Month: July 2012
StarHill Global – DBSV
Keep on shopping
• 2Q12 results in line with expectations: 1H DPU forms 51% of our forecast
• Improving office occupancy and Wisma Atria’s AEI to drive earnings
• Maintain BUY at a higher S$0.77 TP
Highlights
2Q12 DPU of 1.08 Scts in line. Gross revenues and net property income came in at c.5.0% higher at S$46.4m and S$37.1m respectively. The stronger performance was largely attributed to Wisma Atria post AEI, which has also locked in a higher ROI of 12.8% vs its initial target of 8%. Assets in Japan and China have also seen better performances due to the strengthening of their local currencies. As a result, distributable income (net CPPU holders) had come in at S$21.0m, which translates to a DPU of 1.08 cts (+3.8%yo-y, +1.0% q-o-q). On a sequential basis, its performance had remained relatively stable, despite a seasonally-weak quarter.
Our View
More to come for Wisma Atria AEI. Going forward, the earnings are still likely to be SG driven. Post AEI, Wisma Atria occupancy has strengthened from 95% to 99.5%, while committed leases in the last 12 months have risen by 33% on a blended basis. That should continue to filter down to 2H earnings. Meanwhile, the outdoor area with the upgraded façade has also created opportunities for hosting promotional events, which in turn would help to drive footfall and revenues. Therefore, footfall and retail sales which are still 9% and 22% lower respectively y-o-y, are expected to improve sequentially.
Strong SG office performance, Chengdu bottoming out. Its office portfolio has also seen a strong uptick from 95% a quarter ago to 98.4%. Committed leases in the last six months were also 19% higher, with signing rents at c.S$9.50 vs FY13 expiring rents of c.S$8.50. While the trust will see close to 40% of the office leases in term of revenues expiring next year, we think its differentiated tenant mix from the CBD and high occupancy should help mitigate leasing risks. Meanwhile, Chengdu property, which has seen a weaker performance due to tenant renovations and competition from newly-opened malls, should bottom out this quarter upon the opening of a major tenant – Zegna in 3Q12.
Proactive capital management. The reit has already started to look at various funding sources for its S$551m loan for refinancing in FY13 and is likely to refinance its S$81m Aussie loan this year. The remaining loan will likely be financed by a mixture of MTN and bank loans, with staggered maturities for diversifying its financing sources and for extending debt maturity.
Recommendation
BUY call maintained, TP raised to S$0.77. FY12/13 yields of 6.2% and 6.5%, backed by a visible organic growth outlook remain attractive. Gearing at 30.5% also means that there is ample room for acquisitions growth. Our revised TP offers a total return of 16%.
HPH Trust – DMG
DPU in-line; near-term volumes could be weak
Results in-line; low capex in 1H12 due to uncertain outlook. HPHT’s 1H12 DPU of HK24.05¢ accounted for 51% of our estimate and 47% of the guidance in its IPO Prospectus (HK51.24¢). 1H12 throughput volumes grew 5% YoY, in-line with our estimate and at the lower end of management’s guidance of 5-7%. Key takeaways from the 2Q12 results conference call: (1) outlook is uncertain due to weak exports to Europe and slow recovery in the US; (2) Management will not be aggressive in spending development capex. HPHT spent HK$370m in 1H12 vs. projection of HK$802m. (3) Management maintained throughput growth guidance of 5-7% in FY12 but if the current situation does not improve, growth will likely hit the lower range. Maintain Neutral with a DCF-derived TP of US$0.78. The stock is trading at FY12-13F yield of 7.8% and 7.3% respectively.
Throughput growth in-line; HIT saw strong growth from transshipment. 2Q12 revenue rose +6.1% YoY, driven by higher overall throughput (+5% YoY) and ASP (1.0-1.5%). HIT achieved strong volume growth in 2Q12 of +8.3% YoY, outpacing the flat growth for all Kwai Tsing terminals, but the growth was mainly driven by higher transshipment movements. HIT’s YTD June volume grew +8.9% YoY. Yantian’s volume rose +4.0% YoY in 2Q12 and +1.9% YoY YTD June.
