Month: April 2012
CIT – DMG
Continue to strengthen through acquisitions
Full year results in-line with expectations. Cambridge Industrial Trust (CIT) released its 1Q12 results yesterday posting gross revenue and net property income of S$20.9m (+8.2% YoY) and S$18.0m (+8.4% YoY) respectively. The increase in revenue is mainly attributed to additional contributions from the five acquired properties over the last twelve months. DPU for the quarter came in at 1.171 S¢ (+17% YoY), equivalent to 24% of our FY12 DPU estimate. Going forward, we expect CIT’s DPU to continue to remain strong from 1) additional contributions from 25 Pioneer Crescent and 16 Tai Seng Street, 2) resilient industrial rental rates and 3) the completion of the BTS project at Tuas in 2H12. We maintain our BUY call on CIT with an unchanged DDM based (COE: 10.7%, terminal growth: 1.0%) TP of S$0.605. With CIT currently trading at 7.5% spread vs the pre-crisis historical mean of 4.6%, our TP represents a spread of 6.7% posting a potential upside of 10%
Multiple acquisitions and upgrading to improve portfolio performance. Since June 2011, CIT has completed five acquisitions, and divested its holdings at 7 Ubi Close. Recently, the company further indicated an acquisition at 16 Tai Seng Road. In addition, together with the completion of the BTS project at Tuas View Circuit by 2H12, we expect CIT’s DPU to grow by c.0.5S¢ (+12%) in FY12.
Pro-active management with room for slight positive reversion. CIT’s management continues to be pro-active in engaging tenants early on negotiations of lease renewals in a bid to reduce lease concentration. Average lease expiry profile for FY13/14 continues to decline to 48.4% from 53.4% YoY. Currently, CIT’s portfolio passing rent is S$0.95 psf/month; below current spot rents of S$1.00 – S$1.05 psf/month, with rents expected to re-rate slightly upwards upon lease expiry.
Acceptable gearing amid multiple acquisitions. Management has been undertaking a portfolio reconstitution exercise since beginning of 2010, divesting nonperforming assets and redeploying capital into yield accretive acquisitions. Amid multiple acquisitions, gearing has been pared down from 42.6% in Dec 2009 to 35.9% in Mar 2012. With an internal target gearing 40%, CIT will still has room to raise S$47.6m for further acquisitions.
Stable rental rate with respectable growth expected in 2012. As the outlook of industrial rental rates continues to remain stable together with a strong pipeline of acquisitions, we maintain our BUY rating with a TP of S$0.605.
A-REIT – DBSV
Prime asset, prime valuations
Highlights
• 4QFYMar12 DPU of 3.5 Scts was slightly ahead. Gross revenues and net property income increased 19% and 13% y-o-y to S$134.4m and S$95.1m respectively. FY12 was a fruitful investment year, where the REIT invested close to S$946m in development & asset enhancement projects and new assets into growing its portfolio. As a result, distributable income in 4Q12 was 19% higher at S$72.9m (DPU of 3.5 Scts). Full year DPU of 13.56 Scts formed 103% of our FY12 estimates.
• 6.9% lift in NAV to S$1.88. A-REIT also reported a revaluation gain of close S$222m, resulting in a lift in NAV to S$1.88, largely due to improving rentals and occupancies, and supported by a 10bps cap rate compression compared to 31st March 2011.
Our View
• Sound operational outlook; ability to pass on cost increases to tenants a key positive. We note that NPI margin of 71% (vs 74% a year ago) was marginally lower. This was due to higher utility costs incurred on an expanded portfolio, while the conversion of several buildings into multi-tenanted buildings eroded effective portfolio margins. Margins should remain relatively stable from hereon as the manager should be able to pass on some of these costs to tenants through raising service charges as per rental agreements.
• Portfolio performance to remain steady. Portfolio occupancy remained high at 96.4%for its multi-tenanted buildings. Overall occupancy (excl new acquisitions which averaged c.76.6%) was stable at 92.8% (vs 92.2% a year ago), while rental reversions remained positive at 5.2%-15.7% across all sub-segments. We see minimal leasing risks in FY13, mitigated by an average long WALE of 4 years and having only 13% of topline up for renewal, which is further diversified across various industrial segments. In addition, we see earnings risks from negative rental reversions to be low for this year, as market rentals are a healthy 16-32% above expiring rents.
• Debt expiry profile is well spread out. Gearing at c.36% is within management's target of 35-40%. The manager reported that they have issued a new 12 year ¥10bn denominated MTN @ 2.55% p.a., further lengthening its debt maturity profile.
Recommendation
• Maintain HOLD with TP slightly raised to S$2.17. We tweaked our estimates up to reflect higher reversionary rents and occupancy rates in 2012. While we like A-REIT's FY13-14F yields of close to 7.0%, we are maintaining our HOLD rating given limited upside to TP.
CLT – BT
Cache Logistics Trust's Q1 DPU up 7% at 2.09 cents
CACHE Logistics Trust delivered a distribution per unit (DPU) of 2.09 cents for the first quarter of 2012, a 7 per cent increase from 1.95 cents in the same period last year.
Distributable income was $13.4 million, up 7.6 per cent from the year-earlier period, while net property income rose 11.6 per cent to $16.1 million.
Gross revenue for the quarter was $16.9 million, a 13.9 per cent rise over the previous year, due mainly to additional rental income and revenue from new acquisitions. Net financing costs also increased 29.5 per cent year on year to $2.5 million, largely due to increased borrowings for acquisition funding.
