Author: tfwee

 

REITs – UOBKH
Falling Yield Premiums, But S-REITs Still Attractive

We compare Singapore REITs (S-REITs) with other Asian REITs to source for its comparative attractiveness.

Falling yield premiums. We observe that yield premiums across Asia has generally fallen. However, as we note that investors are not just looking for yields but also higher capital gains, mentioned in our last ‘Office REITs – Season For Picking’ report, Singapore still looks attractive in terms of risk-returns. Yield premiums of Malaysia REITs (M-REITs) have negated, while that of Japan REITs (J-REITs) looks relatively attractive at 0.96% considering that it is a matured market. S-REITs are currently trading at a yield premium of 0.35%. It is also interesting to note that HK-REITs have a very high average ROE of 10.1% while PB is only 0.95.

S-REITs still look attractive in terms of PB vs ROE. Compared to its Asian REITs market peers S-REITs still looks attractive in terms of its price-to-book vs its ROE, especially so as S-REITs consists of high quality REITs. Amongst the S-REITs, we like CCT (Target price: S$3.72), K-REIT (Target price: S$3.39), and A-REIT (Target price: S$3.13).


Click on the Figure Above for a bigger view

July 9, 2007 A-REIT, CCT, KepREIT No Comments »

MLT – SGX

MAPLETREELOG ACQUIRES PROPERTY IN CHINA FOR RMB155 MILLION

Singapore, 5 July 2007 – Mapletree Logistics Trust Management Ltd. (“MLTM”), manager of Mapletree Logistics Trust (“MapletreeLog”), is pleased to announce that MapletreeLog has signed a Reservation Agreement to acquire three warehouses in Putuo District, Shanghai, China for RMB155 million (S$31 million1) from Shanghai Shunjie Logistics Co., Ltd (“Shanghai Shunjie”) and Longtong Warehouse Management (Shanghai) Co Ltd. The properties (“Northwest Property”) will be purchased by MapletreeLog’s wholly foreign-owned enterprise to be incorporated in China.

Northwest Property will be purchased with assignment of existing leases. The tenants are a Spanish discount supermarket operator, a leading car maker in Japan and an American-based information technology wholesale distributor providing sales, marketing and logistics services for the IT industry. All three tenants are well-established multi-national companies. Shanghai Shunjie will take up the remaining space in the property for its logistics operations. Shanghai Shunjie is a local third party logistics company with nearly 20 years of experience in logistics operations. They provide a full range of logistics services such as airfreight, road transportation, railway, express delivery and storage, including inbound as well as outbound services.

Northwest Property is located in Northwest Logistics Park, Jinda Road, Putuo District, Shanghai. The acquisition will be accretive to MapletreeLog’s distribution per unit (“DPU”) and the pro forma financial effect of the acquisition on the DPU for the financial year ended 31 December 2006 would be an additional 0.04 Singapore cents per unit2.

Benefits and rationale of the acquisition
Mr. Chua Tiow Chye, Chief Executive Officer of MLTM, said, “We are very pleased with this acquisition which strengthens our presence in Shanghai. This follows our purchases of Ouluo Distribution Centre in Shanghai, Xi’an Seastar Distribution Centre and our announced acquisition of the American Industrial Park in Guangzhou. This acquisition, our fourth in China, consolidates MapletreeLog’s position in Shanghai, which is the first choice for many international companies to set up distribution centres in eastern China. The Northwest Logistics Park area is a wellestablished logistics hub and the acquisition of a good asset in this choice location will entrench our presence in Shanghai. We are also very happy to welcome the four quality names into our family of tenants.”

“The continued economic growth and emerging affluent middle class have resulted in the rapid urbanization and consumption trends in China. Distribution centres play an important role in the supply chain of moving goods across China. The acquisition of Northwest Property will allow us to capitalise on these growing and increasing important retail and wholesale sectors,” Mr. Chua said.

According to Jones Lang LaSalle, growth in China’s property market for warehousing and distribution centres is likely to take off in 2007 as global retailers expand aggressively in the country3.

In the International Monetary Fund’s April 2007 World Economic and Financial Surveys, China has seen an increase in its production capacity and capability. In many sectors – notably aircraft, home electrical appliances, industrial machinery, precision apparatus and automobiles – export of final products have continued to grow strongly. Retail sales grew by over 13 percent in 2006, with car sales rising by nearly 25 percent.

Funding
The acquisition is expected to be completed by early 2008. From MapletreeLog’s perspective, the Manager intends to fund the acquisition entirely by debt. However, this does not preclude the Manager from exploring alternative means of funding should the need arise.

General description of the property
Northwest Property comprises three single-storey warehouses with an ancillary office building and a four-storey building used as dormitory.

Northwest Property is located in Jinda Road, Putuo District, Shanghai. It is about 1 km to Huning highway and Huning railway. Situated 5 km from Hongqiao Airport, it has easy access to downtown Jiangsu and Zhejiang Province.

