Author: tfwee
CRCT – UOBKH
2Q07: DPU Growth Despite Lower Revenue
DPU growth of 9.6% despite lower gross revenue. CRCT’s gross revenue of S$17.6m and NPI of S$12.4m came in lower than its forecast by 7.2% and 1.6% respectively. This lower revenue is largely due to longer than expected time taken to conclude lease negotiations with F&B tenants in Qibao Mall, and also to a smaller extent, weakening of RMB against Singapore Dollars. Despite that, DPU reported 1.27 Scts in 2Q07, a 9.6% increase over its forecast.
Impact of reconfiguration works to come in 2H07. Despite several issues faced associated with its reconfiguration works, such as longer than expected time taken by authorities to approve tenants’ business operations, pretermination of leases as well as affected shoppers traffic, we believe CRCT is capable of resolving the issues with the stabilising of rental income and impact of asset enhancements to come in the second half of the year. Potential upside may also be derived from improvements in occupancy rates of Wangjing Mall, Qibao Mall and Xinwu Mall whose current occupancy rates are at 90.3%, 78.0% and 81.5% respectively.
Aggressive acquisition pipeline. CapitaLand, CRCT’s parent, has signed an agreement with Vanke, China’s largest residential developer to acquire retail malls in China. CapitaLand has already identified a list of retail malls for CRCT where it has the first refusal, allowing its current portfolio to potentially grow multi-fold for the next few years. We believe acquisitions and continued asset enhancements will be the key stock driver going forward.
CMT – DBS
More of Funan Digilife in store
Unutilised GFA paves the way for development plan. Asset enhancement plans are continually unwrapped by CMT, creating value to its portfolio on a consistent basis. This time, it centres around 385,000 sf of unutilised GFA of derived from a maximum plot ratio of 7x. This paves the way for further value creation opportunities for CMT on top of the various asset enhancement initiatives as discussed in our previous note on various assets under its portfolio.
Office extension in store. As revealed by CMT recently, its planning application has received provisional approval from URA, paving for the development of a nine-storey commercial building as an extension to the existing retail mall. To achieve a more efficient floor plate for the proposed new office block extension, CMT is appealing to URA for an additional waiver. We expect CMT to disclose more details for this new development soon as the latest edition of a consistent string of AEI initiatives, pending finalisation of details with URA.
Preliminary assumptions. Assuming S$400 psf development cost for the office extension fully funded by debt with 80% efficiency of floor plate, we expect this piece of asset enhancement to be highly accretive ROI of 15% on book costs of development (inclusive of DC) based on our estimates. We expect DPU accretion of 6% to our 2011 DPU estimates, assuming a three-year development time frame.
Raising TP to S$4.31. Factoring the potential addition of Funan Extension to CMT’s portfolio, we derive accretion of 24 cents to our DCF-based target price of S$ 4.31 (inclusive of surplus on CRCT stake). Maintain Buy on CMT, in our view the primer of S-REITs supported by consistent performance in organic growth, asset enhancement initiatives as well as acquisitions-driven growth reinforced by alternative channels of acquisition pipeline.
CRCT – SGX
CRCT’s Second Quarter 2007 Distribution Exceeds Forecast1 by 9.6%2
Asset enhancement plans to transform Jinyu Mall into the first one-stop shopping destination in Huhehaote, Inner Mongolia Yield accretive acquisition worth over S$250 million is expected by end-2007
Singapore, 25 July 2007 – CapitaRetail China Trust Management Limited (“CRCTML” or “the Manager”), the manager of CapitaRetail China Trust (“CRCT”), is pleased to announce a distributable income of S$8.1 million to unitholders of CRCT (“Unitholders”) for the period from 1 April 2007 to 30 June 2007 (“Second Quarter 2007”). This is S$0.7 million or 9.6% higher than the forecast1 distributable income of S$7.4 million for Second Quarter 2007.
Distribution Per Unit in CRCT (“DPU”) for Second Quarter 2007 is 1.70 cents (6.82 cents on an annualised basis), which is 9.6% higher than the forecast1 DPU of 1.55 cents (6.22 cents on an annualised basis) for the same period. DPU for the period from 1 January 2007 to 30 June 2007 (“First Half 2007”) 3 is 3.21 cents (6.46 cents on an annualised basis), 9.6% higher than the forecast1 DPU of 2.93 cents (5.90 cents on an annualised basis).
