Author: tfwee
CRCT – DBS
Steady retail revenues
At a Glance
• 4Q09 DPU of 2.04 Scts in line
• Balance sheet metrics stable, gearing at 33.6%
• c26% of its FY09 revenue base up for renewal in FY10
• Maintain HOLD, TP adjusted to S$1.22.
Comment on Results
4Q DPU of 2.04 Scts in line. CRCT 4Q09 results were in line with our expectations. Gross revenues and net property income were 5.3% and 0.8% lower yoy at S$29.6m and S$20.3m respectively. The weaker performance was mainly due to weaker RMB and S$, tenant remixing activities at Wangjing mall coupled with lower performance from Saihan Mall as its AEI activities are still underway. Income available for distribution grew a marginal 1.3% to S$12.9m.
Book NAV of S$1.04. The trust also revalued up its book value by 1.2%, gearing levels remained the same at 33.6%, interest cover is high at 8.0x.
Performance should remain stable in 2010. While occupancy levels remained relatively stable at 95%, rental reversions at Wangjing (-4.9%) and Xizhimen (-3.3%) continued to be negative in 4Q09 due to tenant remixing but declines narrowed when compared to a year ago. Performance was somewhat offset by stronger performance at Xinwu Mall (+61.9%). Looking ahead, CRCT will be (i) renewing 23.5% of its space in FY10F; of which the majority will be from Xizhimen, Saihan and Wangjing malls.
Recommendation
Maintain HOLD, TP S1.22 based on DCF. While we like CRCT for exposure into China’s consumption and urbanization story in the longer term, we see limited upside to our target price at current levels. Our TP is adjusted upwards as we roll forward our numbers.
K-REIT – BT
K-Reit buys half of Brisbane office block for A$166m
K-REIT Asia has bought a 50 per cent stake in an office building in Brisbane, Australia, its first acquisition outside Singapore.
It paid Charter Hall Opportunity Fund No 4 A$166 million (S$206.5 million) for the stake in the Grade A commercial building, the same as its appraised value.
The seller has also signed an income support agreement until 2012 that will top up the difference between actual cashflows and a guaranteed net cashflow of A$12.8 million a year.
The building at 275 George Street was completed in April last year and comprises 40,317 sq m of office space over 30 floors plus 1,431 sq m of retail space. K-Reit said it was 99.4 per cent leased and two Australian corporations, Telstra and Queensland Gas, have 10-year leases.
Ng Hsueh Ling, chief executive of K-Reit Asia Management, said the acquisition will add 10 per cent to K-Reit Asia’s asset size, or from $2.1 billion to $2.3 billion. The building is expected to be immediately yield accretive and has a weighted average lease expiry (WALE) of 9.4 years. This will extend the WALE of K-Reit’s present portfolio to 5.9 years from 5.2 years.
K-Reit said the purchase will be funded entirely by proceeds from its recent rights issue, which will improve aggregate leverage from 27.7 per cent as at Dec 31 to 25.2 per cent after the deal is completed this quarter.
K-Reit recently reported distributable income for the fourth quarter increased 11.4 per cent to $19.4 million. For the full year, distributable income to unitholders increased 21.1 per cent to $70.5 million. It said then it was considering buying a stake in Marina Bay Financial Centre from parent Keppel Land.
CRCT – BT
CRCT posts 10% fall in Q4 DPU to 2.04 cents
But its FY09 income to be distributed climbs 10% on higher revenue from most of its malls
CapitaRetail China Trust (CRCT) yesterday reported a 10 per cent fall in income to be distributed in fourth quarter 2009 to $12.7 million from $14.1 million a year ago as rental revenue fell.
The trust, which gets its income from rents from eight retail properties in China, said that distribution per unit (DPU) likewise fell 10 per cent to 2.04 cents from 2.27 cents.
In Q4 2009, gross revenue was $29.7 million, down 5 per cent from a year ago due to frictional losses at Wangjing Mall when new tenants were introduced to improve mall positioning, as well as lower revenue from Saihan Mall.
The trust is upbeat on future prospects. Chief executive Wee Hui Kan said that the trust’s first-tier city malls are stable and greater contributions are also being seen from other malls.
‘I think we can certainly expect some growth (from CRCT in 2010) as China is growing,’ said Mr Wee. The trust will see organic growth on back of rising retail sales in China. In addition, it is looking for suitable acquisition opportunities, he added.
Mr Wee also said that the trust will continue to strengthen its business model to drive operational performance and improve results.
For the full 2009 financial year, CRCT reported a 10 per cent climb income to be distributed to $50.6 million, from $45.9 million in 2008, on improved revenue from most of its malls.
For FY2009, CRCT retained $0.55 million of the income available for distribution for working capital and capital expenditure.
DPU for the full year rose to 8.14 cents from 7.53 cents.
As at end-2009, CRCT’s total borrowing was $406.4 million while gearing stood at 33.6 per cent. The trust has successfully refinanced a $88 million loan facility which is maturing on Feb 5 this year. CRCT’s next major debt will mature in November and discussions with financial institutions have commenced. The trust is confident that it will refinance the debt when it matures, it said.
CRCT shares lost 4 cents or 3 per cent to close at $1.20 yesterday.
Cambridge – Phillip
Full Year 2009 Results
• Full year revenue of $74.4 million, net property income of $65.1 million, distributable income of $44.2 million.
• 4Q09 DPU of 1.38 cents, bringing full year DPU to 5.36 cents.
• Total asset value of $874.2 million.
• Maintain hold recommendation, fair value raised from $0.41 to $0.48
Results within expectations
CIT recorded full year revenue of $74.4 million (+3.0% y-y), net property income of $65.1 million (+3.7% y-y) and distributable income of $44.2 million (-7.7% y-y). Full year DPU was 5.36 cents (-10.9% y-y). CIT full year results came in within expectations. Revenue was +2.0% higher than our forecasts, net property income was +1.4% higher, distributable income was +11.6% higher and DPU was +10.9% higher. The higher DPU against our forecast was due to the amortization of transaction cost.
CIT divested some properties in 4Q09 for total sale proceeds of $6.6 million and recorded a gain of $0.3 million. Total property asset value as at 31 Dec 2009 was $874.2 million. CIT has reclassified $78.6 million worth of properties as current assets held for divestment and management has mentioned that these properties would be divested in the course of the year.
Quarterly results review
CIT has registered stable revenue with slight growth over the quarters. This is expected as the leases are secured with an rent escalation component. Portfolio occupancy was also remarkable at almost full occupancy, above the Singapore industrial average of 91.9%. DPU has held steady in the past 3 quarters. Going forward, we may see a weakening in revenue as well as DPU, given that CIT has sold off some properties and had also earmarked properties meant for divestment.
Capital management
CIT has total of $390 million, which is due only in 2012. Gearing (debt/assets) is 42.6%. CIT was among the first REITs to secure refinance during the height of the credit crisis in 2009. For its ability to secure the refinancing, it was awarded the ‘Best Deal in Singapore 2009’ award at The Asset Magazine Triple A Asian Awards earlier this year.
Forecasts
We made some adjustments to our revenue forecast to account for the divestment of properties, however we have not factor in the sale of the earmarked properties as well as any contribution from asset enhancements and acquisitions. We forecast a revenue drop of 5.4% in FY10E and a DPU of 4.2 cents, which translate into a dividend yield of 9.0%. We roll forward our valuation to FY2010E and raise our fair value from $0.41 to $0.48 and maintain our hold recommendation.