1 Based on exchange rate of S$1.00 to RMB5.03
2 Assuming that MapletreeLog had purchased, held and operated the subject property for the whole of the financial year ended 31 December 2006 (based on 41 properties) and that the acquisition is fully funded by debt.
3 Reuters, “Big retailers fuel China’s logistics growth”, 8 March 2007

Source : SGX

July 6, 2007 MLT No Comments »

MLT – SGX

COMPLETION OF ACQUISITION OF PUBLIC LORRY PARK SPACES OF GRANDTECH CENTRE AT NO. 8, ON PING STREET, SHATIN, NEW TERRITORIES, HONG KONG FOR HK$31.0 MILLION

1. Further to our announcement on 5 June 2007 on the completion of the acquisition of Grandtech Centre (excluding public lorry park spaces which will be completed upon the issuance of modification letter by the HKSAR Government) at No. 8 On Ping Street, Shatin New Territories, Hong Kong, Mapletree Logistics Trust Management Ltd., as manager of Mapletree Logistics Trust, is pleased to announce the completion of the acquisition of the public lorry park spaces of Grandtech Centre (the “Property”) today for a purchase price of HK$31.0 million, following the issuance of the modification letter by the HKSAR Government.

2. The purchase price and other acquisition costs of the Property are fully funded by debt.

Source : SGX

July 5, 2007 MLT No Comments »

CDL REITS – DBS
CDL REITS, dbs remains a BUY with target price $2.81 (from $2.20)

– Story: CDLHT’s is to issue up to 130m shares for a equity fund raising exercise in two tranches: 1) 3 for 20 basis and 2) private placement to institutional and other investors.

– Point: Including their recent purchases in Novotel Clarke Quay, they have five Singapore hotels (over 2,300 rooms) and a New Zealand hotel (455 rooms). The REIT has become a key hotel landlord in Singapore benefittng from the tourism boom and increase in business travelers.

– Relevance: We assume the price for the new tranche will be at S$2.20, translating into estimated value of S$286m for the new shares. This will help to lower the gearing ratio from 43% to 26%. We have also increased our y-o-y rental rate increase to 18% for the Singapore portfolio and this works out to a new target price of S$2.81. Maintain Buy.

– New share issue: CDLHT is issuing 130m new shares in two tranches: 1) A non-renounceable preferential offering to Singapore-registered security holders on 3 for 20 basis; and 2) A private placement to institutional and other investors. The issue price is expected to be close to 10% discount to the weighted average price for trades done for the day the placement agreement is signed. The purpose is to repay certain existing debts and for general corporate and working capital. It will also help to lower the gearing ratio, providing the REIT flexibility to make further yield accretive acquisitions.

– Maintain Buy, TP S$2.81: We assume the pricing for the new tranches to be at S$2.20 per share, translating to a potential increase in capital of S$286m. This will help to offset the capital for the Novotel Clarke Quay purchases of S$201m and some other outstanding debts. The capital call will also lower their gearing. We remain positive on the stock as current hotel demand outweighs supply plus the upcoming mega projects and events will help sustain visitor arrival growth. We have raised our forecast for Singapore hotel rates to increase at a 18% y-o-y from 2007 to 2012 for RevPAR under their portfolio. Maintain Buy, target price increased to S$2.81 at parity to our DCF calculation based on fully diluted basis. This is the best stock within the property sector with the highest exposure and benefits the most from the tourism sector’s upturn.

July 3, 2007 CDL H-Trust No Comments »

CDL REIT – BNP
CDL REITS, bnp remains a BUY with target price $2.81 (from $2.28)

– We believe CDREIT, a BNP Top Pick, will enjoy higher RevPAR in fiscal 2007 and 2008, underpinned by the uptrend in tourist arrivals and the supply crunch. We forecast a 30% and 25% jump in the average room rate of CDREIT’s portfolio of Singapore hotels in 2007 and 2008, respectively. Maintain BUY, with a revised target price of SGD2.81.

– Upgrading our RevPAR assumptions . We raise our RevPAR growth assumptions for CDREIT’s portfolio of Singapore hotels to 37% for 2007 (27% previously) and 28% for 2008 (21% previously), underpinned by a combination of both increasing room rates and improving occupancies.

– Rising demand and limited supply should propel room rates to new highs in 2007 and 2008 , The Singapore hotel industry has witnessed robust growth led by the strong tourism uptrend and the hotel shortage situation. The new supply of rooms is likely to be limited to only 2% in 2007 and 7% in 2008, with visitor growth estimated to rise 6-7% annually. With the emergence of low-cost carriers throughout Southeast Asia, interregional travel should grow rapidly. Singapore is also seeking a bigger slice of the multibilliondollar meetings, incentives, conventions and exhibitions (MICE) market, which is expected to grow to 100m in the Asia-Pacific by 2015, from 50m at present. We see greater vibrancy in the leisure and business travel space, considering the host of measures undertaken by the government to strengthen Singapore’s tourism offering.

– Upward revision in hotel rates to drive DPU growth . CDREIT’s strong operating trends will continue to feed through to 2008. We raise our 2007 earnings estimates to SGD68.8m from SGD66.7m, which is premised on the assumption of a portfolio average room rate (ARR) of SGD212 (SGD202 previously), average occupancy of 87% (85% previously) and a further SGD276m worth of acquisitions in 2H07 at an NPI yield of 5.5%.

– New target price of SGD2.81, based on DDM valuation . We maintain our BUY rating on CDREIT and have upgraded our target price to SGD2.81 from SGD2.28. Our 12-month target price is based on DDM, using a WACC of 6.3% and a terminal growth rate of 1%. We have adopted the DDM approach given the steady income distributions from the REIT structure. DDM also captures the longer-term impact of sustained growth in DPU.

July 3, 2007 CDL H-Trust No Comments »