Month: April 2012
CIT – DBSV
High stable yields
• 1Q DPU makes up 24% of our FY12 forecast
• 2H earnings driven by new and impending acquisitions, as well two soon to be completed built-to-suit projects
• Maintain BUY with an unchanged TP of S$0.58
Highlights
DPU of 1.171 Scts in line. Both topline and net property income grew 8% each to S$20.9m and S$18.0m respectively. Growth was driven by contribution from properties acquired (where CREIT acquired close to 5 properties since a year ago) coupled with annual rental hikes for certain properties in its portfolio. Average occupancy remained high at 98.6%, while arrears remained low at 0.1% (vs 0.6% in 4Q11). Interest costs were lower due to oneoff costs incurred a year ago due to refinancing activities. As a result, distributable income grew by 17% to S$12m, translating to a DPU of 1.171 Scts (+17% y-o-y). We note that CREIT has also announced that a dividend reinvestment plan will be instituted in the quarter ended Mar’12.
Our View
Built-to-suit projects, AEI remain on track. The trust had a busy quarter, completing close to S$50.8m worth of acquisitions with an additional S$72.8m (16 Tai Seng Street) on option, which we believe will complete in the coming quarters. Development of two built-to-suit projects (Tuas View Circuit & Peter’s Polyethylene Industries Pte Ltd) will start contributing to earnings from 2H12, pointing to an even stronger FY13.
Resilient balance sheet, more acquisitions in 2H12 will be positive. Gearing at c.36% is within management’s comfortable range. The manager has a S$500m MTN program on tap for potential acquisition opportunities. We also note that CREIT will also be receiving S$102m in cash from the Singapore Land Authority (SLA) in Jan 13 arising from the compulsory acquisition of its properties. We believe management is actively looking to redeploy the proceeds to limit potential earnings downside.
Recommendation
BUY for higher relative yields of 8.8%-9.3%. CREIT remains attractive for its stable FY12-13F yields of c. 9%. Re-rating catalysts hinge on deployment of cash (cS$90m as of end-4Q11) on the balance sheet and incoming cash (est. S$102m by Jan 13) into income-producing acquisitions.
PCRT – BT
Perennial jumps 7.1% after investments
SHARES of Perennial China Retail Trust shot up yesterday following substantial investments from the co-founders of Wilmar International.
Perennial's mainboard-listed stock closed at 53 cents yesterday, up by 7.1 per cent or 3.5 cents.
"I think the market is hungry for any kind of good news," one trader said.
The Singapore-headquartered business trust with a focus on retail real estate in China announced late on Wednesday that Wilmar chairman and chief executive Kuok Khoon Hong bought about $60 million worth of shares in an off-market transaction to raise his deemed stake in Perennial to 16.94 per cent from 5.02 per cent. The shares were bought at about 44.625 cents apiece on average.
Wilmar chief operating officer Martua Sitorus also raised his deemed stake to 5.66 per cent from 3.17 per cent previously.
Mr Kuok bought his shares from China businessman Tong Jinquan, whose wholly owned Shanghai Summit (Group) Co is a strategic partner of Perennial. Mr Tong, who previously held a 14.9 per cent stake, no longer owns Perennial shares.
But Mr Tong will continue to be a key business partner in China, Perennial Real Estate Pte Ltd executive chairman Pua Seck Guan said. Mr Tong's Shanghai Summit has also agreed to an additional "earn-out" amount of 342 million yuan (S$67.9 million) from July 2013 to end-2014. That money can be drawn down to ensure that Perennial can pay a minimum dividend of 19.4 yuan cents per unit during the relevant period.
"This new agreement could lift 'guaranteed' dividend yields to 8-8.5 per cent till FY14," CIMB analysts Donald Chua and Lee Syn Yi wrote in a note. "While management has not indicated any target distributions for FY13 and FY14, this ample buffer provides greater certainty of [dividend per unit] growth over the next three years and potentially more than 8 per cent dividend yields till 2014."
Mr Pua also entered into a deal with Mr Kuok and Mr Sitorus to establish Perennial Real Estate Holdings Pte Ltd, an investment vehicle with a target capital size of $500 million. The vehicle will eventually hold 49 per cent of Perennial Real Estate Pte Ltd, which controls 78 per cent of the trustee-manager of the listed entity.
Mr Pua told BT that Mr Tong's sale was a solution to onerous and hampering interested-party transaction rules that resulted from Mr Tong's role as a business partner in China.
Mr Tong's ability to act as a major sponsor, like in a rights issue, was also limited because of China's capital controls.
"He can't subscribe! And then people will think something is wrong," Mr Pua said.
Mr Kuok was a valuable shareholder with the depth of his pockets and his experience in China, Mr Pua added.
"He said, 'Seck Guan, you remind me of what I was 20 years ago trying to build my business'," Mr Pua recalled. "If we combine our strengths we could actually capitalise on a lot of opportunities in the marketplace today."
MLT – BT
MapletreeLog's quarterly DPU rises 9.7%
MAPLETREE Logistics Trust (MLT) delivered a distribution per unit (DPU) of 1.7 cents for the three months ended March 31, 2012, a 9.7 per cent increase from 1.55 cents in the same period last year.
Gross revenue for the quarter was $71.2 million, a 14.4 per cent rise from the year-ago period, while net property income rose 12.3 per cent to $61.4 million.
MLT attributed the improved performance to contributions from properties acquired, as well as 5.6 per cent organic growth from the existing portfolio stemming from positive rental reversions and a high occupancy rate of 98.7 per cent.
The amount distributable to unitholders for the quarter was $41.3 million, up 10.1 per cent year on year.
