Author: tfwee
CDLHTrust – DBS
Cutting Dividend Payout
CDL HT reported their FY08 results in line with expectations. DPU of 10.6cts for the year meant a DPU yield of 16% for unitholders. However, the trust is reducing their payout ratio to 90% from 2H08 onwards, in light of an increasing challenging operating environment. We switch our methodology to DDM to take into account the reduced payout. TP is adjusted to S$0.70. Maintain HOLD. CDL HT is trading at c..11% FY09-10F DPU yields.
Results in line. Gross revenues and NPI, which came in at S$115m and 103m (+26% and +20%) respectively, were in line with our estimates. This was on the back of a 20% yoy growth in RevPAR to S$208, which mainly reflected the stronger first 3Qtrs results offsetting a slightly weak 4Q. Distributable income of S$91.9m was also in line. DPU of 10.6 Scts for the year was slightly below our estimates, due to a change in payout ratio to 90% from 2H08 onwards. NAV was adjusted downwards to S$1.42 due to a 9.1% write-down in asset values. Gearing remains low at 18%. The trust is looking to finalize the refinancing of ST loans in the near future.
Moving to a lower payout ratio. Mgmt guided that the decision to reduce payout was driven by financial prudence and use for working capital and potential capex in the light of a deteriorating local tourism outlook. Though we agree that this will enable better financial leverage for the trust moving forward, it comes at a high price as the trust will be liable for tax on the retained amount.
Switching to DDM valuation. We switch our valuation methodology to DDM to take into account the impact of a reduced payout moving forward. Our target price, as a result, is reduced to S$0.70 (11% cost of equity, 1% terminal growth). Maintain HOLD.
StarHill Gbl – DBS
Not Shining yet
Starhill Global Reit (Starhill) reported FY08 results in line with expectations. Unitholders will receive DPU of 7.17 cts , translating to a 14% yield. Looking ahead, while we view that the trust should be able to deliver relatively stable DPU, headwinds from weaker consumer discretionary and tourism spending could limit re-rating opportunities in the near term. As such, maintain HOLD, TP$0.60
Results in line. Starhill Global Reit (Starhill)’s FY08 distributional income of S$69.4m, DPU of 7.17 Scts were in line with expectations. Gross revenues and gross profits increased 24% and 25% to S$127.0m and S$95.9m respectively, driven by (i) higher rentals achieved through FY08, (ii) 19.75% Toshin kicker from Jun’08.
NAV of S$1.44. The trust recorded a revaluation loss of S$160.9m on its properties, resulting in a NAV of S$1.44, compared with S$1.61 a year ago. Gearing inches up slightly to 31%, which remains relatively low amongst the SREIT space.
FY09-10 DPU yield of c.14%. Moving ahead, we estimate DPU yields to remain relatively stable, as the reit enjoys the full year contribution from the positive Toshin rent review which offsets our estimated 5% drop in portfolio occupancies and a 20%-10% fall in asking rents its office space and retail space respectively.
HOLD, TP S$0.60. Re-rating catalyst appears lacking in the near term, due to anticipated worsening newsflow of a further tightening of consumer and tourist spending. Our DCF-based TP is adjusted slightly upwards to S$0.60 as we roll forward our numbers.
Cambridge – BT
Cambridge Ind’l Trust reports 4% fall in DPU
It hopes to deliver stable DPU this year with its long average lease expiry
CAMBRIDGE Industrial Trust (CIT) has announced a distribution of 1.373 cents per unit for the quarter ended Dec 31, 2008, said Reit manager Cambridge Industrial Trust Management Ltd (CITM).
The Q42008 DPU is 0.117 cent lower than the same period a year ago.
CIT’s total net distributable income for FY2008 was $47.9 million with an annual DPU of 6.012 cents. This represents an annual yield of 21.9 per cent based on the closing price of $0.275 per unit on Dec 31, 2008, said CITM.
The annual DPU for FY2008 of 6.012 cents was a decrease of 4.0 per cent from 6.262 cents in FY2007.
Said Chris Calvert, chief executive officer of CITM: ‘We are pleased to report a set of consistent results for FY2008 in this difficult economic environment.’
All its properties are signed with long leases of up to 15 years, with fixed rental escalation. The weighted average remaining lease term of CIT’s existing portfolio of 43 properties remained stable at 5.7 years as at December 2008, CIT said.
As at the end of 2008, CIT has a portfolio of 43 properties with 653,673.39 square metres of lettable area valued at $995.4 million. The weighted average land lease on these properties is 39.4 years, excluding freehold property which comprises 5.4 per cent of total lettable area. About 35 per cent of the portfolio of properties is in the logistics and warehousing sector, with the next significant segment in the light industrial space accounting for 34 per cent.