The Books Closure Date is on 12 September 2007, and Unitholders can expect to receive their Year-To-Date 2007 4 distribution of 3.27 cents per unit on 24 September 2007 5.
Mr Hsuan Owyang, Chairman of CRCTML, said, “We are pleased to have outperformed our forecast to deliver enhanced results to our Unitholders. In the next few months, CRCT is on track to undertake its first yield accretive acquisition worth over S$250.0 million, which will grow its asset size to close to S$1.0 billion. This acquisition will demonstrate the successful execution of CRCT’s well-laid out growth strategy, where stabilised assets from its secured and proprietary pipeline are injected into CRCT. To date, CRCT’s strong acquisition pipeline, constituting retail assets owned by CapitaLand-sponsored private retail funds and in the future, include retail malls acquired through the co-operative agreement with China Vanke, already exceeds 70 retail malls 6 in over 28 cities across China. We will continue to look for new opportunities to grow the size of the portfolio, and remain confident of delivering the 2007 forecast distribution of 6.13 cents per unit, barring any unforeseen circumstances.”
CEO of CRCTML, Mr Lim Beng Chee said, “Our acquisition plan, asset enhancement initiatives, and our continuous focus on applying a disciplined and pro-active management strategy at our malls will all add up to deliver growth and sustainable total returns to our Unitholders. Growing shopper traffic and occupancy rates by over 33% and 5% respectively at newly developed malls from over a year ago are strong testaments to our proactive asset management skillsets. The major asset enhancement initiative at Jinyu Mall, which is expected to grow its net property income by over RMB 8.0 million, sets the momentum for more value creation opportunities at our China retail malls.”
CRCT’s gross revenue for Second Quarter 2007 was 7.2% or S$1.4 million lower than the forecast1 for the same period. This is mainly attributable to the temporary vacancy void as a result of the reconfiguration works undertaken on Level 1 at Xinwu Mall and the longer than expected time taken to conclude lease negotiations with F&B tenants on Level 4 at Qibao Mall. Revenue at Wangjing Mall was also marginally lower due to certain tenants who took longer than anticipated to receive their approvals from the authorities as well as pre-terminations by some tenants.
CRCT’s net property income for Second Quarter 2007 was 1.6% or S$0.2 million lower than the forecast1. In Renminbi denomination, net property income was 0.5% or RMB 0.3 million lower than the forecast1.
Overall, net interest savings, which was partially offset by higher taxation for the period, contributed to the higher distributable income for Second Quarter 2007, compared to the forecast1.
Asset Enhancement Plans at Jinyu Mall, Huhehaote, Inner Mongolia
Jinyu Mall, currently master leased to the Beijing Hualian Group (“Beijing Hualian”), encompasses significant value creation opportunities. Other than having an inefficient layout, the mall also lacks on-site car parking lots. The Manager has thus developed a set of asset enhancement initiatives which is expected to enhance the rental income and consequently, the property yield of Jinyu Mall.
Firstly, the popular fresh goods section of the Beijing Hualian supermarket will be relocated from its current location on Level 1 to Level 3 of the mall. The relocation will release prime retail space on Level 1 for higher-yielding specialty tenants, and concurrently, help drive shopper traffic and raise rental value on the upper floors. Concurrently, the space currently occupied by the departmental store and its sub-lesses on Levels 1, 2 and 3 will be recovered by the Manager, reconfigured and directly leased to specialty tenants. Similarly, this initiative is expected to result in higher rental yields. In addition, new car park lots will be added on Levels 4 and 5 of the mall to attract and cater to the growing population of car owners in the city. The proposed works are expected to transform Jinyu Mall into the first of its kind one-stop family shopping, dining, and entertainment destination in Huhehaote.
The enhancement works are expected to commence in Third Quarter 2007 and are expected to be completed by First Quarter 2008. The initiatives are expected to yield an annual incremental net property income of approximately RMB 8.3 million (S$1.7million)7. Based on an estimated capital expenditure of RMB 82.5 million (S$16.5 million)7, the ungeared return on investment is expected to be 10.0%.
