Author: tfwee
a-iTrust – DBS
Reasons to stay invested
• Consistently strong performance
• Earnings spike to come in FY11 post completion of 2 of its new buildings
• Buy for growing yields, TP S$1.17
Stable operations. Gross revenues came in line with expectations at S$29.9m (+4% yoy, -2% yoy), contributed by higher rents, increase in energy billings from ITPB power plant, higher maintenance fees at ITPC and new contributions from a new multi-level car park in ITPB. Net property income (NPI) came in at S$19.3m (+13% yoy, +1% qoq), lifted by savings from successful cost management initiatives instituted in 2Q10. Distributable income came in at S$14.1m (-8% yoy, 0% qoq) translated to a DPU of 1.85 Scts.
Sustained occupancies, upside from development projects. Looking into FY11, a-itrust will be renewing c35% of its space, most of which are from the Vega and the Crest. Given that this is the first renewal cycle, we believe that tenants should remain at their existing locations. In addition, we look forward to a-itrust taking delivery of 2 out of 3 development projects in the later part of FY11, which will lead to positive earnings growth.
Adjusting INR assumptions. The strengthening of INR vs S$ exchange rates means that future hedges are likely to be in a-itrust favor. Therefore, we adjust our INR vs S$ estimates to INR 33.5 to S$1, in line with our DBS currency strategist’s outlook for INR in 2010 which is similar to the rate that the trust has hedged its next distribution payment.
BUY for growth, TP S$1.17. a-itrust’s DPU CAGR of 9% over FY11-12 remains a key attraction, prospective yield of 7.9-8.5%. Upside earnings surprise will hinge on potential acquisitions given a-itrust’s strong financial leverage position. Our target is adjusted to S$1.17 from higher earnings estimates and rolling forward our valuations.
CMT – CIMB
Zooming in on asset enhancement
• Results in line; upgrade to Neutral from Underperform. FY09 DPU met Street and our expectations (101% of our estimate). We change our assumptions to reflect moderately stronger income growth, and higher but delayed capex. Our FY10-11 DPU estimates rise by 3%. We also introduce FY12 estimates. Following our upgrade, our DDM-based target price rises to S$1.88 from S$1.82 (discount rate 8.1%). We upgrade the stock to Neutral from Underperform as we are more assured of an improving retail performance in 2010 and a possible later injection of Ion Orchard. We see stock catalysts from accretive acquisition announcements.
• Full-year DPU of 8.85cts (CIMB-GK 8.59cts). DPU declined 7% yoy following more units from a rights issuance in 2009. Net property income (NPI) of S$376.8m was up 10% yoy, a net effect of full-year contributions from Sembawang Shopping Centre (re-opened after asset enhancement works), and full contributions from Atrium@Orchard. Distributable income of S$282m grew stronger than NPI, by 18% yoy following: 1) the release of S$4.8m of retained distributable income from 1Q09; and (2) the release of S$2.2m distribution income from CRCT retained in 3Q09.
• Occupancy and rental reversions positive. Occupancy in CMT’s malls remained nearly full at 99.8%. Rental reversions stayed positive at 0.8% p..a. Management is confident of better growth in rental reversions in the new financial year. While portfolio gross turnover per sf declined 2.4% yoy, it improved 11.3% qoq, signifying a recovery in the businesses of CMT’s tenants.
• Asset enhancement of Jurong Entertainment Centre (JEC) and Raffles City basement link would be carried out this year. The work would be completed in 1Q12 and 4Q10 respectively. Total capital expenditure is estimated at S$214m with ROI of 8% for both assets. The asset enhancement would be funded with cash on hand and existing bank facilities.
• Changes in assumptions. We raise our assumptions for income growth of retail malls by up to 7% (from 3%) and increase our capex assumptions for JEC to S$200m (from S$150m) to reflect the new plans announced, and later commencement of work at Atrium@Orchard. Our DPU estimates rise by up to 3%
for FY10-11.
PLife – CIMB
Asset enhancements and acquisitions coming up
• Full-year above expectations; maintain Outperform. FY09 DPU met Street expectations but exceeded our expectations (109% of our estimate) due to lowerthan-forecast interest expenses. We maintain our FY10-11 estimates and introduce FY12 estimates. Our DDM-based target price is intact at S$1.57 (discount rate 7.2%). PLife REIT trades at 0.96x P/BV and a forward yield of 6.6%. Maintain Outperform on potential acquisition catalysts.
• Full-year DPU of 7.74cts (CIMB-GK 7.11cts). This represents a dividend yield of 5.8%. Net property income of S$62m for the full year was up 23% yoy following contributions from newly-acquired Japanese nursing homes in 2009 and higher rent from Singapore hospitals as a result of a high growth rate for the inflation-linked CPI +1% formula. Distributable income of S$46.7m and full-year DPU of 7.74cts increased 13% yoy to exceed our expectations following lower-than-forecast interest expenses. PLife’s REIT’s assets were revalued at S$1.15bn in Dec 09, gaining S$29m. NAV/unit in Dec 09 increased to S$1.39 (including distributable income) from S$1.34 in Dec 08.
