Month: October 2012
HPH-Trust – DMG
Strong 3Q12 throughput offset by weak ASP
Results were in-line, with 9M12 net profit accounting for 72% of our FY12F forecast. Strong throughput growth in 3Q12 was primarily driven by transshipment volumes, leading to lower ASP. HPHT guided down FY12 ASP growth from 1-2% to flat and narrowed throughput growth from 5-7% to 5-6%. They kept DPU guidance of 51.24 HK¢. With capex spending likely to fall ~HK$500m below its projection, the excess cash will be used to meet the guided dividend payout but this will come at the expense of future DPU. We raise FY12F DPU to be in-line with guidance but lower FY13 payout. Maintain Neutral with a revised DCF-derived TP of US$0.79 (from US$0.78).
Transshipment drove volume growth; Oct growth easing. HPHT achieved strong 3Q12 throughput growth of +5.6% YoY in HIT and +9.7% YoY in Yantian. A big part of the growth in Yantian came from transshipment cargoes where the mix from transshipment cargoes rose from 4% to 9%. HPHT also gained from push forward of cargoes to Sept due to the National Day Week in early Oct and bad weather at other ports. There are signs that volumes are easing in early Oct.
Higher costs eating into margins. 3Q12 EBITDA margin of 56.9% was lower compared with 61.7% in 3Q11. 3Q12 revenue growth was +2.6% YoY but staff cost and COGS grew at a faster pace of +7% YoY. Other operating income was significant lower due to a ~HK$78m swing in forex (see details in Figure 1).
Cash from deferred capex to meet FY12 DPU; lower future payout. In 9M12, HPHT spent HK$598m for capex. With full-year capex likely to be around HK$700m, we expect the HK$500m cash from lower capex spending to be paid out as dividend in FY12. However, the need for higher capex spending in FY13- 14 to meet volume growth will reduce future payout.
Revisions: (1) We revised FY12-13F net profit by ±1% and introduce our FY14F estimate. (2) We raised FY12F DPU to 51.24 HK¢ as we expect the HPHT to meet its IPO projection but lower FY13F DPU by 5% to 41.84 HK¢ (5.38 US¢).
LMIR – OCBC
PROPOSAL FOR TWO MORE ACQUISITIONS
- Acquiring two more properties
- Multiple acquisitions proposed
- Raise FV to S$0.47
Two more properties
LMIRT has announced the proposed acquisitions of two retail properties, Pejaten Village, located in Jakarta, and Binjai Supermall, located in Binjai, North Sumatra. As at 30 Jun, the occupancy rates are 95.2% and 91.4% respectively. The purchase consideration for Pejaten Village is IDR748.0b (~S$96.0m), a 12.6% discount to the average of its independent valuations. The purchase consideration for Binjai Supermall is IDR237.5b (~S$30.5m), 5.2% less than the average of its independent valuations. Binjai Supermall is the only mall in Binjai City, which serves as a transit point between Medan, the largest city in Sumatra, and Aceh, where both have high population densities. These two transactions would be interested party transactions.
Slew of acquisitions
The two proposed acquisitions come shortly after the announcement of the proposed acquisitions of four properties – Palembang Square, Palembang Square Extension, Tamini Square and Kramat Jati Indah Plaza (KJI) – on 10 Oct. The completion of the acquisitions of Palembang Square Extension and KJI took place on 15 Oct, half a month earlier than what we expected. We continue to expect that the acquisition of Palembang Square and Tamini Square will be completed on 1 Nov 2012. Including the aggregate purchase consideration of ~S$180.7m and the acquisition fee payable to the manager, as well as professional fees and other expenses, the total acquisition cost for these four properties is expected to be S$188.1m.
Adjusting our model
Apart from financing the acquisitions from the proceeds raised from the issuance of S$250m worth of notes in early Jul, LMIRT will need to raise additional funds. We assume ~S$60m in debt fundraising on 1 Jan 2013 and assume that the proposed acquisitions of Pejaten Village and Binjai Supermall will be completed on the same day. We had previously assumed that any new acquisitions would be completed on 1 Apr 2013.
Raise FV, maintain HOLD
Adjusting our model, we raise our fair value from S$0.45 to S$0.47, and maintain our HOLD rating on LMIRT.
CRCT – DBSV
Positive pricing
• In line with expectations
• Strong rental reversions supported by healthy retail sale
• Upside catalysts to come from possible acquisitions
• Downgrade to HOLD on valuation grounds, TP raised to S$1.67
In-line results. CRCT’s distribution per unit (DPU) for 3Q came in at 2.42 cents representing an increase of 14.2% y-oy. 9M DPU makes up 77% of our forecast. While the growth was supported by 14.2% and 16.1% increase in gross revenue and NPI respectively, the group also benefited from a strong Rmb, which has strengthened by about 10% against the S$ in the reviewed quarter. Stripping that off, gross revenue and NPI would have increased by about 8-10%. Most malls continue to record strong NPI growth on a y-o-y basis offsetting the lower income at Mingzhongleyuan.