The Q1 results give rise to an annualised DPU of 8.39 cents, and a corresponding distribution yield of 8.4 per cent based on Cache's closing unit price of $1 as at yesterday.
Said Daniel Cerf, CEO of trust manager ARA-CWT Trust Management (Cache) Limited: "The biggest driver for DPU growth is acquisitions. . . We will continue to embark on acquisitions when they make sense . . . to add value to the portfolio as well as the bottom line."
Cache's portfolio is set to comprise 11 assets by the end of April, with the completion of a $35.18 million acquisition and leaseback arrangement of a Changi North warehouse facility with Pan Asia Logistics. The acquisition will provide a starting net property income yield of approximately 7.7 per cent.
Addressing a possible ramping up of supply in the logistic assets sector this year, Mr Cerf said: "We think that this supply will be absorbed . . . on the back of Singapore's attractiveness to third-party logistics providers and manufacturing firms who need to get goods to the market quickly."
Capital and equity management has been on the cards for Cache recently, including the issuing of 60 million new units at 98.5 cents apiece in a private placement on March 21, raising $57.1 million in net proceeds and resulting in a reduced 27.7 per cent gearing ratio as at March 31.
The firm also declared an advanced distribution of 60 million new units of 2.044 cents for the period from Jan 1 to March 29, to be paid on April 30.
Units of the trust gained half a cent to close at $1 yesterday.
CMT – BT
CapitaMall's Q1 DPU inches up on flat revenue
CAPITAMALL Trust (CMT), which counts Raffles City, Bugis Junction and new mall JCube, among others in its portfolio, saw its distribution per unit (DPU) in the first quarter edge up to 2.30 cents from 2.29 cents the year before.
This works out to an annualised distribution yield of 5.04 per cent, based on CMT's closing price of $1.835 per unit on April 17.
CapitaMall Trust Management (CMTM), CMT's manager, said the books closure date will be on April 26, and unitholders can expect to receive their Q1 2012 DPU on May 30.
CMT's net property income has risen to $108.33 million for the first quarter ended March 31, 2012, up 2.5 per cent from the year-ago period.
Gross revenue inched up 0.8 per cent year-on-year to $155.24 million, helped by higher rental rates achieved from new and renewed leases. CMT said that excluding the Atrium@Orchard, which is undergoing asset enhancement works, its gross revenue would have grown 3.6 per cent year-on-year.
CMT's distributable income to unitholders was $76.61 million, an increase of 4.6 per cent from the same period last year.
Property operating expenses – an area of concern in Q4 last year – fell to $46.9 million in Q1 2012 from $59.1 million in Q4 last year.
The trust said its strong foundation would enable it to ride out potential economic uncertainties, partly because of the large and diversified tenant base of its portfolio, which give stability and sustainability to the malls' occupancy rates and rental revenues.
Said James Koh, chairman of CMTM: "We expect our city malls located in the downtown core of Singapore to continue to do well this year as the Singapore Tourism Board has forecast 13.5 to 14.5 million tourist arrivals for 2012."
In a separate announcement yesterday, CMT said its Bugis+ mall – formerly known as Iluma – is undergoing a $38 million transformation due to be completed in July this year.
CMT said over 80 per cent of Bugis+ has been pre-committed. The revamped mall will boast more than 30 new brands, including Japanese clothing chain Uniqlo and fast-food franchise BonChon Chicken.
CMT shares ended yesterday up half a cent at $1.84.
CRCT – BT
CapitaRetail China's DPU up 12% in Q1
CAPITARETAIL China Trust (CRCT) remains confident about its prospects in China, the "bright spot in a still uncertain global economy", and its ability to tap into China's robust consumption growth.
CRCT posted a 23.6 per cent increase in income available for distribution in Q1 to $16.6 million, which translated to a distribution per unit (DPU) of 2.41 cents for the first quarter ended March – a 12.1 per cent year-on-year increase.
This translates to an annualised DPU of 9.69 cents. Based on CRCT's closing unit price of $1.265 on April 16, the annualised distribution yield is 7.7 per cent.
Gross revenue for the quarter climbed 18.3 per cent year-on-year to RMB188.2 million, due to contributions from CapitaMall Minzhongleyuan, higher occupancy achieved in CapitaMall Qibao, higher revenues in CapitaMall Saihan after successful tenancy adjustment, and higher rental growth in CapitaMall Xizhimen and CapitaMall Wangjing. Net property income (NPI) for the quarter was RMB126.2 million, an 18.3 per cent year-on-year increase.
Converted to Sing dollars, gross revenue and NPI grew 22.7 per cent to $37.9 million and $25.4 million respectively, mainly due to a stronger RMB against the Singapore dollar.
Tony Tan, chief executive of CRCT manager CapitaRetail China Trust Management, said: "We are pleased that all our multi-tenanted malls continued their growth momentum and achieved double-digit growth. Our two largest malls, CapitaMall Xizhimen and CapitaMall Wangjing, saw NPI growth of 14.0 per cent and 12.5 per cent respectively.
"Across our portfolio, we registered strong rental reversion of 13.0 per cent, reflecting our retailers' confidence in our malls and China's retail industry overall."
CRCT said it has begun tenancy adjustments at CapitaMall Minzhongleyuan, and will soon commence asset enhancement works at the mall. The asset enhancement initiative (AEI) is expected to take place over the next two to three years and estimated capital expenditure required is RMB 74.0 million.
CRCT owns nine malls located in six of China's cities. As at end-March, CRCT's total asset size was approximately $1.5 billion.