Author: kktan
CRCT – OCBC
Ends FY14 on a strong footing
- 4Q14 DPU grew 12.7% YoY
- Positive rental reversions of 23.1% in FY14
- Healthy financial position
4Q14 results within expectations
CapitaRetail China Trust (CRCT) reported a good set of 4Q14 results which met our expectations. DPU grew 12.7% YoY to 2.48 S cents on the back of a 27.7% increase in its gross revenue to S$52.7m. The latter was driven by new contributions from its acquired CapitaMall Grand Canyon and organic rental growth from its other multi-tenanted malls, but partially offset by a decline in revenue from CapitaMall Wuhu. For FY14, revenue and DPU increased by 27.0% and 8.9% to S$203.3m and 9.82 S cents, such that these figures constituted 102.3% and 101.3% of our FY14 projections, respectively.
Fundamentals remain strong
CRCT’s overall portfolio occupancy stood at 95.9% as at 31 Dec 2014, a slight 1.7 ppt QoQ decline. The drag came from weaker occupancy from CapitaMall Wuhu and CapitaMall Minzhongleyuan. The former is undergoing a repositioning phase due to competitive pressures, while the latter was impacted by a major road closure to facilitate the construction of subway Line 6 for two years from Aug 2014 (estimated -0.4 S cents impact to FY14 DPU). Nevertheless, CRCT’s other malls have performed strongly. The REIT manager also secured solid rental reversions of 20.6% and 23.1% in 4Q14 and FY14, respectively, making it the fourth consecutive quarter where it saw a rental uplift of more than 20%. Shopper traffic and tenants’ sales rose 3.9% and 16.2% in FY14, respectively.
Maintain HOLD
As at 31 Dec 2014, CRCT had a healthy gearing ratio of 28.7%. 72.6% of its total borrowings are at fixed rate (86.0% if weexclude onshore RMB loans). We raise our DDM-derived fair value estimate on CRCT from S$1.58 to S$1.64 after rolling forward our estimates. CRCT is trading at FY15F distribution yield of 6.2%, which is approximately one standard deviation below its 5-year average forward yield of 6.8%. Maintain HOLD.
CDL H-Trust – OCBC
Softness to prevail in near term
- 4Q14 DPU +7.2% YoY
- FY14 Singapore RevPAR down 1.6%
- Ample debt headroom for acquisitions
4Q14 results met the street’s expectations
CDL Hospitality Trusts (CDLHT) reported its 4Q14 results which were in-line with the street’s expectations. Gross revenue and DPU rose 14.4% and 7.2% YoY to S$45.1m and 3.13 S cents, respectively, underpinned by the recognition of a full quarter’s hotel revenue from Jumeirah Dhevanafushi amounting to S$5.4m. FY14 gross revenue came in at S$166.8m (+12.1%), while DPU was flat at 10.98 S cents (+0.1%). This formed 103.1% and 99.8% of Bloomberg consensus’ projections, respectively.
Market conditions still challenging
Although CDLHT managed to record a 3 ppt growth in its Singapore hotels’ occupancy to 90% in 4Q14, competitive pressures from higher supply of hotel rooms and a cautious corporate spending environment resulted in a 4.7% decline in its average room rate to S$205. Hence RevPAR was down 1.1% to S$185. For FY14, CDLHT’s Singapore hotels saw a 1.6% dip in RevPAR to S$188. We expect market conditions to remain challenging in the near future, given the uncertain macroeconomic landscape. We believe the situation is further exacerbated by the weak Euro and Japanese Yen, which have drawn tourist arrivals to those areas. There is also an expected addition of 3,258 hotel rooms (+5.7%) to the Singapore market in 2015, and this would exert more pressure on room rates.
Maintain HOLD
Looking ahead, CDLHT will continue to focus on finding suitable acquisition opportunities in the hospitality sector, with Japan and Singapore being the key areas of interest. Its healthy gearing ratio of 31.7% (as at 31 Dec 2014) implies that it has sufficient debt headroom of S$339m to finance prospective acquisitions before reaching the 40% gearing level. Following a change in analyst coverage, we fine-tune our assumptions and derive a new fair value estimate of S$1.76 (previously S$1.80), based on our dividend discount model (discount rate: 8.4%, terminal growth rate: 2%). Maintain HOLD.
Starhill Global – OCBC
Healthy rental reversions at Wisma Atria
- 4Q14 DPU up 4.9% YoY to 1.29 S cents
- 17% rental reversion at Wisma Atria (retail)
- Reiterate BUY with higher FV
4Q14 DPU came in within expectations
Starhill Global REIT (SGREIT) reported its 4Q14 results which met our expectations. Revenue slipped slightly by 0.4% YoY to S$48.9 due to weaker contribution from its China and Japan assets (partly due to FX impact), but this was partially mitigated by stronger performance from its Singapore properties. Despite the lower revenue, NPI rose 2.0% YoY to S$39.6m, resulting in an improvement in NPI margin by 1.9 ppt to 81.0%. 4Q14 DPU was up 4.9% to 1.29 S cents. For FY14, revenue fell 2.7% to S$195.1m, forming 98.2% of our full year forecast. DPU of 5.05 S cents represented an increase of 5.0% (excluding a one-off 0.19 S cents Toshin payout in 1Q13) and constituted 99.3% of our FY14 projection.
