Author: tfwee
AREIT – UOBKH
1Q08: Good Start For The Financial Year
1Q08 NPI increase 15.8% yoy, DPU up 9.1% yoy. A-REIT’S net property income of S$58.0m and net profit S$42.7m reflects a 15.8% and 12.7% increase yoy respectively. The increase in rental income was a result of new leases and expansion by existing tenants which recorded a 57% yoy increase. DPU rose 9.1% from 3.09 Scts in 1Q07 to 3.37 Scts (6.79 Scts on an annualised basis). Overall occupancy was at 97.2% in 1Q08 compared to 96.1% 1Q07
Acquisitions continued to be focal point. Currently, A-REIT has a portfolio of 78 properties with a total book value of S$3.3b. In 1Q08, they acquired 1 Senoko Avenue. Currently, two development projects (HansaPoint @CBP and Zuellig Pharma) and two acquisitions of properties under construction (SENKEE Logistics Hub and Goldin) worth a total of S$148m are pending completion. Going forward, we believe acquisitions will continue to be the strategy for AREIT, although we note that the rate of acquisitions has slowed down in the last quarter.
Rental reversions and rising rental rates still key growth driver. A-REIT has successfully renewed or leased a total of 82,763 sqm of space in the last quarter. New demand for multi-tenanted buildings grew by 57% to 23,234 sqm compared to 14,754 sqm a year ago, out of which 21.5% and 19.3% were in the Business & Science Park Segment and the Hi-Tech segment respectively. We believe that A-REIT’s total 44.3% portfolio of high growth segments will continue to be a key beneficiary of the spillover from office demand for the next 2-3 years.
Re-iterate BUY, target price at S$3.13. We re-iterate BUY call on A-REIT with a target price of S$3.13, based on our DCF valuation which assumes a WACC of 5.62% derived from a market risk premium of 6.5% and beta of 0.75, and terminal growth rate of 1.5%. We also factored in acquisitions of S$400m-700m p.a. over the next few years.
AREIT – DBS
Riding on industrial growth
1QFY08 results. Gross revenue and net income available for distribution grew 14% and 13% y-o-y to S$77.3m and S$44.7m respectively. This improvement was mainly due to additional rental income from completed acquisitions. Distribution per unit grew 9% y-o-y to 3.37 cents.
Continued growth in industrial rent. According to CBRE, the average rent for all industrial space increased in the second quarter of 2007. Hi-Tech industrial properties led the growth, recognising an increase of 11.9% q-o-q. With rising office rents and supply of office space remaining tight, the demand for high-end quality business space is expected to be strong. Therefore, we remain optimistic on the outlook for High-Tech industrial space and Business and Science Parks, of which A-REIT has a total exposure of 45% (by portfolio value).
JTC’s plan revealed. JTC announced its plan to divest property worth between S$1.4bn and S$1.6bn. At least half of the industrial assets would be placed in a trust (expected to be set up in 2Q2008) that will be listed on the SGX. However, we note that the potential acquisition pipeline coming from its sponsor, Ascendas Land (Singapore) Pte Ltd (Ascendas), is still strong.
Maintain Buy with raised target price of S$3.16. Moving forward, in view of higher rental reversions, we have increased our DPU forecasts. DPU forecast for FY08 and FY09 increased by 4% and 9% respectively. Hence, this has raised our target price to S$3.16 based on DCF valuation, which incorporates an acquisition pipeline of S$400m p.a. till 2010. With a total return, including yield, of 11%, we are maintaining
our Buy recommendation.
KREIT – BT
K-Reit Asia’s Q2 net profit soars 70% to $4.16m
Distribution per unit for the quarter rises 20.9% to 2.14 cents
HELPED by higher rental income, K-Reit Asia’s net profit for the second quarter ended June 30 soared 70.4 per cent to $4.16 million from a proforma $2.44 million in the year-ago period.
This brought the first half’s net profit to $7.61 million, up 55.8 per cent from a proforma $4.88 million for H1 2006. K-Reit, a real estate investment trust for commercial properties, was listed in April last year.
For the first six months this year, K-Reit reported 36.8 per cent higher distributable income of $9.48 million. For Q2, the distribution per unit (DPU) rose 20.9 per cent to 2.14 cents from Q1’s 1.77 cents. The DPU for the first half is 3.91 cents, working out to an annualised 7.88 cents.
K-Reit’s portfolio includes Keppel Towers, GE Tower, Bugis Junction Towers and about 44 per cent of the strata area of Prudential Tower.
In a statement yesterday, the Reit’s manager, K-Reit Asia Management (KAM), said its portfolio’s committed occupancy climbed to 99.6 per cent. It also said that average gross rental rates reached $4.28 per square foot (psf) in June 2007, up from $3.65 psf for the same period in 2006.
Turnover for the quarter was $9.9 million compared with $8 million a year ago. For H1 2007, turnover was $18.7 million – a 17.7 per cent increase.