Margins fell as ports handled more transshipment cargoes. 2Q12 ASP at HIT was weaker (~0.5%) while ASP at Yantian saw a positive growth of ~2%. Overall EBITDA margin declined to 57% (2Q11: 60%) due to higher mix of transshipment cargoes at HIT. Cost of services per unit TEU was up 1-2%, in-line with CPI.
Weak near-term outlook for container volumes. Management painted a soft outlook due to the Euro-zone debt crisis and slow economic recovery in the US. Throughput numbers already showed weakness in June: COSCO-HIT -1.9% YoY, Kwai Tsing terminals -1.7% YoY and Yantian +1.1% YoY. We maintain our FY12F volume growth of +6% YoY for HIT and +3% YoY for Yantian.
FCOT – DMG
A counter with much room for growth
We initiate coverage on FCOT with a BUY rating. Based on our DDM model, by assuming a terminal growth rate of 2.0% and a COE of 10.3% (with a risk-free rate of 1.5%, 0.8x beta and 6% equity risk premium), we arrive at our target price of S$1.23. We like FCOT due to (1) potential divestment of KeyPoint will allow the trust to par down its gearing with a possibility of enhancing unitholders' returns via share buy backs/redemption of CPPU, (2) growth in DPU from the acquisition of the additional 50% stake in Caroline Chisholm Centre, (3) the JV to turn China Square Central into part of China Place will benefit both the trust and unitholders with long term growth potential.
Potential upside from the divestment of KeyPoint. Apart from being able to reinvest the capital into higher yielding properties and strengthening the asset portfolio, we believe the divestment of KeyPoint could significantly lower the gearing of the trust from its current 39.5% by c.14ppt (assuming 100% of proceeds are used to par down gearing). Alternatively, if part of the Series A Convertible Perpetual Preferred Unit (CPPU), which represents a distribution yield of 5.5%, based on the issue price of S$1.00 per CPPU, is redeemed by using the proceeds from this divestment, the trust could possibly save 100bps in terms of the interest being paid, thus directly benefitting the unitholders.
FCOT posted a strong 3QFY12 results. FCOT reported 3QFY12 DPU of 1.70S¢ (+23.2% YoY), equivalent to 25.1% of our FY12 DPU estimate. Revenue for this period grew to S$35.7m (+17.0% YoY) while net property income rose by 7.1% YoY mainly due to an increase in contribution from the additional 50% stakes in Caroline Chisholm Centre (+ 76.7%) and positive rental reversion in China Square Central (+11.0%). In the subsequent quarters, we expect FCOT to continue to register strong numbers on the back of 1) contributions from Caroline Chisholm Centre, 2) redeem a portion of CPPU using the proceeds from the divestment of KeyPoint, 3) lower interest payments and 4) positive rental reversion from China Square Central.
DPU growth as a result of both acquisitions and positive rental reversion. We forecast FCOT's DPU to come in at 6.76S¢ (+17.5% YoY) in 2012 and 7.68S¢ (+13.6% YoY) in 2013. Given FCOT's strong potential together with the recent drop in Singapore government 10 year bond yield to 1.33%, we initiate coverage on FCOT with a DDM based (COE: 10.3%, terminal growth: 2.0%) TP of S$1.23. Our TP represents a spread from 10-year government bond of 4.8% and a potential upside of 14.4%.
A-HTrust – Phillip
Another hospitality play in action
Company Overview
Ascendas Hospitality Trust is stapled group comprising A-HREIT and A-HBT. Its mandate is to invest in income-producing hospitality real estate and real estate-related assets in Asia-Pacific region, including the operation and management of the real estate assets.
• A-HTrust's initial portfolio consists of 10 quality hotels with valuation of c.S$1,057mn.