The occupancy of CIT’s portfolio was 99.5 per cent.
‘CIT continues to place prudent capital management at the centre of its business strategy as evidenced by recent signing of term sheets with three banks under which they will commit to provide a $390 million syndicated term loan,’ it said. The group’s gearing was 37.8 per cent, below its long-term leverage target of 40 per cent.
CIT said its future outlook will be determined by the severity of the impact of the current financial crisis. ‘However, for this financial year, CIT believes itself to be well-positioned to deliver stable DPU, with its relatively long average lease expiry of 5.7 years on top of a high 16-month security deposit,’ it added.
CDLHTrust – CIMB
Bracing for a rough ride
• Weak 4Q08 results but FY08 in line. 4Q08 results were weak, with DPU of 1.8cts forming only 16% of our full-year estimate. However, due to strong performances in the earlier three quarters, full-year DPU of 10.62cts was in line with Street and our expectations, at 95% of our estimate. Full-year gross revenue of S$114.7m was up 26.5% yoy on strong average room rate (ARR) growth of 23.9% to S$244. Compared with 4Q07, portfolio occupancy in 4Q08 declined 4.9% pts to 83.7% although ARR still grew by a modest 3.7% to S$224. REVPAR in 4Q08 was S$188, down 1.6% from 4Q07.
• Increased property expenses and tax adjustments hit NPI. 4Q08 net property income (NPI) of S$21.7m was down 19.4% yoy due to: 1) a one-off S$3.2m additional property tax with respect to 2006 and 2007, based on revised assessments by IRAS in Dec 08; 2) an increase in the computation of the annual value of hotels to 20% of gross room receipts (previously 15%) from 1 Jan 08; and 3) S$1.3m paid to the MCST of the Liang Court complex for replacement and refurbishment works.
• Reducing payout to 90%; tightening expenses. Going forward, management‘s focus would be on: 1) maximising revenue by concentrating on non-transient hotel stayers such as airline crew and increasing weekend stays; 2) cost containment through increasing staff productivity; and 3) capitalising on economies of scale through the M&C group. Management will be distributing 90% of its taxable income for 1 Jul-30 Dec 08, instead of 100%. Although this would attract an 18% corporate tax on the S$4m retained, management defended its decision on the basis of an increase in financial flexibility and discipline in capital management. The 10% retention of distributable income reduces paid-out DPU by 4.5%.
• Maintain Underperform; lower target price of S$0.68 (from S$0.77). We reduce our payout assumptions from 100% to 90% and our DPU estimates for FY09-10 have been lowered by 10% accordingly. We also introduce FY11 forecasts. At 0.46x P/BV, CDLHT is more expensive than its hospitality peer, ART (0.38x). In view of continuing slowing visitor arrivals, catalysts appear lacking for 1H09. Maintain Underperform.
PLife – DBS
4Q08 results in line
4Q DPU was 1.84 cents, bringing the year’s DPU to 6.83cents, which is within expectations. PREIT remains a defensive play as gross rentals are protected by the 1%+CPI formula. We revised TP down marginally to $1.11 on lower CPI growth assumption of 0% for 2009 versus 2.8% previously. Dividend yield of 9% is attractive with no immediate refinancing till c.2011.
4Q08 DPU 1.84 cents. FY08 gross revenue ended at S$53.9m due to higher rents from Singapore hospitals and contribution from its Japanese properties (S$5.2m). 4Q DPU was 1.84cents, bringing FY08’s total to 6.83cents. Fair value of properties dipped 0.3%, largely from writing down of capitalized acquisition costs from Japan properties. Valuation of Singapore properties remained stable at $832m on higher valuation of Gleneagles Hospital and Eastshore Hospital, offset by Mount Elizabeth Hospital.
No refinancing risks. PREIT average debt tenor is 2.8 years and they do not have refinancing risks in the next 24 months. Gearing stands at 23.3% with debt headroom of $300m before it reaches a gearing of 40%. Rental downside protected by “CPI formula”. Singapore hospitals revenue is protected by the minimum guaranteed rent, which will grow by at least 1%+CPI. In the event that CPI is negative, rental will still grow by at least 1%.
Maintain Buy, TP: S$1.11. We adjust our DPU and TP down slightly as we take into account lower CPI rate in 2009 and higher interest expense on a larger debt (than previously estimated). We have assumed 0% CPI rate in 2009, in line with DBS economists’ estimate. We like this counter for its prospective dividend yield of over 9%, with downside rental protection and limited refinancing risks till c.2011. Maintain Buy.