In June last year, MLT said its financial year-end would be changed from Dec 31 to March 31 each year with immediate effect.
As a result, MLT's FY11/12 comprises five quarters ended March 31, 2012. Figures from this period would not be entirely comparable to those in FY2010, which had four quarters.
On a five-quarter financial year basis ended March 31, MLT delivered a DPU of 8.24 cents. Gross revenue was $339.5 million, while net property income was $293.6 million, resulting in an amount distributable to unitholders of $199.9 million.
MLT's portfolio as at March 31 consisted of 105 properties with an approximate $4.1 billion book value, including a $113 million or 3 per cent revaluation gain following an annual valuation exercise in March 2012.
MLT carried out a round of fund-raising in mid-March, with the issuance of $350 million worth of 5.375 per cent perpetual securities. Proceeds have contributed towards funding of its acquisitions.
Its aggregate leverage at March 31 was 35.2 per cent. This will increase to around 37 per cent on the completion of four announced acquisitions in South Korea and Malaysia.
MLT units remained unchanged at 97 cents yesterday.
AIMSAMPReit – BT
AIMS AMP beefs up asset quality for better returns
Over 20% of Reit's portfolio undergoing enhancements
AIMS AMP Capital Industrial Reit intends to "sweat" its assets over the next few years by raising the overall quality of its portfolio to provide better returns for its shareholders, said Andrew Bird, director of AMP Capital's property and management business.
With more than 20 per cent of its current portfolio in Singapore undergoing asset enhancements, the industrial real estate investment trust (Reit) intends to focus on improving the quality of its overall assets this year, instead of acquiring new properties.
In particular, Mr Bird, who was also newly appointed as chairman of the board of AIMS AMP Capital Industrial Reit Management (the Reit's manager) yesterday, said that with the completion of the group's $155 million development at 20 Gul Way later this year, the Reit's portfolio – comprising mainly warehouse and logistics assets – which currently stands at around $940 million, is expected to cross the $1 billion mark.
The soon-to-be completed asset at Gul Way (which has already been fully pre-committed) is also expected to enjoy positive rental reversions upon completion, and is forecast to boost the Reit's overall distribution per unit (DPU) by 15 per cent once cashflow starts rolling in.
Said Mr Bird: "The Gul Way property is a great example of us adding value to existing assets. So rather than going out and doing aggressive acquisitions and capital raisings we are seeking to add value to assets we already have thus moving the quality of assets up which is a good thing for investors."
He also added that another part of their strategy would be to sell some of its smaller, lesser quality assets with the final aim to "unlock better returns" for the Reit's overall portfolio.
Commenting on rising concerns over a potential supply glut in the industrial space segment, Mr Bird said: "Markets go up and down whether it is in Singapore or elsewhere in the world. The manager's job is to look forward over the horizon to see where the opportunities are and manage the portfolio to the best of their ability to maximise shareholder returns."
He also pointed out that demand continues to outstrip supply for quality warehouse assets in Singapore, an area that the Reit specialises in, and it remains confident of its outlook going forward.
But touching on the topic of the counter's lacklustre liquidity triggered a more furrowed expression on the face of the industry veteran.
Despite having one of the highest yields in the local Reit universe, the listed counter has been suffering from bouts of poor investor interest over the past few years.
"That is one of the things we are very focused on as a sponsor and shareholder. This is very close to our hearts," he said.
Fortunately, efforts have been starting to pay off of late, with institutional interest picking up over the past few months, said Mr Bird, who also attributed the higher trading volumes to a five-for-one share consolidation carried out sometime last year.
That said, the leader admitted that liquidity continues to remain an issue despite the improvement in trading activity over the past six months, and said he will continue working on sprucing up the Reit's overall marketability to investors in the coming months.
"We have built steady momentum in the trust and we need to continue that on," he said.
Since the start of the year, the industrial Reit has rallied by 24 per cent, outperforming many of its sector peers.
Yesterday, the counter closed half a cent or 0.4 per cent lower at $1.185.
FCOT – BT
Frasers Commercial Trust's Q1 DPU up 8.1%
Frasers Commercial Trust (FCT) said on Thursday its second-quarter distribution per unit (DPU) rose year-on-year to 1.74 Singapore cents from 1.61 Singapore cents a year ago.
Distributable income to unitholders was S$11.2 million for the second quarter ended March 31, a rise of 10.9 per cent from a year ago.
This is achieved on the back of good asset performance and lower interest expenses, said Low Chee Wah, chief executive of Frasers Centrepoint Asset Management, which is the manager of the trust.
FCT's Q2 net property income has also risen to S$24.76 million, up 3.8 per cent for the year-ago period. Gross revenue similarly gained 4.2 per cent to S$30.87 million.
For the half-year period, DPU rose 13.2 per cent year-on-year to 3.24 Singapore cents.
This works out to an annualised yield of 7.4 per cent based on FCT's closing price of S$0.88 per unit on April 18.
FCT's distributable income to unitholders for the half-year period was S$20.78 million, an increase of 16 per cent year-on-year. Net property income has also risen 6 per cent to S$49.39 million.
Its gross revenue grew 5 per cent year-on-year to S$61.53 million, helped by higher rental rates achieved from new and renewed leases.
FCT's Singapore portfolio occupancy of 96.6 per cent fared slightly better than its average occupancy rate of 96.1 per cent.
"The rents of our Singapore properties continue to be competitive and the occupancies remain healthy with positive growth from the Australian properties providing a good uplift to the income of the portfolio," Mr Low said.
"Collectively, they provide a strong platform and underpin the growth of FCT," he added.
Unitholders can expect to receive their first-half FY12 DPU on May 30.