Month: April 2012
Suntec – DMG
Turning Point
1Q12 results within expectations. Suntec (SUN) released its 1Q12 results yesterday, posting gross revenue and distributable income of S$73.3m (+20.1% YoY) and S$54.9m (+3.8% YoY) respectively. DPU for the period came in at 2.45S¢, accounting for 25.3% of our FY12 DPU forecast. NPI increased by 5.0% YoY bringing it to S$49.0m on the back of high occupancy rates and additional income from Suntec Singapore. Going forward, we expect SUN’s DPU to drop slightly amid the loss in income from the divestment of CHIJMES and lower income contribution from Suntec City as a result of the AEI which will begin in June. Based on our DDM valuation (COE:8.9%; TGR:1.5%) we maintain BUY on this counter with a lowered TP of S$1.51. SUN is currently trading at 6.0% spread to 10-year bond yield which is 108bps and 363bps above its long term (4.9%) and pre-crisis mean spread (2.4%) respectively, our TP of S$1.51 translates to a spread of 4.9% and a potential upside of 17.5%.
Proceeds from CHIJMES used for AEI and mitigate dips in DPU. As part of the company’s proactive asset management strategies in maximising returns from the portfolio, Suntec divested CHIJMES for a price of S$177.0 million, 23.2% higher than valuation. According to management, the proceeds will be deployed to partially fund the AEI at Suntec Singapore and Suntec City Mall, and to mitigate any temporary dip in distribution per unit during the execution of the AEI from June onwards.
Gain in revenue offset by lost in income. Going forward, as ORQ and MBFC continue to outperform the general office market, together with additional income from Suntec Singapore in the 1H12, we expect SUN’s DPU to drop mildly by 2.8% in FY12. In our forecast, we expect most of the lost in income due to the divestment at CHIJMES and the AEI at Suntec City to be offset by the gain in income from the abovementioned. Given that this counter is currently trading at 0.65x P/B together with a forecasted yield of 7.5% for FY12, we believe our TP of S$1.51 which translates to a spread of 4.9% is undemanding.
Suntec – DBSV
A winner in the making
• Slightly ahead of expectations, 3MDPU representing 28% of our forecast
• First phase of Suntec City AEI to start, expect earnings to normalise
• Maintain BUY at an unchanged TP of S$1.45
Highlights
Slightly ahead of expectations. 1Q12 gross revenue and NPI rose by 20.1% and 5.0% y-o-y to S$73m and S$49m respectively, largely due to the consolidation of revenue from Suntec Singapore. Additional contribution from Marina Bay Financial Centre (MBFC) Phase 1 also helped to lift distributable income by 3.8% to S$54.9m. DPU was 2.453Scts representing 28% of our FY12 Forecast
Our View
Stable office portfolio. While this quarter marked the end of the income support for ORQ, we expect this income vacuum to be offset by positive rental reversions for its remaining portfolio, and the possible refund of the GST paid on the ORQ income support in the next three quarters. Meanwhile, monthly signing rents at Suntec City Office Towers remained firm at S$8.79 psf supported by high occupancy (99.5%).
First phase of Suntec retail mall’s AEI works starting. Approximately 193,000 sq ft, or 23% of the Suntec City retail space is expected to undergo AEI works from June 2012. While we expect some downtime in occupancy, the management will mitigate this by carrying out the works in phases. 4Q12 is likely to be the most intensive phase of its refurbishment exercises before occupancy starts trending up in 1Q13. On a positive note, NLA will be boosted to 380,000 sf upon the completion of AEI works in mid -2013, of which 45% has been pre-committed to popular tenants like H&M, GAP and La Senza. At the same time, some of the anchor tenants are expected to have new concept stores. This will boost the mall appeal and drive footfall in the medium term.
Recommendation
Maintain BUY. Suntec offers FY12-13F DPU yields of 6.7% and is trading at an undemanding 0.7 x P/BV. Gearing is at a healthy 37.4%. There is also minimum refinancing this year (7% of total debt). Our unchanged DCF-backed TP of S$1.45 offers a total return of close to 20%.
MIT – DBSV
Diversification is key
• 4Q12 DPU of 2.22 Scts slightly ahead, full year DPU of 8.4 Scts is 6% above our forecasts
• Rental growth profile expected to moderate
• Maintain BUY; TP raised to S$1.30
Highlights
4Q12 DPU of 2.22 Scts slightly ahead of estimates. Mapletree Industrial Trust (MINT) reported gross revenue and net property income of S$66.3m and S$46m respectively, representing 20.8% and 23.4% growth above forecasts. The stronger performance was largely attributed to the contribution from its newly acquired JTC portfolio of eight flatted-factories and three Amenity Centers, supported by portfolio wide positive rental reversions. The new portfolio contributed c.63% of topline growth this quarter. As a result, distributable income of S$35.8m was 28% above forecasts, translating to a DPU of 2.22 Scts.
