Month: May 2012
HPH Trust – DBSV
Volume growth should pick up
• Results in line; Yantian Port volumes disappointing in 1Q12, but offset by better than expected HIT volumes
• FY12F dividend guidance stays at 6.6UScts; cash flows to be supported by deferring capex plans if needed
• Maintain BUY for yield in excess of 8.5%
• Catalysts expected from better y-o-y throughput data
Highlights
HIT gains market share in HK port. Overall volume growth for HPH Trust’s portfolio came in at about 5% y-o-y, largely thanks to 9.4% throughput growth at HIT, driven by higher transhipment and Intra-Asia volumes. Container throughput at Yantian Port was down 0.4% y-o-y, as export volumes to US and especially Europe remained weak. ASP grew by about 2-3% at Yantian Port, and declined slightly at HIT in 1Q12, largely due to the change in volume mix towards transhipment cargoes.
Cash generation not far from projections. Though revenues fell 6% short of management projections, savings at the operating level, lower interest expenses and taxes, and the larger contribution from 100%-owned HIT meant that net profits attributable to unitholders were largely in line with estimates. This has been the trend in previous quarters as well and the ~7% y-o-y growth in revenues and likely similar growth in EBITDA implies that the Trust is on track to deliver on its DPU guidance for FY12.
Our View
Expect better growth numbers hereon. We believe a somewhat more sustainable y-o-y recovery in volumes could be noticeable from April 2012 onwards, as volumes had started to flatten out during that period in 2011. Management indicated that volumes have started to pick up in April and May, and export bookings to the US are looking better, though the European market still remains weak. We estimate that volumes at HIT and Yantian Ports should show modest low, single-digit growth of 2-4% this year, though management still remains optimistic about the possibility of 5-7% growth.
Recommendation
DPUs secure, maintain BUY with TP of US$0.85. We expect the Trust to meet its DPU guidance of 6.6UScts for FY12, as it can divert some cash reserves earmarked for growth capex if volume growth is not strong enough in the near term. In 1Q12, the capex outlay was indeed 51% lower than projected.
Separately, HPH Trust announced the succession plan for its CEO, Ms. Hai Chi Yuet, who will be retiring in Nov-2012. Mr. Gerry Lui Fai Yim has been named the CEO designate. Mr. Yim had served with the HPH Group between 2003-09 and last served as the CEO of HK-listed Hysan Development Company. We do not expect any change in strategy or DPU policy.
CLT – DBSV
Sound earnings, high yields
• Proposed acquisition of Pandan Logistics Hub for S$66m from sponsor CWT
• Widely anticipated and earnings accretive deal; gearing to head towards 31%
• Attractive 8.3-8.5% yields; Maintain BUY and S$1.11 TP
Tapping sponsor’s pipeline. Cache Logistics Trust (Cache) is proposing to acquire Pandan Logistics Hub from sponsor CWT for a total consideration of S$66.0m (all in cost of S$69.3m, inclusive of a 1% acquisition and professional fees). Pandan Logistics Hub is a 5-storey ramp up warehouse located at 49 Pandan Road, built by the sponsor, CWT Limited. The warehouse is relatively sizeable, with total GFA of 329,109 sf and typical floor plate sizes of 58,000 sf. Together with accessible mezzanine office space, we believe the building caters well to single-user end tenants to base their operations. The property has just recently achieved CSC status (Apr 12, TOP in Oct 11).
Master lease arrangement with CWT. Upon completion of the purchase, CWT will leaseback the whole property on a triple net basis for 3 years. The first year rent is negotiated at S$5.2m (est. at S$1.32 psf pm, initial yield of 7.6%), with annual escalations of 2.5% which we believe fair given its master lease structure. Upon the expiry of the master lease after 3 years, CWT has signed an agreement to extend leases for the first and fifth storeys for an additional 2-4 years, bringing the total weighted average lease for this property to 4.3 years. This will then allow Cache to engage the end tenants occupying the other parts of the warehouse and actively manage the property to optimize yields. Given the size of the acquisition and it is an interested party transaction, the manager will be calling for an EGM to seek unitholders approval.
