Author: tfwee
CMT – CIMB
Could be cheaper
• In line. 4Q08 results were in line with Street and our expectations. 4Q08 and full year DPU were 3.65cts and 14.29cts respectively. Full year gross revenue of S$510.9m was up 18.3% yoy mainly on contributions from Atrium@Orchard and Raffles City. Portfolio occupancy improved marginally to 99.7%, up from 99.6% in the last quarter.
• Cap rates, asset values up. As at 1 Dec 08, CMT saw a marginal 1.9% increase in its asset values across its portfolio over their last valuation on 1 Jun 08 despite moderate cap rates expansion by 15 to 25 bps. With this valuation, asset leverage remained unchanged at 42% from the last quarter.
• AEI updates. Sembawang Shopping Centre which had been closed since early 2007 for asset enhancement works opened on 22 Dec 08. NLA had increased by 32% to 128,241 sf; whilst average monthly rents increased 48.8% to S$7.41psf. Todate, 98% of the NLA has been committed. Separately, asset enhancement works at Lot One Shoppers’ Mall were also largely completed. NLA had increased 6.6% to 216,982sf whilst average monthly rents had increased 20.5% to S$12.10psf.
• The billion dollar headache…CMT has S$986m of debt due for refinancing this year. This is some 31% of its total debt of S$3.2bn. Cash and committed credit facilities are sufficient to pay off only S$110m or 11% of the debt due in 2009. Due to the large quantum of the debt and relatively high leverage of 42%, management is likely to have to resort to both recapitalisation and debt to complete the refinancing. We are of the view that, with no changes in regulatory policies, the management is not likely to reduce payout of dividends to repay debt as the total distributable income of S$238m is only 24% of 2009 debt.
• Maintain Underperform, lower target price of S$1.66 (from S$1.90). We further cut our estimates assuming a 10% drop in rents from Atrium@Orchard and lower growth rate of 2% from CRS and the subsidiary portfolio. Our DPU falls 13-16% over 09-10 to 13.12cts and 12.01cts respectively. We also introduce our FY11 DPU estimates. Although CMT’s price has declined 31% from its last peak of S$2.18 in Nov 08, leading P/BV to fall from 0.9x to the current 0.68x, investors could look to a lower entry point in view of potential recapitalisation and dilution. Maintain Underperform.
MapleTree – DBS
Stable and Resilient
MLT reported their 4Q08 results in line with estimates, mainly due to contributions from its robust acquisitions over FY08. Looking ahead, the trust doed not face major refinancing needs. A low gearing of 38.5% combined with an unencumbered underlying asset portfolio underpins its balance sheet strength. Maintain BUY, TP$0.44 based on DCF. MLT is currently trading at c.14% FY09-10 DPU yield.
Results in Line. MLT reported a 4Q08 topline of S$52.4m (+ 30% yoy, 14% qoq) on top of a 43% yoy growth in distribution income to S$28.3m. DPU was 1.46 Scts, an -18% yoy was due to higher share base from rights issued completed in 2H08. For FY08, the trust delivered a DPU of 7.24cts. Assets were revalued upwards by c. S$94m (+ 3.3%), resulting in an NAV of S$0.89. Gearing is at a low of 38.5%.
No major refinancing needs. We view that MLT does not face major refinancing needs as short-term debt of c. S$218m is just 7% of total portfolio which is currently unencumbered. These assets will form a strong collateral base for further new loans when needed. In addition, the trust has more than sufficient lines to meet its debt obligations. Post recap balance sheet remains robust (38.5% gearing) and is poised to ride out current tough economic times well.
Buy for sustainable yield. We believe MLT is likely to continue to deliver a sustainable yield of c. 14% FY09- 10 fully diluted yield. Our forward earnings estimates reflect a 10% decline in portfolio occupancy over FY09. Rolling forward our valuations, we derive a TP of S$0.44. Maintain BUY.
MapleTree – CIMB
Stable growth
• In line. Full-year distributable income of S$97.4m was in line with expectations. However, full-year DPU of 7.24cts was above consensus and our expectations due to fewer units in issue than forecast after the rights issue. Full-year gross revenue of S$184.9m was up 30.5% yoy mainly on contributions from 11 acquisitions completed in 2008. Net property income margins declined from 87.4% to 86.1% on higher property-related expenses. Portfolio occupancy improved to 99.6% from 99.0% in the last quarter.
• Strong reversions in 4Q08. Average rentals achieved for leases renewed in the quarter were 51.2% higher than preceding rentals. These were mainly leases in Singapore and Hong Kong, and partly contributed by several new tenants who are data centre operators.