Positive rental reversions drive mall’s performance Occupancy continued to hold steady at c.97% except for MZLY which is undergoing AEI works and CapitaMall Wuhu which is undergoing tenancy adjustments. Rental reversion was also up by 18% vs 15% last quarter, largely driven by Wangjing (+33.7%), MZLY (+22.6%) and Xizhimen (+19.4%). The healthy reversion was supported by a 15.6% rise in tenant sales outperforming China’s overall Sep retail sales number at +14.2%. With 9.7% and 27.1% of the revenue up for renewal in 4Q12 and FY13, we believe this REIT should continue to see strong rental reversions.
Downgrade to HOLD on valuation grounds. We raise our TP by 6.3% and FY12/13 DPU by 4.4%-6.6% to account for the better-than expected rent. While FY13/14 yield remains attractive at 6.0-6.5%, we believe much of the positives have been priced in with the REIT trading at 1.27x P/BV vs the Asian retail average at 1.15x. With limited upside to our new TP, we downgrade the stock to HOLD largely on valuation grounds. Upside risk for share price performance of the stock could likely depend on news flow about potential acquisition of new properties in the pipeline.
FirstREIT – OCBC
ANOTHER QUARTER OF STEADY EXECUTION
- 3Q12 DPU of 1.68 S cents
- Maintain core focus on Indonesia
- Positives likely priced in
3Q12 results were within expectations
First REIT (FREIT) reported 3Q12 results which were in line with our expectations. Gross revenue increased 3.7% YoY to S$14.2m, driven by a full quarter of contribution from its Sarang Hospital (acquired in Aug 2011) and higher rental income from its other assets. Distributable amount to unitholders and DPU slipped 12.1% and 12.5%YoY to S$10.6m and 1.68 S cents, respectively. This is unsurprising given the absence of a special distribution of S$2.2m (S$0.34 per unit) in 3Q11 which arose from a gain from the sale of the Adam Road property (four equal tranches paid from 3Q11 to 2Q12). For 9M12, gross revenue climbed 5.4% to S$42.2m and formed 71.4% of our full-year forecast which includes our assumptions on the contribution from its proposed new acquisitions. Distributable amount to unitholders rose 9.6% to S$34.9m, or 74.8% of our FY12 estimate.
Abundant opportunities in Indonesia’s healthcare market
FREIT continues to see ample growth opportunities in Indonesia’s underserved healthcare market. Demand for higher quality private healthcare services would likely gain traction moving forward, underpinned by a growing population, rising affluence and urbanization rate. Hence we expect Indonesia to remain as FREIT’s core focus, especially since it has a right-of-first-refusal on its sponsor Lippo Karawaci’s (Lippo) Indonesian healthcare assets.
Maintain our HOLD rating
FREIT has lodged its Circular regarding its recent proposal to acquire two Indonesian properties from Lippo. An EGM will be held on 9 Nov to obtain unitholders’ approval. While we like FREIT for its visible and defensive income streams which would provide stability to unitholders, we believe that this has been factored in its share price, as reflected by its FY13F P/B ratio of 1.3x. Although this represents a 7.2% discount to its closest comparable peer Parkway Life REIT (1.4x), it is still a 20.8% premium to the S-REIT universe average of 1.1x. Maintain HOLD with an unchanged fair value estimate of S$0.98.
FCT – DBSV
Making waves again
• A set of in-line results
• Steady performance supported by healthy rental reversion and acquisitions catalyst in the pipeline
• Maintain BUY at a higher TP of S$2.04
Highlights
Meeting the mark again. FCT’s 4Q12 topline and NPI grew by about 14% and 13% respectively as the REIT continued to reap the benefits of rental uplift at Causeway Point, post AEI works, and the additional contribution from Bedok Point that was acquired in August 2011. Rental reversion for the quarter was 8.2% supported by close to 100% occupancy (excluding Causeway Point which is undergoing AEI works). Consequently DPU came at 2.71 ct, putting the full-year DPU at 10.01 cts. This was 20.3% y-o-y and 5% higher than our FY12 forecast but is in line with street estimates. The outperformance was largely coming due to the better performance for Yew Tee Point and Anchor Point. FCT also took in a revaluation gain of 100.7 m translating to a 8.5% increase in NAV to S$1.53. The revaluation gain was largely driven by Causeway Point, post AEI works and the improved earning power of Northpoint with a 15 bbp and 40 bbp cap rate seen in Northpoint, Yew Tee Point and Anchorpoint..
Our View
Steady rental positive reversion anticipated. Causeway Point AEI is on track to open at the end of the year and occupancy is expected to improve sequentially going forward. Meanwhile, c.20% of the portfolio’s NLA will be up for renewal in FY13 with more than half coming from Northpoint and Causeway. Management says that while there is room to further tweak the tenant mix or AEI works at some of the malls, they will be on a smaller-scale basis. Hence, we believe operations should remain steady, while the reversion coming from causeway point should continue to reap the benefits of the AEI works. Occupancy cost is at 15-16%, a tad higher than a year ago (14-15%).
Recommendation
Maintain BUY at a higher TP of S$2.04. Stock remains attractive for its defensive earnings profile. We have raised our DCF-backed TP by 5.6% and FY13/14 DPU by 3-5% to account for the better than expected rental achieved at Anchorpoint and Yew Tee Point, higher FY13 occupancy assumption of Causeway Point (estimated at 98% vs 95% previously) and the adjustment for the lease expiry profile of various malls. Further upside catalysts hinges on the acquisition of Changi City Point, which could be executed from CY2H13. Our new TP offers investors a total return of >10%.