Month: January 2013
FCT – OCBC
STILL BENEFITTING FROM AEI
- In-line 1QFY13 results
- Occupancy to improve further
- Balance sheet remains robust
Continued growth in 1QFY13
Frasers Centrepoint Trust (FCT) reported 1QFY13 NPI of S$27.1m and distributable income of S$21.8m, up 9.1% and 10.8% YoY respectively. Of the available distributable income, we note that S$2.1m will be retained this quarter, as opposed to S$1.6m in 1QFY12. As such, DPU for the quarter came in at 2.40 S cents, representing a YoY growth of 9.1%. This is largely in line with expectations, given that the quarterly DPU met 22% of both our and consensus FY13F DPU estimates.
Operating indicators largely positive
All the five malls within FCT’s portfolio registered healthy growth in income during the quarter. However, Causeway Point (CWP) and Northpoint remained the key drivers, generating 12.3% and 6.7% YoY increase in NPI. Operationally, we note the overall portfolio occupancy improved from 93.6% in prior quarter to 97.2%. This was boosted by an 8.7ppt QoQ improvement in occupancy at CWP to 96.4% following the completion of its AEI, which cushioned the temporary weakness at Bedok Point amid a reconfiguration of its layout. Overall, a total of 62,341 sqft of NLA (7.1% of portfolio NLA) was renewed at an average positive rental reversion of 5.2% in 1Q (4QFY12: 8.9%). Management also revealed that several new tenants are still in the process of fitting out at CWP and expects the occupancy to trend up further when more tenants commence their operations from Jan onwards.
Maintain BUY
On the acquisition front, we understand that Changi City Point remains a feasible pipeline asset, but the regulatory procedures for the strata division into its retail, business park and hospitality components is a lengthy process. FCT currently boasts a strong aggregate leverage of circa 30.9% and extended debt maturity of 3.6 years following the recent issue of S$70m MTN. This is likely to put it in good stead to take any attractive acquisition opportunities as they arise. Maintain BUY with an unchanged fair value of S$2.13 on FCT.
CLT – DBSV
Going on the offensive
- Acquisitions the key driver in 2013
- Portfolio to remain stable, with minimal renewals over the next 2 years
- Upgrade to BUY, TP S$1.40 based on DCF
Acquisitions the key driver in 2013. Armed with a Pan Asian mandate, the management team continues to see acquisition opportunities in the region but with a near term focus in deepening its Singapore exposure. Targeting yields of 7.0-7.5%, which is higher than current implied yield of 6.0%, acquisitions are likely to mean further accretion to distributions Given the strong visibility of available acquisitions; we have now doubled our acquisition forecasts to S$200m (vs S$100m previously) @ 7.25% initial yield. These are projected to be completed over 2013-14. Gearing level of 31% is comfortable and management is open to obtaining a credit rating (more gearing flexibility) if a large acquisition opportunity arises.
Portfolio with minimal earnings risks. 4Q12 results was in line with estimates, with a higher DPU of 2.139 Scts (+2.5%) owing due to an expanded portfolio. Looking ahead, Cache has minimal lease expiries (8% of income) over 2013-2014, which will shield the trust from any releasing risks given the large completing supply in the warehouse space over the same period. Moreover, given that underlying end-users are largely 3PLs, demand for its warehouse should remain firm.
Upgrade to BUY, TPS$1.40. Cache offers one of the strongest earnings visibility over the coming 2 years with potential upside if management undertakes a more aggressive acquisition stance against our forecasted S$200m. We estimate that an additional S$25m in acquisitions can raise our DPU estimates and TP further by c0.4% and 1 Sct respectively.
a-iTrust – DBSV
In a stronger position to acquire
- 10% rise in S$-INR rate erodes true earnings potential
- Low gearing of 21% opens up debt-funded acquisition firepower
- HOLD Call, TP S$0.81 based on DDM
Highlights
Robust underlying growth. Ascendas India Trust’s (a-itrust) reported revenue and net property income (NPI) of S$31.7m (+4% yo-y) and S$18.6m (+7%y-o-y) respectively. In INR terms, underlying operational performance remained robust, with topline and NPI growing by 14% and 18% y-o-y to INR 1.40bn abd INR 0.8bn respectively. This was due to progressive recognition of rental income from Zenith, Park Square ad Voyager which continues to ramp-up operationally and the acquisition of aVance. Organically, aitrust’s portfolio continues to show stability with occupancy remaining a healthy 96% supported by strong tenant retention rates of c79%, while renewals remained stable. Distributable income was marginally higher y-o-y to S$12.26m. DPU (after 10% retention) amounted to 1.21 Scts. Whilst 19% lower yoy, it is stable on a sequential basis even after accounting for the enlarged share capital post the recent placement exercise.
