Month: January 2013
StarHill Global – Kim Eng
Results In-Line; Investment Thesis Intact
4Q/FY12 earnings inline. SGREIT’s FY12 DPU beats street estimates of 4.30 SG-cts with an upbeat payout of 4.39 SG-cts. FY12 revenue at SGD186m (+3%) was 100% of ours and consensus estimate. 4QFY12 revenue at SGD47.4m (+2% QoQ, +3% YoY) was 26% of ours and consensus estimate. FY12 DPU at 4.39 SG-cts (+7%) was 101% of ours and 102% of consensus estimates. 4QFY12 DPU at 1.13 SG-cts (+2% QoQ, +12% YoY) was 26% of ours and consensus estimates. Gearing inched down to 30.3% from 31.2% last quarter, following revaluation gains and depreciation of JPY. Net financing costs for 4QFY12 averaged 3.16% (3Q: 3.13%) with an average term of debt of 1.7 years (3Q: 1.5 years).
Wisma Atria retail harvesting upside. Wisma’s AEI is completed in 2Q12 with all Orchard road fronting stores commencing business. It was officially relaunched on 6 Sep and enjoyed a +1.7% QoQ and +21.4% YoY increase in 4Q12 retail revenue on strong rental reversion, and almost full occupancy (99.5%). According to our estimates, average passing rent continues to scale from SGD35.04 psf/mth last quarter to SGD35.82 psf/mth.
Portfolio review. Singapore properties contributed 63% of 4Q12 and FY12 revenue. Wisma’s retail and office occupancy were at 99.5% and 98.7% from 100% and 97.7% last quarter respectively. Ngee Ann City retail maintained at full occupancy while Ngee Ann City office occupancy remains flat at 98%. Despite 100% occupancy, Renhe Spring Zongbei’s 4Q12 revenue was down 13% YoY, mainly due to lower revenue amidst increased competition and softening of retail market (esp. mid to high-end luxury segment).
Toshin rental review. With regards to the master lease in Ngee Ann City, three international licensed valuers have been appointed according to directions prescribed by the Court of Appeal. The valuers’ work on the rental valuation is expected to be finalised by 1Q13. Toshin constitutes 85.3% of NAC retail gross rent as at 31 Dec and is SGREIT’s largest tenant (18.8% of portfolio gross rent). 4Q12 average passing rent at NAC retail stays at depressed levels of SGD13.68 psf/mth from our estimates.
Investment thesis intact. SGREIT’s key assets are in the coveted Orchard Road area, where tight supply and the entry of new international retailers should give it greater bargaining power in terms of leasing its space. We continue to like SGREIT for the rental upside at Wisma Atria and income stability in Malaysia and Australia. We also incorporated the Plaza Arcade acquisition (Perth), which we expect to complete by 31 Mar 2013, with yield-on-cost of 7.8%-8.6% from FY13-FY18 into our forecast. At 5.5% FY13F yield and 413bps yield-spread, we reiterate BUY with a DDM-derived TP of SGD0.90.
PLife – DBSV
Stable earnings
• Declared 2.69 Scts DPU (+9% y-o-y) in 4Q12, taking FY12 DPU to 10.3 Scts
• Gearing remains healthy
• Raised 2013 CPI assumption to 4%
• Maintain HOLD, nudged up TP to S$2.19 after adjusting for higher CPI
Highlights
4Q12 DPU in line. Gross revenue grew 5% led by three properties in Japan acquired in Mar12, Gleneagles Medical Centre Kuala Lumpur (acquired in Aug12), as well as higher rents at its Singapore hospitals in Year 6 of its lease commencing 23 Aug12 (yield: CPI+1% = 6.31%). However, this was partly offset by a weaker Japanese Yen in in the quarter. Nevertheless, net property income margins inched up to 92.2% led by lower property repair costs and a weaker Yen.
Gearing remains healthy at 32.9%. This gives the REIT S$174m, S$323m and S$995m debt headroom before reaching 40%, 45% and 60% gearing, respectively. Weighted average term to maturity is now 2.4 years with only S$163m JPY loans (34% of total loans) due in 2014. Total cost of debt remains at 1.62%.
Our View
Acquisition yet to materialize. We believe management is continuing its efforts to source for acquisitions, and continue to expect this to be in markets such as Malaysia and Australia. Though this has taken slightly longer than expected, management could be taking a more cautious stance, in our view. We have not factored acquisitions into our assumptions given the uncertainty in timing.
Factoring in higher CPI. We expect PREIT’s hospital assets to continue to benefit from a higher inflation rate in Singapore. In line with DBS economists’ latest forecast, we raised our CPI assumption for 2013 to 4%, from 3.1% previously. Consequently, DPU is nudged up to 10.7Scts for FY13F and 11.1Scts for FY14F.
Recommendation
Maintain HOLD, TP: S$2.19. PREIT is trading at 1.5x P/BV and 4.7% FY13F yield, amongst the lowest in the SREIT universe. Our DCF-derived TP (WACC: 5.7%, t:2%) is raised.
ART – OCBC
Raises S$150m through private placement
- Acquisitions more likely
- Advanced distribution
- Maintain HOLD
Private placement
Ascott Residence Trust has raised gross proceeds of S$150m through a placement of 114.9m new units at an issue price of S$1.305 per new unit, representing a discount of ~4.6% on the adjusted VWAP of S$1.3685 per unit for trades done on the SGX-ST on 28 Jan. The placement will increase ART’s free float from 51% to 55%. ART received participation from existing and new institutional investors from Asia, the United States and Europe.