Update on Jiulong Mall
On 13 July 2007, CRCT obtained the legal ownership of Jiulong Mall with the transfer of Jiulong Mall’s strata titles to the basement, Levels 1, 2 and 3 to CapitaRetail Beijing Shuangjing Real Estate Co., Ltd (formerly known as CapitaRetail Beijing Jiulong Real Estate Co., Ltd), the special purpose company established to hold the mall.
Since listing on 8 December 2006, CRCT did not hold the legal title of Jiulong Mall and had only contractual rights to the mall’s rental income. Levels 2 and 3 of the mall were subject to a court injunction as the vendor of Jiulong Mall was party to certain legal proceedings under the China laws, whilst the transfer of strata titles for Level 1 and the basement level were not effected on time by the China real estate administrative authorities before the Listing Date.
Update on Xinwu Mall
Reconfiguration works on Level 1 at Xinwu Mall was completed on schedule in May 2007. Established China domestic retailers, such as Daphne (达芙妮), one of the leading shoe brands in China, Disney Lifestyle Store (迪士尼生活馆), which sells Disney fashion and accessories as well as Mengziyuan (蒙自源过桥米线), a popular local fast-food chain, have since commenced operations.
Update on Wangjing Mall
Occupancy rate at Wangjing Mall now stands at a high of 98%. Levels 5, 6 and 7 of the mall’s tower block have been leased to a reputable children enrichment school, Elfa Learning Centre (爱儿坊), kids’ fashion store, Lijia Baby (丽家宝贝), and a popular Chinese restaurant, Beijing Jiangnanchuzi (北京江南厨子). Escalators linking the tenants on the three levels of the tower block to Level 4 of the mall podium have also been added to help drive shopper traffic and tenants’ sales at the upper floors.
1 Based on the forecast shown in CRCT Prospectus dated 29 November 2006 (“the Prospectus”)
2 Actual annualised Distribution Per Unit for the period from 1 April 2007 to 30 June 2007 versus the forecast annualized Distribution Per Unit for the same period
3 As disclosed in the Prospectus, CRCT will make distributions to the Unitholders on a semi-annual basis for the six-month periods ending 30 June and 31 December of each year.
4 Year-To-Date 2007 includes private trust period from 23 October 2006 to 7 December 2006 and public trust period from the date of listing on 8 December 2006 (“Listing Date”) to 30 June 2007.
5 As disclosed in the Prospectus, the first distribution after the Listing Date will be paid by CRCTML on or before 30 September 2007.
7 S$1 = RMB4.99
Source : SGX
FrasersCT – SGX
Frasers Centrepoint Trust 3Q07 Results
- 3Q07 DPU of 1.67 cents, up 14.4% from IPO forecast of 1.46 cents
- Track record of strong organic growth continues
Singapore, 24 July 2007 – Frasers Centrepoint Asset Management Ltd. (“FCAM”), the Manager of Frasers Centrepoint Trust (“FCT”), is pleased to announce that FCT’s distributable income for third quarter 2007 (period 1 April to 30 June 2007), was S$10.3 million. This translates to a distribution per unit (“DPU”) of 1.67 cents, an increase of 14.4% compared to the forecast.
Gross revenue for third quarter 2007 was S$18.9 million, and net property income was S$12.6 million, in line with the forecast. More than 90% of new and renewed leases in third quarter 2007 were from Causeway Point, which secured rental renewal rates of more than 10% above preceding rental rates to continue the trend of strong and sustainable rents at FCT’s malls. In the quarter, Northpoint extended five expiring leases for a period of one-year in anticipation of its pending asset enhancement in FY 2008.
High Portfolio Occupancy Rates On the Back of Rising Demand
The weighted average occupancy rate of FCT’s portfolio was 92.9% as at 30 June 2007, with Causeway Point and Northpoint achieving occupancy rates of 100.0% and 99.0% respectively. Anchorpoint’s occupancy rate was 39.1% pursuant to the exercise to vacate sections of the mall for asset enhancement and repositioning works.
