Author: tfwee
FSL – DBS
Distributions in line
Comment on Results
First Ship Lease Trust declared its 2Q08 results today and announced a distribution of 2.80 UScts per unit for the quarter, which is in line with our expectations of 2.77 UScts per unit. The total distribution amounts to US$14.0m and represents 100% of distributable cashflows. The DPU payout for 2Q08 is 8 % higher qo-q and 28% higher y-o-y. Revenue for 2Q08 came in at US$20.7m, up 71% y-o-y.
The increase in revenue and net distributable income y-o-y is mainly due to the incremental cashflows from the acquisition and leaseback of six vessels – 2 product tankers with Groda in Nov’07, two crude oil tankers with Geden in Apr’08 and two containerships with Yang Ming Marine in May and Jun’08. A full quarter’s cash flow impact from the acquisition of the two Ying Mang ships is thus, expected to come into effect only from 3Q08 onwards. In addition, the third vessel to be acquired from Yang Ming, which is currently under construction and expected to be delivered by end October’2008, should bolster earnings from Nov’08 onwards. The Trust is currently negotiating an increase in its revolving credit facility by US$65m in order to facilitate the acquisition. Postacquisition, debt to equity ratio would stand at 1.2:1 (slightly higher than long term target of 1.16:1).
Recommendation
Thus, FSLT will continue to provide investors with steady distributions backed by accretive acquisitions and we maintain our DPU forecasts for 3Q08 and 4Q08 at 3.05 UScts and 3.07 UScts, respectively. Our DPU projection for the full year remains unchanged and we maintain our BUY recommendation at a target price of S$1.65, which is pegged to a target return of 9.4%. The stock is currently trading at a dividend yield of 12.8%-13.8% in FY08-09, which we believe translates to yield spreads that are unjustified when compared to US peers.
MapleTree – BT
MapletreeLog banking on rights issue
Move will enable the company to boost capacity for acquisitions
A RIGHTS issue will boost Mapletree Logistics Trust’s capacity for acquisitions, but the trust will only selectively take on deals that are highly accretive.
‘While we remain committed to our yield plus growth strategy, in the current environment, the manager’s immediate focus is to optimise yield from organic growth through extracting positive rental reversions and undertaking asset enhancements,’ said the CEO of Mapletree Logistics Trust Management (MLTM) Chua Tiow Chye.
‘We believe that with a robust balance sheet after the rights issue, we are well positioned to operate in the current more uncertain times,’ he said in a statement.
‘While current market conditions do make acquisition opportunities more readily available, we will evaluate these selectively and only if they are highly accretive.’
MapletreeLog’s unitholders approved a renounceable rights issue to raise around $606.7 million at an extraordinary general meeting on Friday. Of the net proceeds of around $591.6 million, $348 million or 59 per cent will be used to finance or refinance the acquisition of target properties.
Another $243 million will be used to repay debt, while the remaining proceeds will go towards general corporate or working capital needs.
MapletreeLog made the rights issue to strengthen its balance sheet – by lowering its gearing and improving its debt coverage ratio, for instance – and to increase the free float of its units.
‘Notwithstanding the dilution, we should still do better this year than last year,’ said MLTM’s deputy CEO and CFO Richard Lai at a briefing yesterday.
This could be due mainly to the full accounting of contributions from MapletreeLog’s earlier acquisitions and positive growth in its base properties.
MapletreeLog on Sunday reported distributable income of $22.6 million and available distribution per unit (DPU) of 2.04 cents for the second quarter ended June 30.
Both results were 28 per cent higher than in the same period last year.
Mapletree units ended trading at 70 cents yesterday, 0.5 cent down.
First Reit – BT
First Real Estate Investment Trust (First Reit) announced today that its distributable amount for the second quarter ended June 30, 2008 rose 16.1 per cent to $5.2 million from a year ago.
This translates to a distribution per unit (DPU) of 1.91 Singapore cents, up 15.8 per cent, said Bowsprit Capital Corporation, the manager of the Reit.
For the half year ended June 2008, First Reit’s distributable amount and DPU are $10.26 million and 3.76 cents, respectively.
Based on its annualised DPU of 7.62 cents and the closing price of 70.5 cents on July 18, First Reit’s distribution yield is 10.81 per cent, one of the highest amongst Singapore Reits, Singapore stocks and government bonds, Bowsprit noted. The units closed yesterday at xxxx cents.
Driven by rental increases from its four Indonesian properties as well as the rental income generated from its four Singapore properties acquired in 2007, First Reit’s gross revenue in the second quarter rose 15 per cent $7.5 million, lifting its half-year gross revenue by 19.3 per cent to $15.0 million.