• Asset leverage remained low at 28%. In 2H10, S$34m (10.5% of total debt) of debt will be due for refinancing. Management guides that new interest rates are likely to remain the same, if not lower. Interest cover remained high at 6.8x. Additionally, interest rates have been fixed for 100% of its debt, which eliminates uncertainties from fluctuating interest rates.
• Asset enhancements and acquisitions in 2010. Management will commence asset enhancement work, likely to concentrate in Singapore hospitals. Additionally, it will continue to look for accretive acquisitions in the region. We anticipate more acquisitions in Japan, and possibly Australia and Malaysia.
a-iTrust
Ascendas India Trust’s Q3 distributable income falls 8%
ASCENDAS India Trust has recorded distributable income of $14.1 million for its third financial quarter ended Dec 31, 2009, down 8 per cent from a year ago.
Distribution per unit (DPU) for Q3 was 1.85 cents, also lower by 8 per cent.
Total property income for the quarter was $29.9 million, which was 4 per cent higher than the corresponding quarter last year. Net property income was $19.3 million, up 13 per cent.
The trust’s portfolio of 4.8 million sq ft of completed space is fairly evenly distributed among Bangalore, Chennai and Hyderabad. The properties house 248 tenants operating in various IT sub-sectors such as software development, business process offshoring, research and development, and data centres.
Portfolio occupancy remained high at 97 per cent as at Dec 31, 2009, while tenant retention rate over the last nine months was 79 per cent, the trust said.
Jonathan Yap, chief executive officer of Ascendas Property Fund Trustee Pte Ltd, the trustee-manager, said: ‘We are pleased to report another strong portfolio performance in the third quarter. Indicators are suggesting that an economic recovery is well underway.’ The Indian economy grew 7.9 per cent year-on-year in the quarter ended September 2009.
‘We will focus on positioning the trust to benefit from further improvements in the general operating environment,’ he said.
The trust will continue to focus on growing the operating earnings of its assets by actively managing the portfolio, optimising its capital structure, and further growing the portfolio through developing the land it owns and pursuing yield accretive acquisitions.
FirstREIT – BT
First Reit Q4 distributable income down 0.6%
FIRST Real Estate Investment Trust (First Reit), Singapore’s first healthcare real estate investment trust, posted a distributable income of $5.3 million for the fourth quarter ended Dec 31, 2009, down 0.6 per cent from a year ago, its manager Bowsprit Capital Corporation reported yesterday.
Distribution per unit (DPU) for Q4 2009 was one per cent lower at 1.92 cents. Based on its closing price of 86 cents on Jan 20, 2010 and the annualised DPU of 7.62 cents, First Reit said that it has a distribution yield of 8.86 per cent.
Gross revenue and net property income inched up 1.4 per cent and 1.2 per cent to $7.7 million and $7.6 million, respectively.
On a full-year basis, distributable income increased 0.6 per cent to $21 million on the back of a 0.7 per cent rise in gross revenue to $30.2 million.
‘The recent global recession has demonstrated the resilience of the healthcare business, particularly in Asia which continues to perform well,’ Bowsprit said. First Reit’s portfolio consists of eight properties located in Indonesia and Singapore.
‘We are heartened that our hospitals in Indonesia have continued to perform well despite the global financial crisis last year. The variable rental component, in addition to the fixed annual rental escalation, will mean higher revenue to be generated by our Indonesian assets for FY2010,’ said Ronnie Tan, Bowsprit’s chief executive officer.
In Indonesia, First Reit’s Siloam Group of hospitals has witnessed robust growth in demand for services and higher occupancy, it said.
In Singapore, where First Reit owns three nursing homes, the group reported that prospects for private nursing care are bright in view of a steadily aging population and the government’s recent push to boost and raise awareness of palliative care services. ‘All these factors will help to underscore the current and future demand for quality nursing homes and eldercare facilities for short and long-term convalescent, respite and rehabilitative care’.
The Reit will continue to look at ways to enhance its nursing homes in Singapore. Plans are being proposed for extension works at the Lentor Residence. First Reit has also commenced comprehensive asset enhancement works for its Adam Road Hospital since November last year with completion targeted for mid-2011.
The cost of asset enhancement works, estimated at $18.6 million, will be funded through debt, and will raise First Reit’s gearing from 15.5 per cent as at Dec 31, 2009 to just below 20 per cent upon completion – which will still be lower than the regulatory limit of 35 per cent.
‘Our tight capital management and low gearing, coupled with the fact there is no refinancing requirement until 2012, have provided First Reit with ample headroom to pursue acquisition opportunities and carry out further asset enhancement works to provide best-in-class service for our patients. With improving market conditions, we are currently exploring acquisition opportunities with our sponsor, PT Lippo Karawaci Tbk and other third parties to expand our portfolio of yield accretive properties and raise our overall asset base,’ said Dr Tan.
As at Dec 26, 2009, First Reit’s eight properties were revalued at $340.9 million, representing an increase of $16 million over book value as at end December 2008.
First Reit will maintain a payout policy of 100 per cent of distributable income for FY2010.
The Reit last traded at 86 cents.