• Outlook not so negative. After the rights issue, MLT’s asset leverage is a healthy 38.1%. Short-term debt of S$218m (19% of total debt) due for refinancing in 2009 looks manageable. Despite the fact that acquisitions are expected to take a back seat, full-year contributions from the 11 acquisitions last year should supplement organic growth. Additionally, management highlighted that concerns over warehouse oversupply in Singapore are exaggerated, as 81% of the 682,000sq m of upcoming supply over the next two years has been pre-leased or is being built by end-users. In Hong Kong, MLT’s second largest market, there is no new supply expected for the two years.
• Maintain Outperform; unchanged target price of S$0.60 (discount 9.6%). We maintain our assumptions for FY09-10 and introduce our DPU forecast for FY11. MLT offers dividend yields of 14.1%. We remain confident that performance in the current year will be stable with some room for upside on the back of full-year contributions from the previous year’s acquisitions. Maintain Outperform.
FCOT – DBS
Equity Raising Possible
FCOT results were in line with our expectations. FY08 DPU of 6.35 cts translates to a 25% DPU yield at current trading price, one of the highest in the sector. We believe current price reflects investor nervousness of near term refinancing requirements and possibility of an equity raising exercise. Until more clarity on that front, share price is unlikely to re-rate. Based on our estimates, FCOT is trading at c.17% FY09-10 yield. Maintain HOLD, TP S$0.23.
Results in line. 4Q08 distributable income was -40% yoy at S$9.3m due to increased interest expense from higher debt margins incurred in 2H08 on top of increased property expenses. FY08 distributable income came in at S$45.8m (- 3.5% yoy), pulled up by a better 1H08 performance, translating to a DPU of 6.35cts for the full year. Book NAV of S$0.97 per share as at Dec’08 reflects (i) further devaluations to Keypoint (-7%) and Cosmo Plaza (-10%) and (ii) translation losses due to a declining A$ offset by a stronger yen. As a result, gearing spikes up to 54.4%.
Adjusting FY09 DPU estimates. We lower our forward DPU estimates by 12% to reflect (i) lower than expected A$-S$ exchanged rates for FY09 (ii) tenant default at Cosmo Plaza as the main master lessee, Restoration Asset KK (60% of asset NLA) is in rental default and is not expected to contribute to earnings further. The manager has begun marketing the space and is in progress of releasing c.30% of the vacated space.
Recapitalization a likely catalyst. Given a gearing of 54.4%, FCOT is dangerously near the regulatory limit of 60%. We view that a re-rating for the stock will hinge on further details of a potential recapitalization exercise aimed at strengthening the trust’s fundamentals and resolving its ST financing needs.
CMT – DBS
Still going strong
CMT’s FY08 results were within expectations, lifted by organic improvement amid a fully occupied portfolio. Continued shopper traffic growth despite a weakening spending environment underlines the more resilient suburban retail sector. The stock offers FY09 yield of 9.7%. Near term catalysts from successful rollover of its debt and recapitalising newsflow within the Sreit sector could spur share price. Upgrade to Buy with DCF-backed TP of $1.92.
Continuous organic growth. CMT reported Q4 revenue of $134.5m, +16% yoy and +3.7% qoq while distribution income came in at $60.9m, -2.1% yoy and +0.3% qoq. Topline benefited from The Atrium income and organic improvement within its portfolio. Occupancy remained at c100% and new lease/renewals were transacted at an average 9.3% over preceeding levels. However, a hike in expense ratio to 36% (vs 33% previously) after charging a $4m capital allowance and greater interest cost eroded bottomline growth. Asset values rose by 9% yoy despite a 15- 25bps hike in cap rates, bringing book NAV to $2.41 and gearing 43%.
Locked in >87% of revenue. While retail sales outlook is dampened by the poorer economic outlook and discretionary spending had weakened towards end 08, shopper traffic at CMT malls continued to grow, showing the resilience of suburban malls. In addition, based on committed leases @ end 08, CMT had locked in >87% of its FY08 revenue for FY09. In terms of capital management, the group has $986m of debt due to be rolled over in 2009, of which $876m is maturing in 2H09. The group is exploring options for refinancing and intends to complete its refinancing ahead of the deadline.
Upgrade to Buy. CMT offers investor exposure to the more resilient suburban retail sector. Share price had fallen by 17% since early Jan 09 and is trading at 9.7% yield based on our stillbelow- consensus DPU forecast of 14.4cts. We expect newsflow on both its debt refinancing and removal of overhanging deleveraging concerns in S-reit sector via recapitalisation activities to be a driver to share price performance in the near term.