Net property income improved by 23.3 per cent to $13.75 million for H1 2007. For the quarter, net property income rose 30.4 per cent to $7.28 million.
KAM also said that with 70 per cent of the existing portfolio’s net lettable area due for renewal between 2007 and 2010, K-Reit was in a good position to ‘capitalise on the market upswing’. It added: ‘Strong underlying demand combined with limited quality office space will continue to support high occupancies and rental growth.’
K-Reit’s portfolio is valued at $677 million as at Dec 31, 2006. KAM said it has a target portfolio size of $2 billion over the next few years and the Reit is actively seeking acquisitions of prime commercial properties in Singapore and other other Asian growth cities. K-Reit is also reviewing possible asset enhancement initiatives to add value to the existing portfolio.
CDL H-Trust – SGX
ANNOUNCEMENT THE ISSUE OF 120,162,795 NEW STAPLED SECURITIES (THE “NEW STAPLED SECURITIES”) AND USE OF PROCEEDS OF THE EQUITY FUND RAISING
Issue of 120,162,795 New Stapled Securities
These New Stapled Securities will commence trading on the Main Board of Singapore Exchange Securities Trading Limited (the “SGX-ST”) at 9.00 a.m. today.
Results of the Private Placement
Results of Preferential Offering
The H-REIT Manager and the HBT Trustee-Manager are pleased to announce that as at the close of the Preferential Offering on 13 July 2007, valid acceptances for 100,635,729 New Stapled Securities were received under the Preferential Offering. The Joint Lead Managers and Underwriters, DBS Bank Ltd and Citigroup Global Markets Singapore Pte. Ltd., have procured subscriptions and/or subscribed for the remaining 6,527,066 New Stapled Securities under the Preferential Offering pursuant to the placement agreement dated 6 July 2007.
Rule 812(1) of the Listing Manual
Except for subscriptions under the Preferential Offering by Restricted Placees under the Waiver, none of the Restricted Placees subscribed for any New Stapled Securities under the Private Placement.
Status of the New Stapled Securities
For the avoidance of doubt, the New Stapled Securities will not be entitled to participate in the distributions of any distributable income accrued by H-REIT prior to the date of issue of such New Stapled Securities.
Out of the net proceeds of approximately S$291.0 million from the Equity Fund Raising, S$177.4 million will be used to repay part of tranche B of the DBS Bank Bridging Loan Facility (as defined in the Circular) with DBS Bank Ltd which was used to fund the acquisition of Singapore Hotel Investment Holdings Company for the purpose of the acquisition of Novotel Clarke Quay. The H-REIT Manager and the HBT Trustee-Manager will make further announcements upon the utilization of the remaining net proceeds of approximately S$113.6 million from the Equity Fund Raising.
KREIT – UOBKH
No Surprises
1H07 net profit up 55.8% yoy, distributable income up 36.8%. K-REIT achieved a good set of results, with its Q2 property income increased 11.1% qoq to S$8.9m. Net profit increased 20.6% qoq to S$4.2m, resulting in a 55.8% yoy increase for the total 1H07 net profit of S$7.6m. The increase in rental income is mainly attributed to improved occupancies, and higher rental rates achieved for new and renewed leases. Property income saw the highest increase for Keppel Towers and GE Tower, of about an addition of S$0.88m over that of 1Q07 (S$3.68m). DPU rose 20.9% from 1.77 Scts in 1Q07 to 2.14 Scts (7.88 Scts on an annualized basis), reflecting a yoy increase of distributable income to S$9.5m in 1H07. Property expenses increased marginally due to higher property tax (consequent to improved occupancies), higher repair and maintenance costs as well as higher management fees.
Rental reversions and rising rental rates still key growth driver. K-REIT is well-positioned to capitalise on the rentals uptrend as it will see almost 70% (by NLA) of its office leases expire and due for renewal between now to end 2010. Blended portfolio occupancy has reached a high of 99.6%, limiting any upside through improvements in occupancy levels. Although management is currently reviewing any possible asset enhancement opportunities, we are cautious on the potential impact.
Earnings surprises from acquisitions. Any earnings surprises will come from acquisitions to hit K-REIT’s target portfolio of S$2.0b over the next few years, although it has not made any maiden acquisitions so far. Key risk, however, is the increasing difficulty in making yield accretive acquisitions, especially in the office segment where capital values and soaring. Having said that, we do not rule out the possibility of Keppel Land injecting its office assets into K-REIT.
Maintain BUY, target price S$3.39. We maintain BUY on K-REIT with a target price of S$3.39.The stock is currently trading at a yield of about 2.86%. In deriving our target price, we adopted DCF valuation using a WACC of 6.04% derived from a market risk premium of 6.5% and beta of 0.7, and a terminal growth rate of 2.0%. We also factored in conservative acquisitions of S$100-150m p.a. over the next few years.