AREIT – CIMB
Bulk of refinancing secured
• Performance on track. A-REIT’s 2QFY09 results were in line with Street and our expectations. DPU of 4.01cts for the quarter grew 14.2% yoy, forming 26% of our forecast of 15.4cts for FY09. Gross revenue of S$97.3m was up 21.3% yoy due to continued strong rental reversions from Business and Science Park and Hi-Tech segments, as well as additional revenue contribution from completed acquisitions. These include 8 Loyang Way 1 (SKP) in May, 31 International Business Park (Creative) in June and completion of Pioneer Hub BTS in August. 1H09 DPU of 7.9cts was also in line with expectations, forming 51.3% of our full-year estimate.
• Refinancing for bulk of FY10-11 debts secured. The management announced that it had secured a $200m bilateral loan from its relationship bank that could be used for its refinancing of its nearest major debt of S$300m CMBS due in Aug 09. Tenure of the loan is three years. Borrowing spreads was attractive at under 120bps. Additionally, management also expects to refinance its term loan facility of S$300m due in March 2010 with its existing relationship bank for a tenure of two years. All-in cost of A-REIT’s total debt of S$1.9bn as at 30 Sep 08 stood at 3.25%, up marginally from 3.16% from the last quarter. Asset leverage stood at 41.4% in
the same period.
• New S$25.6m BTS at Airport Logistics Park of Singapore (ALPS). The management announced that it has secured a new BTS project from Expeditors Singapore Pte Ltd. A-REIT will develop a logistics facility at the ALPS for the tenant for S$25.6m. The 11,430sqm facility is expected to complete by Dec 09 and will be leased to Expeditors for a period of 5 + 5 years. Assuming a net development yield of 9%, we estimate a positive increase of 0.3% to the DPU with this addition.
• Maintain Outperform, increased target price of S$2.17. We add to our model the new BTS development and increase our earlier revenue contribution assumptions from FY09 acquisitions to 60% up from 40% to reflect more precise timing of contribution. Our DPU estimates for FY09-11 increases by 0.3-2.1% Our DDMderived target price (discount 8.7%) increases marginally to S$2.17 from S$2.16. Maintain Outperform.