Use of proceeds
The proceeds will be used to fund potential future acquisitions, finance AEIs, repay existing debt and for general working capital. Assuming that the net proceeds of S$147.9m are used to repay existing debts, the private placement is expected to reduce ART’s aggregate leverage from 40.1% to 34.9%. As of 31 Dec 2012, S$167.8m of debt was due to mature in 2013 for ART. At the FY12 results briefing a few days ago, management stated that it is comfortable with gearing between 40-45%, hence even if the proceeds are used to pay off the debt that is maturing, we think the additional financial flexibility from the placement will likely be utilised over the longer run for yield-accretive acquisitions. That said, we will incorporate future acquisitions into our model if and when they are announced.
Advanced distribution
There will be an advanced distribution of between 0.59 cents and 0.63 cents per unit to existing unit-holders. The advanced distribution is taken from ART’s distributable income from 1 Jan 2013 to 5 Feb 2013, which is the day before the date on which new units will be issued. The next distribution will be for 6 Feb to 30 June 2013 and semi-annual distributions will resume thereafter.
Reduce FV to S$1.36
We maintain our HOLD rating but reduce our FV from S$1.37 to S$1.36 due to the dilutive effect of this placement.
FCOT – OCBC
EXPECT FURTHER DPU ACCRETION
- In-line 1QFY13 results
- Fundamentals strengthened
- Expects DPU uplift
Consistent 1QFY13 showing
Frasers Commercial Trust (FCOT) released its 1QFY13 results last Friday. NPI fell by 6.9% YoY to S$22.9m due mainly to the disposal of KeyPoint and three properties in Japan. However, higher contribution from additional 50% interest in Caroline Chisholm Centre and lower interest costs helped to offset the loss of income from the divestments. As a result, distributable income and DPU grew by 6.9% and 4.6% YoY to S$10.3m and 1.5832 S cents respectively. The results were congruent with our expectations, as NPI and DPU met 25.2% and 22.2% of our respective full-year projections.
Healthy portfolio performance
Australia properties surpassed Singapore properties as the biggest income driver in 1Q, contributing 53.7% to NPI (Singapore: 45.1%). Portfolio occupancy remained stable at 94.6% compared to 4QFY12 occupancy of 94.9%. ~95k sqft of space was contracted, reflecting healthy tenancy activities within the office space. For the rest of FY13, we note that 13.7% of its leases (by gross rental income) are due for renewal, with China Square Central (CSC) forming the bulk of lease expiry (8% of total income). As the average passing rent at CSC (S$6.20 psf pm) is lower than the spot market rents, we believe positive rental reversions may be achieved upon renewal.
Further improvements expected; maintain BUY
Management updated that the Precinct Master Plan initiatives and asset enhancement works for CSC office tower are on track for completion and are expected to rejuvenate the area and make CSC an even more attractive office accommodation. FCOT now boasts a healthy gearing of 29.2% and improved financing costs of 3.3% (3.5% in 4QFY12) following the partial prepayment and refinancing of its debts. Together with the successful 47.6% redemption of CPPUs on 2 Jan, we maintain our view that FCOT’s DPU will get further uplift going forward. We keep our forecasts unchanged but bump up our fair value to S$1.48 from S$1.31 on lower cost of equity of 7.0% (7.8% previously) as we factor in an anticipated increase in investor risk appetite and the current low interest rate environment. Maintain BUY.
PLife – Phillip
Poised to build on its past successes
Company Overview
PLife REIT is one of the largest listed healthcare REITs in Asia by asset size. Its mandate is to invest in income producing real estate and/or healthcare-related assets primarily used for healthcare and/or healthcare-related purposes in Singapore and Asia.
- 4Q12 (FY12) revenue S$24.0mn (S$94.1mn), NPI S$22.1mn (S$86.4mn), distributable income S$16.3mn (S$62.4mn)
- DPU for 4Q12 (FY12) at 2.69 cents (10.31 cents)
- Maintain Accumulate with revised target price of $2.450
What is the news?
PLife REIT turned in a strong set of results for 2012. DPU grew 7.4% from 9.60 cents in FY11 to 10.31 cents in FY12. The increase was largely due to the purchase of three Japan properties, higher rent collected from Singapore properties and cost-savings on financing. The portfolio asset was revalued at S$1.4bn and recognized revaluation gains of 3.1% compared to last year.
How do we view this?
FY12 DPU exceeded our estimates by 3.8%, principally due to lower-than-expected finance and trust expenses. It is encouraging to see FY12 DPU continued to grow at 7.4% after five years of portfolio expansion since the IPO in 2007. Marching towards 2013, the trust is poised to repeat and build on its past successes on account of (i) potential rental increase for Japan properties under the “Refurbishment AEI” concept (ii) CPI+1% rental revision for Singapore properties owing to elevated inflation rate in Singapore, and (iii) enlarged debt headroom of S$173.5mn to drive inorganic growth.
Investment Actions?
We fine-tuned our assumptions and rolled over our estimates to FY13 and included FY17 to our model. With the adjustments, our price target is raised from S$2.33 to S$2.45, indicating a total return of 11.1% for FY13. As our model does not take into account of potential acquisitions and asset enhancement, further DPU upsides could be expected. Given our conservative projections, we maintain our Accumulate call in view of potential DPU growth.