Our View
Low gearing of 21% opens opportunities for growth. a-itrust has utilized part of the proceeds from the placement exercise to repay its short term MTNs and loans which resulted in its gearing level heading down to 21%. We believe that the manager continues to look for growth opportunities to gear the trust back towards the 30-35% comfort level in the medium term, implying a headroom of up to S$200m. Avenues are from a myriad of acquisition possibilities, from (i) previously alluded potential acquisitions from 3rd party vendors cS$100m or (ii) its sponsor for asset injection opportunities.
Construction of Aviator on track. Construction of Aviator, a 601-630 sqft development in ITPB’s SEZ is on track with pre-commitment of space at 26% (flat q-o-q). The property is expected to complete by end of 2013 (FY3Q14) and is expected to underpin the longer term earnings growth potential for a-itrust.
Recommendation
HOLD, TP S$0.81 maintained. Our HOLD call is premised on limited upside potential but could be hiked depending on acquisitions executed by the manager that we have not factored in at this moment. Stock offers a forward yield of 6.3% which we see as fair.
MIT – CIMB
Decent 3Q performance
MINT bucked trends of slower economic growth and delivered steady rental reversions and occupancy gains in 3Q. However, we think positives are priced in, particularly with a pure-local mandate and lack of pipeline assets likely to hinder meaningful acquisition growth.
3Q/9MFY13 DPUs were slightly above our and street expectations on stronger margins, forming 26/77% of our FY13 forecast. We tweak DPUs higher on stronger margin assumptions, but keep our DDM-based target price (discount rate: 7.5%) of S$1.50 unchanged. We maintain our Neutral rating.
Steady quarter
3QFY13 DPU was up 7% yoy on contributions from acquisitions, positive rental reversions and margin improvement. DPU rose 1% qoq. Positives came from the marginally stronger portfolio occupancy of 95.2% (2Q: 95.0%), while rental reversions remained fairly strong – flatted factories at +24%; business parks at +8%; stack-up/ramp-up at +18%. Also management announced a new AEI (estimated capex of S$4m-5m) at its business park property, The Signature to enhance common areas and competitiveness of the asset.
Capital management
Asset leverage remains a healthy 37.1%, with all FY13 loans refinanced. As part of proactive capital management efforts, management will also introduce the distribution re-investment plan (DRP) for 3QFY13. We are positive on the financial flexibility offered by the programme (proceeds could be channelled toward funding needs of small AEIs such as the one at The Signature), but remain cautious of impact from potential dilution.
Maintain Neutral
The key draw of MINT’s portfolio, we believe, lies in its bond-like income stream, its pure local exposure and positive rental reversions. But we see positives priced in at 1.4x P/BV, particularly with a pure-local mandate and lack of pipeline assets likely to hinder meaningful acquisition growth, till MINT looks at expanding overseas with the expiry of its pure-local mandate in Oct 2013.
Suntec – OCBC
POSITIONING WELL FOR GROWTH
- 4Q12 DPU exceeded expectations
- Office segment stayed resilient
- Good progress on Suntec City AEI
4Q12 DPU above expectations
Suntec REIT posted an encouraging set of 4Q12 results last evening. Despite registering a 41.3% YoY decline in NPI to S$30.6m, DPU for the quarter came in at 2.326 S cents, down only 6.2%. This brings the FY12 to 9.49 S cents (-4.5%), ahead of our full year DPU forecast of 9.28 S cents (consensus: 9.4 S cents). Notably, no proceeds from the divestment of Chijmes were needed to achieve the quarterly performance, which in our view reflects the strong execution by management.
Office segment continues to perform
The drop in 4Q NPI was mainly attributable to the closure of Suntec Singapore in Oct 2012 and Suntec City Mall (Phase 1) in Jun for the asset enhancement works (AEI) and the sales of Chijmes. In particular, Suntec Singapore saw a loss of S$10.9m vs. S$5.8m in 4Q11. However, the office segment continued to perform, raking up 11.1% growth in revenue amid positive rental reversions and consistently high occupancy of 99.7% (99.9% in 3Q). This helped to cushion the softness at its retail segment, which experienced a 27.6% decline in revenue.
More details on Suntec City AEI
Suntec REIT also shed more light on the Suntec City AEI, saying that its Phase 1 AEI is on track for completion by 2Q13 and that its 83% of its NLA had been pre-committed (71.2% in 3Q). For the first time, management disclosed that the Phase 2 AEI will commence on Mar and that 37% pre-commitment had already been secured. Based on the timeline, we believe that 2Q may face the largest impact on its rental income, thereby prompting the REIT to utilise Chijmes sales proceeds to mitigate the fall in DPU. We now tweak our model assumptions to factor in the better-than-expected results and a possible S$10m distribution from the divestment proceeds in FY13. Our fair value in turn is raised from S$1.70 to S$1.94. Maintain BUY.