Author: tfwee
FCOT – SGX
Frasers Commercial Trust announces recapitalisation measures to strengthen its balance sheet and complete its refinancing
- Rights Issue to raise S$213.9 million for debt repayment, capital expenditure and working capital
- Acquisition of Alexandra Technopark, a quality Singapore business space asset financed by preferred equity
- Debt facilities of S$675.0 million secured to refinance debt maturing in 2009
StarHill – BT
Starhill falls after unveiling rights issue plan
Moody’s affirms its ratings of the Reit, says the outlook for the ratings is stable
STARHILL Global Reit yesterday fell 3.9 per cent – amid a broad market pullback – a day after the property trust said it will tap the market through a $337.3 million rights issue.
Meanwhile, Moody’s Investor Services affirmed its ‘Baa2’ corporate family and ‘Baa3’ unsecured debt ratings of Starhill Global Reit – which owns stakes in Wisma Atria and Ngee Ann City in Singapore.
Moody’s added that the outlook for the ratings is stable.
The Reit, which is partly owned by Malaysia’s YTL Corp, lost 2.5 cents to close at 61.5 cents. The trust on Monday announced plans to sell new units to raise $337.3 million to reduce debt and get new funds for possible acquisitions.
The Reit does not have any refinancing requirements in 2009, although the bulk of its $670.1 million of borrowings are due in 2010.
The rights issue will improve Starhill Global Reit’s balance sheet, said Franklin Heng, chief executive of the trust’s manager. On Monday, the trust also announced a 7.1 per cent write-down in the value of its property portfolio to $1.95 billion as at June 15, 2009 from $2.1 billion at end-2008.
That would have pushed up its gearing from 31.1 per cent to 33.4 per cent. But with the rights issue and the repayment of some debt, gearing will instead be reduced to 20.7 per cent.
The capital raising should provide the Reit with adequate buffer against further asset write-downs, Moody’s said.
‘If (the rights issue is) completed and used to reduce debts by 35 per cent to $434.3 million, the capital raising would materially enhance Starhill’s credit metrics,’ said Moody’s senior analyst Kathleen Lee.
However, while the initiative will have a positive effect on Starhill’s credit metrics once completed, Moody’s is concerned that further weakening in the operating environment could translate into slower demand for rental space and result in further asset write-downs. This could be exacerbated by the strong supply of new retail space coming on-stream within the Orchard Road precinct between Q3 2009 and 2012, Ms Lee added.
CMT – OCBC
Positive retail sales data eases concerns
Retail sales of small-ticket items picking up. While sales of big-ticket items such as motor vehicle remained weak, sales of small-ticket items have been picking up since March. According to the latest data from Singstat, the seasonally-adjusted retail sales excluding motor vehicles rose by 1.1% MoM in April. This was the second consecutive month of rising retail sales, following the 3.3% MoM increase in March.
More positive data from GSS. According to data from MasterCard, spending by local MasterCard holders during the first weekend (May 29 to 31) of the Great Singapore Sale (GSS) had increased by 7% YoY to US$26.3m. Including spending by tourists, sales increased by a smaller 1% YoY to US$37.5m and this was due to lower tourist arrivals. Nevertheless, spending by locals still represents a higher proportion of the retail spending and the improvement in spending sends a positive signal that consumer sentiment continues to improve after hitting a low in February.
Easing pressure on retailers and landlords. Even though the economic outlook remains uncertain, we believe that the initial stage of fear among consumers has now passed and small-ticket item spending by local consumers is now picking up, as seen in the recent retail sales data. This momentum has continued into May as supported by data from MasterCard. This bodes well for retailers that had been facing pressures from declining sales and rising operating costs since 2H08. To retail landlords such as CapitaMall Trust (CMT), concerns on tenant eviction and rising tenant turnover would also ease.
No catalyst in sight yet; maintain HOLD. While we believe that the worst could be over for the retail industry, we expect the recovery in consumer spending to be gradual as consumers are likely to stay cautious in light of the uncertain economic outlook. As such, we maintain our forecast of a 10% decline in rent for FY09 and a 5% decline in rent for FY10. Our RNAV estimate remains at S$1.36 per unit. We also expect mid-year revaluation of the retail malls to remain stable. After the Rights issue, its gearing level will decline to 29.1% after the repayment of borrowings and we estimate that CMT’s asset portfolio can tolerate up to an 18% decline in valuation before it reaches the upper bound of its comfortable leverage target of 30%-35%. Our fair value of CMT remains at S$1.21 and we maintain our HOLD rating.
CDLHTrust – UOBKH
Beneficiary Of Upcoming Integrated Resorts
Strong recovery in visitor volumes expected with 12m visitors for Resorts World at Sentosa alone. Tourist arrivals are likely to rebound 20% yoy in 2010, augmented by the opening of two integrated resorts (IRs). The higher number of attractions will enable tour operators to enhance their offerings with longer-stay packages to a total population of 2b within a 5-hour flight radius. Genting Singapore alone expects 12m visitors p.a., comprising 40% locals and 60% tourists.
Occupancy could return to above-80% levels from 2010. Though there would be a huge supply of about 11,807 new hotel rooms over the next four years, occupancy rates could still return to above-80% levels based on four-year CAGR of 3% in tourist arrivals in 2008-12 (vs the historical 10-year CAGR of 5%) at an average length of stay of 3.7 days. Our forecast of a 20% rebound in visitor arrivals in 2010 is expected to lift occupancy levels beyond 80%.
Well positioned to handle increase in visitor arrivals. Novotel Clarke Quay has already filled 80% of its rooms for the 2009 Formula One event, bucking the trend even though it is not a trackside hotel. We expect to see a similar situation with the opening of the IRs in 2009 and 2010. We believe the knock-on effect from the opening of the casinos will be great, and CDL Hospitality Trusts (CDREIT) is well positioned to benefit from this as all of its properties in Singapore are strategically located either in or near the Central Business District with close proximity to Marina Bay Sands or Orchard Road.
Maintain BUY; target price: S$1.24. We remain positive on CDREIT for its potential to reap benefits from the opening of the IRs. It offers an attractive yield of 8.5%. We maintain our target price of S$1.24 based on a two-stage dividend discount model (required rate of return: 7.7%; terminal growth: 2.5%).