Asset Enhancement Initiative Update: Anchorpoint
The asset enhancement initiative to reposition Anchorpoint with a village-mall concept offering a wider range of F&B and fashion options is on schedule for completion at the end of November 2007. Close to 80% of the mall has been committed or in advanced stages of discussions. Confirmed major tenants include Cold Storage and Kou Fu which will operate a supermarket and food court respectively. Other new comers to Anchorpoint include The Coffee Connoisseur (TCC), Xin Wang, Kopi Alley, Times the Bookstore, SK Jewellery, Capitol Optical, Club Marc, Reading Place and Jollibean. Anchorpoint’s asset enhancement is expected to increase the average rental rate of the mall by over 35% to approximately S$7.00 per sq ft.
Acquisition of Hektar REIT
In June 2007, FCT announced the completion of the acquisition of 86.4 million units or 27% of the issued units in Hektar Real Estate Investment Trust (H-REIT), Malaysia’s only pure retail REIT listed on Bursa Malaysia Securities Berhad. The cost of the investment was RM104.5 million (approximately S$46.6 million1) at RM1.21 per H-REIT unit. The cornerstone investment in H-REIT provides FCT with a yield-accretive investment in an underlying portfolio of prominent and high quality suburban regional malls in Malaysia, namely Subang Parade in Selangor and Mahkota Parade in Melaka. These retail malls have a total net lettable area of approximately 944,500 sq ft, house more than 230 major international and domestic retailers, and enjoy a combined visitor traffic of more than 279,000 persons per week. H-REIT is expected to increase FCT’s DPU by 0.21 cents on an annualized basis, or 3.5% over the forecast for the year ending 30 September 2007 as disclosed in FCT’s prospectus dated 27 June 2006.
“We are pleased with the continuing development and prospects of FCT. Occupancies and rental reversions remain strong. Anchorpoint’s upgrading is on track for completion to capture the year-end festive season and the strategic investment taken this quarter in H-REIT will start to make its maiden contribution in the next quarter,” said Mr Christopher Tang, Chief Executive Officer, Frasers Centrepoint Asset Management Ltd., the Manager of Frasers Centrepoint Trust.
1 Based on an assumed exchange rate of RM1.00 = S$0.4456
Source : SGX
MMP – DBS
Looking forward to next year’s bonus
Potential bonus for MMP next year – Toshin lease renewal. We highlight a key point in terms of organic growth for MMP, with its master lease with Toshin up for renewal in June 08. The master lease is expiring in 2013 with an option to renew for another 12 years. Under the lease arrangement, rents are reviewed every three years with a maximum upward revision of 25%. With the master lease currently under-rented at around the S$11 psf level, we think there is a potential for the next rental review to edge towards the higher end of the 25% cap on positive rental revision.
Acquisitions momentum still at an early stage? To recap, MMP has recently begun its cross-border acquisition growth path with i) acquisition of a portfolio of seven properties in Japan for MMP’s debut deal; and ii) 50% of retail asset, Renhe Spring Department Store for RMB150m in Chengdu. Moving forward, MMP has also secured ROFR on vendor Renhe’s property ventures, which could imply an alternative acquisition pipeline for MMP gaining more momentum moving forward in terms of acquisitions in the absence of a developer sponsorship.
Enjoying office rental reversions. With the very tight office supply situation in the CBD, other alternative office locations are also enjoying positive spillovers. Asking rents for Wisma Atria and Ngee Ann City are already at S$13 and S$12 respectively and we expect closing rents to edge upwards.
Maintain Buy with raised TP of S$1.48. We are raising our target price on the premise of two factors: I) Assuming a base case scenario of bargaining power shared between landlord and tenant, we now impute a potential rise in retail rentals for the Toshin lease to 12.5% when the renewal is up; and ii) higher imputed office rents of S$11 and S$12 for Ngee Ann City and Wisma Atria respectively. This leads to our higher DCF-based target price of S$1.48 and maintain our Buy recommendation. Key risks to our recommendation include i) inability by the REIT manager to secure positive renewal rates for the Toshin lease and ii) acquisitions from third-party assets do not gather pace to imply growth justifying yield compression.