• At the IPO price of S$0.88, A-HTrust is trading at 8.6% above its book value compared to CDL HT at 29.7% of NAV premium.
• Given the strong sponsor and strategic collaboration with Accor, we opine the stock is fairly value with some potential upsides for the attractive yield of 7.9%.
What is the news?
A-HTrust is scheduled to list on 27 July 2012, 2pm. Approximately S$581.3mn will be raised from the issuance including the over-allotment option. Of which, 86% is uitilised to partially fund the purchase of the properties. Its initial portfolio consists of 10 quality hotels spanning across Australia, China and Japan with 3,482 rooms and a property valuation of c.S$1,057mn. Pre-allotment, the sponsor will retain 35.0% stake in the trust.
How do we view this?
The listing of A-HTrust would bring the number of REITs in SGX to 24 REITs. Certainly, A-HTrust will provide another option for the investment community who believe in the tourism growth story in Australia. Australia hotels in the four cities where A-HTrust has a foothold are well-positioned to rake in higher RevPAR attributable to the limited supply of hotel rooms and proliferation of low-cost carriers to these cities.
The dividend yield of 7.9% for FY13 is compelling to investors who prefer dividend plays especially in the period of low interest rate and high inflation environment given the erratic market climate. Since A-HTrust is a stapled security between REIT and business trust, investors would be assured with 90% payout ratio on the distributable incomes. However, please bear in mind that the distributions may not be relatively stable as the earnings are highly dependent on the hotel performance which is cyclical with the market conditions.
Investment Actions?
At the IPO price of S$0.88, the stock is trading at 8.6% above its book value compared to CDL HT at 29.7% NAV of premium. Given the strong sponsor and strategic collaboration with Accor, we opine the stock is fairly value with some potential upsides for the attractive yield
CRCT – OCBC
BETTER-THAN-EXPECTED 2Q12
•Slightly above expectations
•Stronger rental reversions
•High NPI growth at CapitaMall Saihan
Slightly above expectations
CRCT reported 2Q12 income available for distribution of S$16.65m, up 23.5% YoY. 2Q12 DPU is 2.41 S-cents per share. The results were slightly above our expectations; YTD DPU of 4.82 S-cents made up 52% of our initial full-year forecast. 2Q12 revenue rose 18.2% YoY to RMB190.2m and net property income climbed 15.0% to RMB124.4m. CapitaMall. The increase was chiefly due to the contribution from CapitaMall Minzhongleyuan which was acquired on 30 June 2011, as well as higher rental growth at its multi-tenanted malls. Shopper traffic and tenant sales at CRCT’s multi-tenanted malls grew 26.4% and 13.1% respectively.
Good rental reversions
Solid rental reversions of 15.2% YoY for the portfolio were achieved (versus 13.0% for 1Q12). CapitaMall Xizhimen in Beijing saw the highest rental reversion of 28.9% on the back of a 52.1% YoY increase in shopper traffic to approximately 85k-90k people per day, following the opening of a basement connection to the subway. Management said that tenant sales at Xizhimen grew at a high single digit percentage rate, and believes that there is further potential to fine-tune the tenant mix at the mall. Management will be bringing in international fast fashion brands such as UNIQLO and Urban Renewal to Xizhimen. Our understanding is that the recent floods in Beijing will not have a significant impact on CRCT’s malls there.
Transformation of CapitaMall Saihan
CapitaMall Saihan in Huhot, Inner Mongolia, registered the highest NPI growth of 38.2%. Since the completion of AEI at Saihan in 2010, which marked its transformation from a master-leased mall to a multitenanted mall, Saihan has experienced strong growth, with occupancy at 99.7% as of Jun 2012.
Maintain BUY
We maintain our BUY rating on CRCT and raise our fair value from S$1.44 to S$1.50. CRCT is offering a good FY12F dividend yield of 6.9%.