Author: tfwee
LMIR – BT
LMIR Trust beats forecast with $16m Q2 distributable income
Contribution from Sun Plaza boosts results; it is upbeat about prospects
LIPPO-MAPLETREE Indonesia Retail Trust (LMIR Trust) yesterday said that its second-quarter distributable income came to $15.9 million – 3 per cent higher than the $15.4 million forecasted.
Distribution per unit (DPU) for the three months ended June 30, 2008, was 1.50 cents, also 3 per cent higher than the forecast DPU of 1.45 cents.
Net property income for Q208 was $23.3 million, 17 per cent higher than the forecast of $19.9 million.
There is no comparable period for 2007 as LMIR Trust was only listed on the Singapore Exchange in November last year.
LMIR Trust invests in Indonesian retail assets. Its current $1.2-billion portfolio consists of eight retail malls and seven retail spaces located within other retail malls.
The trust’s financial performance was boosted by contribution from its Sun Plaza mall, which was acquired in March this year. The $147-million acquisition increased LMIR Trust’s total portfolio net lettable area by about 20 per cent to 4.1 million sq ft.
For the trust’s 2008 financial year-to-date – which spans from Aug 8, 2007 to June 30, 2008 and covers both its time as a private trust and as a listed entity – distributable income was $39.3 million, while DPU was 3.7 cents – both 3 per cent higher than the forecasts.
The trust is upbeat about its future prospects and the continued growth prospects for the Indonesian economy, which have stood up well despite rising inflation and interest rates, said Viven G Sitiabudi, chief executive officer of the trust’s management team. ‘LMIR Trust’s malls are defensive in nature, as they are located in high catchment middle to upper-middle income residential areas where the inflation effect is moderate,’ she noted.
The trust is planning asset-enhancement initiatives at two of its malls – Istana Plaza in Bandung and Mal Lippo Cikarang in Greater Jakarta. Some $3 million will be spent in total on both malls to boost traffic and rental income.
The stock gained 0.5 cents to close at 59 cents yesterday. LMIR Trust has shed 11.3 per cent since the start of the year.
AllCo – DBS
Strong 2Q 08 earnings
Story: 2Q08 results were within expectation. Gross revenue grew 57.9% y-o-y to S$27.6m, while NPI grew 37.6% to S$20.9m. Distributable income grew 61.4% to S$17.2m, translating into 2.4cts DPU in 2Q08. For 1H08, unitholders are getting 3.99 cts DPU. Allco also recorded a write-down for its investment properties, mainly from Cosmo and Centerlink, of S$29.7m, resulting in NAV falling to S$1.39 per share on 30 Jun 2008 (1Q08: S$1.45).
Point: The better 2Q08 performance was driven by higher rents achieved at Central Park and contributions from properties purchased after 2H07, i.e. Centerlink, the Japanese assets and Keypoint. Moving forward, there are several issues to look at: (i) expiry of S$70m loan in Nov08 that is expected to be repaid from proceeds from the divestment of AWPF, and (ii) strategic review of its Australian assets. Proceeds will be used to pare down existing facilities and for capital re-cycling for asset acquisitions lined up by Frasers Centrepoint Ltd (FCL). In this respect, we remain optimistic about opportunities in the medium term with its new parentage. Allco should benefit given FCL’s established presence in Asia Pacific and a ready pipeline of assets worth S$700m.
Relevance: We have adjusted FY08F and FY09F DPU to 6.9 and 7.0cts, respectively. Our DCF-backed target price is reduced to S$0.93 after imputing higher risk free rate of 3.9%, beta of 0.8 and a lower terminal growth rate of 0.5%. The share price could underperform in the near term, given the uncertainty in terms of the structure and direction of the REIT following the change in parentage. But valuation wise, Allco is trading at attractive 0.6x P/BV and offers FY08-FY09F DPU yields of 8.9% – 9.0%.
Maintain Buy
PLife – UOBKH
Defensive and resilient
Enhancing contributions from Singapore Hospitals. Parkway Life REIT has embarked on asset enhancement initiatives to improve the returns from low revenue yielding space. Space previously occupied by management and support functions has been decanted to create centres of excellence. Renovation works are ongoing to set up Parkway Cancer Centre at Mount Elizabeth Hospital, Parkway Heart Centre and Obstetrics & Gynaecology wards at Gleneagles Hospital and Women Centre at East Shore Hospital. The enhancement allows the hospitals to hire more specialist consultants, thus increasing patient admission and variable rent. Parkway Life REIT does not have to bear cost incurred for refurbishment, as the lessee, Parkway Holdings, is responsible for capex till Dec 09.
Protection against slowdown. CPI was 2.1% in 2007. The minimum rent payable from Singapore hospitals this year would be 3.1% (CPI + 1%) higher than levels in 2007. The downside protection kicks in on 23 Aug 08, a year after listing. Parkway Life REIT is protected against fluctuation in admission of international patients due to slower growth in regional countries. Revenue contribution from Mount Elizabeth, Gleneagles and East Shore hospitals increased by only a marginal 0.8% qoq to S$12m in 2QFY08. This comprises a base rent of S$7.5m and a variable rent of S$4.5m.