Positive revaluations of S$94m. NAV was lifted to S$1.03 (from S$0.95), due to stronger occupancies and rental income achieved. Gearing headed slightly lower to 37.8%.
Resilient portfolio, healthy reversions. MINT’s diversified portfolio of industrial properties continued to exhibit resilience, achieving reversions of between 15% and 29%. Occupancies were stable at 94.9% in 4Q12 (vs 95.1% in 3Q12) and the average portfolio rental at S$1.55 psf/mth was slightly higher. Retention rates remained healthy at 76.1%.
Our View
Stable performance expected; renewal gap should narrow in our view. Looking ahead, we believe performance will remain relatively stable with portfolio near full occupancy. The manager’s strategy to lengthen its WALE has met with good response, with tenants offered leases with longer tenures. While there will be organic growth from expiring rents in view of the positive spread between passing and market rents, we expect the pace of growth to moderate given the uncertain operating environment with end tenants facing cost pressures on all front.
Recommendation
Maintain BUY, TP S$1.30. Our numbers are adjusted slightly higher to account for higher occupancy and lower than expected interest costs. Our TP of is raised to S$1.30 as we roll forward our valuations to FY13. Maintain BUY.
ART – CIMB
Lacking catalysts
ART came in with a decent 1Q12. However, there are some concerns on cost pressures in certain markets and forex swings. While performance should pick up in 3Q with the London Olympics, we see a lack of compelling catalysts to spark a major rerating.
1Q12 DPU was broadly in line with estimates, forming 25% of our full-year estimates. We raise DPUs marginally, factoring in its recent acquisitions and REVPAU changes. Maintain Neutral with higher DDM-based target price (discount rate: 8.5% vs. 9.1% previously).
Decent quarter
Performance was decent despite 1Q being typically the seasonally weaker quarter. Performance is expected to pick up in 3Q with the London Olympics. 1Q12 gross profit was up 2% yoy as increased staff, maintenance and other costs eroded a 6% rise in revenue. The traditionally stronger Singapore market failed to perform probably due to weaker corporate travel, with revenue flat and gross profit up 4% yoy only due to a reversal of provisions. Growth in the quarter came instead from the Philippines, UK and China.
Europe flat
European portfolio’s revenue was marginally up 2% yoy though gross profit was down 3% on higher staff costs in Spain and provision of incentive fee in UK. Revenue from UK rose on higher rental rates at Citadines Prestige Trafalgar Square London post-refurbishments, and is expected to see a tick-up in 3Q as the London Olympics approaches.
Widening forex swings
We are slightly concerned with FX swings with forex movements widening to -2.1% from 4Q’s -1.2%, and particularly given MAS’s stance on a faster appreciation of the S$. Management has so far continued to manage its exposures through revenue/opex matching and natural hedge. That said, it is monitoring FX fluctuations associated with remittance and would, where feasible, hedge these currency risks.
CDL H-Trust – OCBC
SOLID SET OF RESULTS
•Good 1Q12 results
•Record Singapore hotel performance
•Tourism attractions coming up
Solid 1Q12
For 1Q12 ended Mar 2012, CDLHT recorded a 19% YoY in gross revenue of S$38.4m. The increase was from strong organic growth, maiden 1Q contribution of S$2.7m from Studio M Hotel, and the receipt of a full-year’s variable income of S$1.8m versus S$0.84m recognised for an 8-month period in 1Q11 for Australia hotels. Net property income grew 20% YoY to S$36.0m. Total return for the period climbed 24% to S$28.6m. After deducting income retained for working capital, income available for distribution per security climbed 17% YoY to a 1Q record of 2.78 S-cents, which translates into an annualised DPU yield of 6.0% based on yesterday’s close of S$1.87. The results were in-line with our forecasts.
Record numbers for Singapore hotels
Excluding Studio M Hotel, which was acquired in May 2011, Singapore hotels saw RevPAR grow 9.3% YoY to S$213, the highest 1Q RevPAR since the inception of CDLHT. Average occupancy grew by 2.7 ppt from the corresponding period last year to a 1Q record of 88.5%. Average daily rate grew by 6.2% YoY to S$241. For Novotel Singapore Clarke Quay, an upgrade of the bathrooms and room touch-ups for the remaining 44 guest rooms was completed in mid Jan 2012. The Australia hotels continued a strong performance, boosted by a buoyant natural resources sector and a static supply of hotel rooms.
Exciting year for tourism
Upcoming attractions of note include Phase One (Bay South) of the 101-hectare Gardens by the Bay, the River Safari (Asia’s first riverthemed wildlife park) and the Marine Life Park at Resorts World Sentosa. We believe that they will continue to enhance the experience of tourists. While the supply of new hotel rooms in Singapore is expected to grow by 3.1% YoY according to Howard HTL, we believe that demand growth will outstrip supply growth.
Maintain BUY
We maintain our BUY rating on CDLHT and our RNAV-derived fair value estimate of S$2.04.