First Reit is Singapore’s first healthcare reit. It is aiming to raise assets under management (AUM) to $500 million by 2009 from the current $326 million. ‘First Reit will continue to seek opportunities in the region including Singapore, Indonesia and China to raise its AUM,’ said Bowsprit. ‘We have been selective in our acquisitions as we want to ensure that our portfolio consists of only quality and good yielding healthcare assets which will provide consistent, sustainable returns to unitholders.’
Apart from portfolio expansion, First Reit intends to improve on the income generating capacity of its existing healthcare properties through asset enhancement initiatives and working with its tenants to continually undertake upgrading of healthcare services. Despite the current uncertain economic conditions, Bowsprit said it remains ‘optimistic’ that First Reit will continue to perform well in the second half of the year as its revenues are largely derived from long-term rental leases. The current economic environment is also an opportunity for making better acquisitions. — Wong Weikong, BT Newsroom
MapleTree -CIMB
Possible overhang after rights issue
• In line. 2Q08 distributable profit of S$22.6m was in line with our expectations, forming 22% of our full-year estimate. DPU grew 28.2% yoy to 2.04cts, forming 28% of Street expectations and 38% of our forecast for FY08. We expect 2H to be stronger on the back of the completion of acquisitions and rental reversions. Our forecasts have factored in dilution from a coming rights issue. Revenue increased 28.4% yoy to S$43.8m on full contributions from 18 properties acquired in 2007 and four properties acquired in the quarter, as well as average rental reversions of 12% over preceding rates.
• Approved rights issue to strengthen balance sheet. At an EGM held on 18 Jul, unitholders approved a renounceable rights issue of 831.1m new units to raise S$606.7m. Despite the recent fall in MLT’s share price, the rights offer price of S$0.73 was maintained, with all excess rights not taken up by investors or the sponsor Mapletree Investment Pte Ltd to be absorbed by the four underwriting banks. However, we note that there is no moratorium to prevent the underwriters from releasing their units on the open market after the rights issue. Proceeds will be used to bring down MLT’s asset leverage from 56% to 37%, and its short-term debt from 42% of total debt to an estimated 10%. MLT’s average debt duration would also be stretched from 2.15 years to about three years.
• FY08 DPU forecast raised; but target price lowered to S$0.85 (from S$1.00). The rights issue is a bitter pill that needs to be taken, in our view, in order for MLT to break out of its high gearing. We have raised our FY08 DPU forecast of 5.4cts to 7.6cts, after adjusting for a shorter 4-month dilution effect. Following this, our DDMderived target price rises to S$1.03 (discount rate 8.0%) from S$1.00. At the rights offer price of S$0.73, dividend yield for FY08 is 10.4% while price upside potential of 38% is higher than for its peer, A-REIT (AREIT SP, Outperform, S$2.20, target price S$2.60) (yield 6.6%, price upside 18%). But as we see risks of a share overhang after the rights issue, we have brought our target price down to S$0.85, which is MLT’s estimated book level post-dilution. Maintain Neutral.
AREIT – DBS
Confidence boosting 1Q09 results
Story: Ascendas REIT (AREIT) begins the new financial year on a good note. Gross revenues and NPI grew 19.6% and 20.1% yoy to S$92.5m and 69.7m respectively and are within 25% of our full year forecasts. Distribution income also increased 16% to $51.7m, translating to a DPU of 3.89cts. A-REIT’s portfolio also enjoyed high portfolio occupancy of 98.6%.
Point: The strong performance was largely attributed to contributions from an enlarged asset base following completion of several properties in the last quarter. In the current quarter, AREIT added 2 more properties to its portfolio, bringing it to 86 properties worth c.$4.5bn. In the near term, we expect growth from i) contributions from the recent purchase of Creative Building and 8 Loyang Way in coming quarters, and ii) positive rental reversions from 7.1% of its NPI. In the medium term, its development projects worth S$326m currently WIP will provide support for NPI growth, not forgetting potential 3rd party asset acquisition opportunities. In this aspect, we have assumed S$400m worth of asset acquisitions in FY09- FY11, funded by a combination of debt and equity in the later 2 years, leading to a LT gearing ratio of 44%.
Relevance: Maintain BUY with TP S$2.48. We have adjusted our DCF valuation downwards to take into account a higher risk free rate of 3.9 and a lower terminal growth rate of 0.5%. AREIT is currently trading at 1.2x P/NAV and offers investors a stable FY09 and FY10 DPU yield of 7.4% and 7.6% respectively.