Robust rental uplift attained at Wisma Atria (retail)
The brightest development during 4Q14 came from the 17% positive rental reversions accomplished for leases committed at Wisma Atria (retail). This was underpinned by the renewals and new leases signed for the prime façade units. Management remains positive on the outlook of rental reversions at Wisma Atria (retail) over the next 3-6 months. Although shopper traffic and tenants’ sales at this mall fell 3.1% and 5.6% YoY to 7.2m and S$139 psf in 4Q14, respectively, which reflects headwinds in the retail sector, we believe assets which are strategically located in prime areas will continue to be a draw for international retailers. SGREIT’s overall portfolio occupancy improved from 99.1% to 99.6% due to recovery in its Japan occupancy rates.
Maintain BUY
SGREIT’s financial position remains healthy, with a comfortable gearing ratio of 28.6%, as at 31 Dec 2014. Its borrowings are 100% hedged via a combination of fixed rate debt and interest rate erivatives. We fine-tune our assumptions marginally and roll forward our valuations, thus deriving a higher fair value estimate of S$0.93 (previously S$0.90). We continue to like SGREIT for its attractive valuations and distribution yields vis-à-vis its peers. The stock is trading at FY15F P/B and yield of 0.88x and 6.3%, respectively. Maintain BUY.
CLT – OCBC
A year in transition
- 4Q14 DPU +0.4% YoY to 2.146 S cents
- Focus on occupancy rates
- Raise FV slightly but maintain HOLD
4Q14 results in-line with expectations
Cache Logistics Trust (CACHE) reported its 4Q14 results which met our expectations. Gross revenue declined 0.4% YoY to S$20.6m due to higher vacancies and tenant rent free period. Nevertheless, DPU climbed 0.4% to 2.146 S cents. For FY14, revenue rose 2.3% to S$82.9m and this formed 96.7% of our full-year forecast. Income available for distribution increased 2.0% S$66.9m, but DPU slipped 0.8% to 8.573 S cents due to a larger unit base. The latter constituted 98.7% of our FY14 projection.
Outlook remains challenging
CACHE is currently undergoing a transition period as it is in the midst of converting some of its assets from master-leased properties to multi-tenanted properties. This had some impact on its occupancy, which declined from 99.5% to 97.5%. Management will continue to step up its efforts to secure forward renewals during this conversion phase. 11% of its lettable area is up for renewal in FY15. Approximately 72% of C&P Changi Districentre and 41% of CWT Cold Hub have been pre-committed by tenants, with a strong pipeline of interest from new tenants, according to CACHE. We expect some near-term pressure on its NPI margins due to expenses related to these conversions. Concerns over the oversupply situation for Singapore’s industrial space also remain as a concern. On a positive front, CACHE managed to renew the master lease of CWT Commodity Hub with its sponsor CWT for a period of three years from Apr 2015, with an estimated initial uplift of 1% in rental rates.
Maintain HOLD
Looking ahead, CACHE will seek to pursue yield accretive acquisitions. Australia is one of its key areas of focus given the institutional-grade warehouses with good credit tenants. China has moved behind Australia in the pecking order as cap rates have narrowed. We lower our FY15 DPU forecast slightly by 1.1% and introduce our FY16 projections. Rolling forward our valuations, our fair value is increased from S$1.13 to S$1.15. Maintain HOLD.
MGCT – OCBC
Limited upside here – downgrade to HOLD
- 3QFY15 DPU rose 9.5% YoY
- Solid operation statistics
- Limited potential returns ahead
3QFY15 results came in within our expectations
Mapletree Greater China Commercial Trust (MGCCT) reported its 3QFY15 results which met our expectations. Gross revenue grew 12.0% YoY to S$73.6m, while DPU jumped 9.5% to 1.662 S cents. This robust set of performance was underpinned by sturdy rental reversions achieved at both Festival Walk (FW) and Gateway Plaza (GP), resulting in YoY gross revenue growth of 9.4% and 20.1% to S$54.1m and S$19.5m, respectively. For 9MFY15, gross revenue of S$204.9m represented an increase of 9.2%, forming 74.5% of our FY15 projection. DPU accelerated 10.6% to 4.815 S cents and constituted 76.1% of our full year forecast.
Underlying trends exhibit strength
Positive rental uplift of 21% and 32% was achieved at FW’s retail and GP’s office segments, respectively, as at 31 Dec 2014. 90% of MGCCT’s expiring leases (by lettable area) in FY15 have already been renewed or re-let. Overall portfolio occupancy stood at a healthy 99.4%, as at end Dec-2014, with full occupancy maintained at FW. Other encouraging signs include an estimated 4.4% and 5.1% YoY improvement in FW’s footfall and tenants’ sales to 11.9m and HK$1,597m, respectively, in 3QFY15. This was accomplished despite the challenging Hong Kong retail scene. We believe this exemplifies the solid positioning and resilience of FW.
Downgrade to HOLD on valuation grounds
Since our initiation on MGCCT with a ‘Buy’ rating in 3 Oct last year, its share price has jumped 13.3% (total returns of 16.8% if we include 1HFY15’s 3.162 S cents distribution). At current price level, we see limited potential total returns ahead. Hence, we downgrade MGCCT to HOLD on valuation grounds, with a marginally higher fair value estimate of S$1.01 (previously S$1.00) due to a slightly smaller unit base assumption. The stock still offers a decent FY15F and FY16F distribution yield of 6.2% and 6.4%, respectively.