Diversification from acquisitions in Japan. Parkway Life REIT has acquired a pharmaceutical production and distribution facility in Matsudo City, Chiba prefecture and two nursing homes located in Yokohama City and Ibaraki City for S$69.4m. In particular, rental income from the two nursing homes is index-linked to inflation with rent reviews every five years. These acquisitions allow Parkway Life REIT to gain exposure to Japan where the population is ageing rapidly. Revenue contribution from the Japan properties was S$0.5m in 2Q08 (1.5- month contribution from Matsuda facility, 1-month contribution from nursing homes). The Japan properties will provide full-quarter contribution in 3Q08.
Low gearing provides significant room for acquisitions. Parkway Life REIT will partner sponsor Parkway Holdings to expand in the region with Parkway Life REIT acquiring third-party hospital buildings and Parkway Holdings taking over as operator. The company’s gearing is low at only 10%. There is headroom of S$570m for growth via acquisitions if it utilises debt capacity for optimal debt level of 45%. Parkway Life REIT targets to double the size of its portfolio to S$1.6b by end-09. It also plans to diversify into medical offices, research & development (R&D) facilities and warehouse and manufacturing facilities for biomedical and pharmaceutical industries.
Reiterate BUY. We like Parkway Life REIT for its healthcare focus. It provides strong defensive qualities as rental income from hospitals in Singapore and nursing homes in Japan is linked to inflation. Our target price is S$1.54 based on the discounted dividend model (required rate of return: 7.6%; terminal growth: 2.8%). The stock is trading at a 12.7% discount to NAV/share of S$1.34. Parkway Life REIT declared DPU of 1.66 cents, which will be paid on 27 Aug 08.
KREIT – DBS
2Q08 led by positive rental reversion
Story: K-reit 2Q08 revenue grew 32% yoy to $13m while NPI rose a more modest 26% yoy to $9.2m as expense ratio increased to 29%. On a qoq basis, NPI was flat despite 13% higher revenue due to greater marketing and leasing costs. Distributable income of $14.2m was almost 2.7x over the previous period and 29% higher qoq with the added associate income from ORQ. There was no revaluation exercise carried out on the properties during the period.
Point: The improved operating performance was due to positive rental reversion from its office portfolio, largely at Keppel and GE Tower as average passing rents rose to $7.37psf/mth from $6.86psf/mth in Q1. Looking ahead, we believe DPU growth will continue to derive from positive rental renewals as new leases are re-contracted at levels which are higher (but growing at a more modest pace than before) vs expiring rates. It has a total of 36.3% of NLA to be renewed over the next 2 years. In addition, refinancing concerns have abated. The group has obtained a new loan of $391m from Keppel Corp, maturing in Mar 2011. When completed by Sep 08, K-reit’s debt maturity profile would be extended to 2.5 years. Cost of debt is estimated at 3.94% and will raise current overall cost of debt of 2.66% to close to 4% when exercised. With a debt/asset ratio of c28%, K-reit is also well placed to tap acquisition opportunities.
Relevance: We have revised our FY08 and FY09 DPU estimates to 9.9cts and 8.6cts to adjust for dilution from the rights issue units. The stock is currently offering 6.1- 7.1% yield over the next 2 years and is trading at 0.62x of FY09 BV. Maintain Buy with a price target of $1.61.
KREIT – BT
K-Reit’s distributable income up 173% to $14.2m in Q2
K-REIT Asia said yesterday its second-quarter distributable income rose 173 per cent to $14.2 million, from $5.2 million a year ago.
better showing was mainly due to income from its one-third stake in One Raffles Quay, which was absent in Q2 2007. Distribution per unit rose 1.9 per cent to 2.18 cents, from 2.14 cents in Q2 2007.
Net property income for the three months ended June 30, 2008 rose 26 per cent to $9.2 million, from $7.3 million the year before.
K-Reit also saw better rental income, with higher rents achieved for new and renewed leases, as well as improved occupancy. The average gross rental rate for investment property held directly by K-Reit rose to $5.66 per sq ft in June 2008, from $4.28 psf a year earlier.
For the first half of 2008, distributable income rose 169.8 per cent to $25.6 million, from $9.5 million in 2007. DPU for the first six months of the year rose 0.8 per cent to 3.94 cents, from 3.91 cents in 2007.
The trust also reduced its leverage to 27.7 per cent at June 30, 2008, from 53.9 per cent at Dec 31, 2007. Based on a 60 per cent aggregate leverage limit, this provides K-Reit with an additional debt headroom of $680 million to fund acquisitions and for working capital. Based on K-Reit’s existing portfolio, there will be no debt re-financing requirement until 2011, the trust said.
For the longer term, the trust’s manager is establishing a medium-term note programme to allow the Reit to swiftly tap the debt capital market.
K-Reit is upbeat about its prospects, even though the global economy is slowing. Some 35.4 per cent of its tenants are from the banking, insurance and financial services sectors. Most of these tenants have lease terms of six years or more, and ‘provide very stable income going forward’, said Tan Swee Yiow, chief executive of the trust’s manager.
Mr Tan pointed out that despite the weaker external environment, Singapore’s office rents rose slightly in Q2 2008, reflecting the tight supply of space.
‘Office rents will be supported by continued demand for prime office space as Singapore transforms itself into a global city and with spin-off multiplier effects from the two integrated resorts currently under construction,’ K-Reit said in a filing to the Singapore Exchange.
K-Reit’s stock closed unchanged at $1.40 yesterday. The stock has shed 29.6 per cent since the start of the year.