. But it is still uncertain due to the many macro issues that continue to hang over Singapore and the rest of the global economy."
In the upcoming financial year ending March 31, 2013, the Reit has around 13.8 per cent of its revenue up for renewal, but the manager remains confident that the Reit will turn in a stable report card, barring unforeseen circumstance.
K-REIT – CIMB
Spectacular leasing!
K-REIT braved headwinds tolease out more than 50,000 sf of space at Ocean Financial Tower and Prudential Tower in 1Q12. Backed by attractive yields of 8% and improving office indicators, we think its risk-reward now favours a positioning for a bottom.
1Q12 DPU was slightly above our estimate and consensus on lower interest costs, at 27% of FY12. We raise DPU by 2-4% and DDM target price (disc. rate: 8.2%) on lower interest costs and higher occupancy. Upgrade to Outperform from Neutral.
Interest cost-savings
1Q12 distributable profit doubled yoy with the help of contributions from the acquisition of OFC and an additional stake in Prudential Tower. The quarter’s outperformance was led by lower interest costs though contributions from increased occupancy should flow in soon. Lower rates on construction loans accounted for the lower interest costs.
Spectacular leasing
Indicators increasingly point to a trough. In 1Q12, K-REIT braved office headwinds to lease out more than 50k sf of office space, taking occupancy at OFC from 85% to 91%. After two quiet quarters, Prudential Tower’s occupancy climbed from 94% to 98%. Signing rents were fairly in line with market rates at S$11-13psf for OFC and S$8-9 psf for Prudential Tower. Take-up was skewed to new tenants with a mix of new-to-market legal firms at OFC and some fund-management firms at Prudential.
Upgrade to Outperform
With portfolio occupancy at a higher 96.3% and lease expiries/ reviews at a low 0.3%/1.6% of NLA, we think downside is limited. Higher aggregate leverage is also likely less of a concern now that capital values are expected to remain buoyed by low interest rates. Trading at forward yields of 8%, we think its risk-reward favours a positioning for a bottom. Potential catalysts include improved take-up and rents at OFC.
KGT – BT
K-Green Trust Q1 earnings hold steady
K-GREEN Trust has reported earnings per unit for the first quarter of 0.56 cent, unchanged from the corresponding period in 2011.
Cash generated from operations was $11.7 million in the quarter ended March 31, 2012, down 21 per cent from the $14.8 million in the year-ago period.
Q1 net profit at the Singapore Exchange's sole green infrastructure business trust remained steady at $3.5 million from a year earlier.
K-Green Trust, which has three energy and water treatment plants in Singapore, will not pay out distributions for the January-March 2012 period.
First quarter revenue inched up 4.4 per cent from 2011's $18.2 million to $19 million, due to a higher operation and maintenance income.
K-Green Trust said the higher operation and maintenance income was because of "annual adjustments of operation and maintenance tariffs to account for changes in consumer price index (CPI), as well as slightly higher output from the plants".
The trust still has no external borrowings as at March 31, 2012.
The performance for K-Green Trust's three portfolio assets "is expected to remain stable".
The flue gas treatment facilities upgrade project for its Senoko waste-to-energy plant is underway and is scheduled for completion by June 2012.
K-Green Trust's trustee-manager said it will continue to consider enhancement opportunities for its three assets.
It also remains interested in acquisitions in the areas of waste management, water treatment, renewable energy and energy efficiency. Europe and Asia Pacific remain its potential acquisition grounds.
K-Green Trust closed 0.5 cent lower at 99.5 cents yesterday.
K-REIT – BT
K-Reit Asia's post-rights DPU doubles in Q1
Surge in property revenue from new office investments
K-REIT Asia yesterday posted a distribution per unit (DPU) of 1.90 cents for the first quarter based on an enlarged post-rights share base – compared to 0.96 cents a year ago,
The annualised DPU works out to 7.64 cents, generating a distribution yield of 7.9 per cent based on K-Reit's closing unit price of $0.965 as at March 30.
The counter ended trading yesterday at $0.94, down 0.53 per cent or 0.5 cents.
The improvement in DPU came on the back of a two-fold rise in distributable income to unitholders to $48.54 million.
Powering the increase in distributable income was a surge in property contributions from associated companies and new acquisitions including Prudential Tower, 8 Chifley Square in Sydney and Ocean Financial Centre (OFC).
Share of results of associates increased 82.6 per cent to $11.2 million as a result of higher contribution from its interest in BFC Development and One Raffles Quay.
Property income for the office Reit was $36.6 million in Q1, up $17.9 million or 96.0 per cent from a year earlier. This is mainly due to the $17.3 million contribution from the OFC interest, and the higher property income from Prudential Tower as well as the interest in 275 George Street in Brisbane.
These higher income streams translated to a 90.8 per cent increase in net property income to $28.5 million.
K-Reit's Singapore portfolio occupancy of 96.3 per cent outperformed that of the core central business district of 90.7 per cent.
The Reit has about 1.9 per cent of net lettable area due for rent review and renewal in 2012. However, it has given an assurance that that with a portfolio-weighted average lease expiry of 6.4 years and healthy capital levels, it is in "good stead" to weather the economic slowdown in 2012.
K-Reit's aggregate leverage level as at March 31 is 41.8 per cent. It has initiated negotiations to refinance $535 million worth of borrowings due at the end of 2012.
CMT – Kim Eng
The suburban revolution
Always forward-looking. CapitaMall Trust (CMT) has a proven track record of delivering consistent growth in distributable income and the next three years could be even more rewarding for investors. This year alone, it will complete its asset enhancement initiatives (AEIs) at four properties. CMT is rated Buy for its active lease management, proactive asset enhancements for organic DPU growth and potential upside of 22%. The company will release its 1Q12 results on Wednesday.
Harvesting rewards. JCube recently reopened, making it the only shopping mall in Singapore with an Olympic-size ice skating rink. For the rest of this year, CMT will conclude its AEIs at Iluma, Clarke Quay and The Atrium@Orchard. Together with the normal rental reversions, we forecast a DPU growth of 15.7% over a two-year period, resulting in a decent DPU yield of about 6% in FY13F.
Retail assets to remain resilient. CMT’s malls have consistently enjoyed healthy occupancy rates in excess of 99%, unless they are undergoing AEIs. With over 70% of its portfolio catering to necessity shopping, CMT’s underlying distributions should remain defensive even if domestic economic growth were to slow to sub-3% pa. As of 2011, the occupancy costs for CMT’s tenants stood at a comfortable 16%, lower than the comparables in Australia and New Zealand.
Acquisitions not on the radar. Last year, CMT acquired Iluma and a 30% stake in the upcoming Westgate. In our view, acquisitions are unlikely this year as the company reels in the rewards from the abovementioned AEIs. Timing aside, we reckon that first on its to-buy list will be CapitaMalls Asia’s 50% stake in the iconic ION Orchard, which we value at $1.45b (or $4,500 psf NLA). At 50% LTV, we estimate that such an acquisition could take CMT’s gearing to about 43% – not ideal, but still fairly comfortable.
More exciting than it looks. While CMT is recognised for its defensive nature, we believe that its DPU growth prospects over the next two years will continue to warrant a Buy call. Our DDM-derived target price of $2.20 suggests an attractive 22% upside potential.