Earnings accretive. The purchase consideration implies a net property income yield of 7.6%, which is higher than its current implied yield of close to 7.0%, meaning that that the acquisition is expected to be accretive to the trust. The manager intends to fund the acquisition fully by debt, at an estimated interest cost of c4.0% (in line with its current debt facilities). Gearing is projected to head towards 31% post completion of this acquisition (assuming 100% debt).
BUY rating and S$1.11 TP maintained, no change to forecast. A widely anticipated and timely move, in our view , as we are looking for the manager to execute on acquisitions in order to maintain Cache’s upward distribution growth momentum. Minimal impact on our numbers as we have factored in S$60m acquisitions in our forward estimates. Maintain BUY and S$1.11 TP. Stock continues to offer an attractive FY12-FY13F distribution yields 8.3%-8.5%.
PCRT – BT
Perennial China Retail Trust's DPU at S$0.094
Perennial China Retail Trust (PCRT) announced on Wednesday its Amount Available for Distribution to Unitholders for the period ended March 31 2012 to be at S$10.6 million, in line with its forecast.
The available Distribution per Unit (DPU) for the period ended 31 March 2012 is at 0.94 Singapore cents while its annualised DPU is at 3.81 cents.
It will be paid together with the DPU for the period from April 1 2012 to June 30 2012 on or before September 2012.
As at 8 May 2012, the Distribution Yield is valued at 7.33 per cent, based on closing price of S$0.520 per unit.
FCOT – BT
S&P affirms FCOT's 'BB' long-term corporate credit rating, revises outlook to positive
Standard & Poor's on Wednesday affirmed Frasers Commercial Trust (FCOT)'s 'BB' long-term corporate credit rating and revised the outlook from stable to positive.
S&P notes that the "positive outlook reflects its expectation that FCOT's financial risk profile could strengthen in the next 12 to 18 months, assuming the trust uses the proceeds from the proposed sale of KeyPoint to pay down its debt."
FCOT's manager, Frasers Centrepoint Asset Management (Commercial) Ltd, said it will be reviewing the possible uses of the sale proceeds of KeyPoint.
HPH Trust – DMG
Margins squeezed; downgrade to Neutral
Results s lightly below expectations. HPH Trust (HPHT) reported 1Q12 EPU of 5.31HK¢, 20% of our forecast and 22% of consensus estimates, as margins were squeezed on higher costs. Following the results, we lower FY12/13F EPU by 3% (on higher costs) but maintain DPU estimates on lower capex. We cut HPHT to Neutral with a lower DCF-derived TP of US$0.78, which reflects our revised estimates and 23.4HK¢ distribution in Mar 2012. With growth concerns emerging in Europe and inflationary pressures, we see downside risk to management’s forecasts. We expect FY12 distribution to come in 8% below HPHT’s IPO target of 51.24HK¢. Based on our DPU estimate, the stock is yielding 8% for FY12.
HIT showed strong throughput growth; Yantian slightly down. 1Q12 revenue was 6% below IPO projection due to weaker-than-expected volume growth from Yantian (-0.4% YoY) and lower ASP from HIT. HIT managed to record strong throughput growth (+9.4% YoY) driven by higher transshipment cargoes. HPHT’s market share is growing: throughput at HIT, Yantian and COSCO-HIT accounted for 53.1% of Kwai Tsing and Shenzhen volume vs. 51.8% in FY11. We maintain our 6% and 3% volume growth for HIT and Yantian respectively.
But margins lower due to higher costs. EBITDA margin came in lower at 56% compared to 59-61% in the past three quarters, as costs per TEU are rising due to the RMB appreciation and inflationary pressures. Staff cost rose +17% QoQ while we estimate that cost of services rendered per TEU is up 4-5%.
Positive demand outlook for April 2012 and May 2012. Management painted a more robust demand outlook for April and May, with volume growth likely to hit the 5-7% range. In our view, the stronger volume has been priced in given the weaker 1Q12 demand in Yantian. Europe demand remains uncertain but the shortfall will be compensated with higher international transshipment. Management may defer some of the capex planned for 2014/15 berths.