Author: tfwee
Cambridge Reits – CL
Ascott Reits – CL
- The recent announcement of the F1 Grand Prix in Singapore has propelled Singapore into a tourist receipts magnet. The government.s ambitious target of attracting 17 million visitors by 2015 is underpinned by strong FDI inflows, the two integrated resorts, MICE activities, medical tourism hub status, leisure travel as well as the F1 Grand Prix. Tourist arrivals are expected to outstrip supply of hotels rooms and we remain convicted that ART.s Revpar is set to increase further in Singapore. Maintain BUY
- Grand Prix spillover . The Singapore government announced on 11 May 2007 that the city state will host the first street circuit F1 race in Asia. Flag off is expected to commenced in 4Q08 and generate receipts estimated at S$100m annually. Consequently, this has seen hotel rates and even some serviced apartment rates increasing by at least 50% during race periods and 20% annually. Given that these races can stretch as long as a week, we expect some spillover demand for serviced apartments which is currently regulated for stays longer than seven days.
- Robust FDI inflows . The increasing FDI inflows into the Asia region reaffirm our bullish view on ART, especially in Singapore where FDI inflows are estimated to reach US$19.9bn in 2007. Coupled with the government.s efforts to draw 17 million visitors by 2015 through the slew of massive projects, we expect positive impact on the Revpar for serviced apartments and hotels. Accordingly, Revpar in Singapore is at record highs of S$176.8 and we have assumed S$191 in our model. Despite new supply for hotels and serviced apartments in the pipeline, we expect demand to outstrip supply given the timing lag of oncoming supply.
- Diversified revenue base . Strong FDI inflows into Asia and ART.s diversified asset base across the Pan Asian region in our view are the pillars of growth and stability for the reit. Currently, Singapore contributes 24% of ART.s revenue and we expect the strong demand for hotel rooms and serviced apartments in Singapore should continue to bode well for its Singapore operations.
- Maintain BUY. In tandem with the narrowing yield gap of S-Reits with the Singapore 10yr bond yields, we have lowered our required yield by 50bps to 4.5% from the previous 5%. This implies a 20% upside from our target price of S$2.41 based on FY08’s DPU of 10.8c and a 4.6% dividend yield for FY07.
Cambridge – SGX
CIT ACQUIRES 120 PIONEER ROAD AND 7 UBI CLOSE FOR A TOTAL OF S$47.0 MILLION
1. Cambridge Industrial Trust Management Limited (the “Manager”), the Manager of Cambridge Industrial Trust (“CIT”), has identified 120 Pioneer Road and 7 Ubi Close (the “Properties”) to be acquired by CIT at a purchase price of S$26,500,000 and
S$20,500,000 respectively (the “Acquisitions”).
2. In connection with the Acquisitions, RBC Dexia Trust Services Singapore Limited, as trustee of CIT (the “Trustee”), has entered into separate conditional put and call option agreements (the “Option Agreements”) with Compact Metal Industries Ltd (“Compact”), a SGX-listed company and Group Exklusiv Pte Ltd (“Group Exklusiv”) respectively, to acquire the two Properties.
3. The acquisitions are expected to be financed by debt or alternative funding sources in line with the Manager’s capital management strategy in optimizing the funding of the Trust. The above Property will be accretive to CIT’s distributable income.
4. Information On The Properties (Extracts)
120 Pioneer Road
– Purchase Price : S$26.5 million
– Leasehold estate of 30 years + 28 years wef 16 Feb1997
– Lease term : 7 years with 5% rental escalations on the commencement of the third
and fifth year.
– DPU Impact : +0.0557 cents
7 Ubi Close
– Purchase Price : S$20.5 million
– Leasehold estate of 30 years wef 1 Aug 1994
– Lease term : 7 years with 5% rental escalations on the commencement of the third
and fifth year.
– DPU Impact : +0.1687 cents
Note : DPU Impact is based on simple annualisation on the audited results for the financial period ended 31 December 2006 and the assumption that CIT had purchased, held and operated the respective property for the same annualised period based on long term gearing ratio of 40%.
Source : SGX
Macarthurcook Industrial REIT – OCBC
Macarthurcook Industrial REIT: Ideal candidate for takeover
Management expects S$500m of acquisitions by Mar 08. Even though MI-REIT’s current asset size is small at S$316m, management has ambitious growth plans. It sees S$500m of possible acquisitions by end Mar 08. Furthermore, it expects the bulk of these acquisitions to be from third party and not from the exercising of its first right of first refusal with its sponsor. This means its acquisition will likely be in direct competition with the 3 other REIT rivals in the industrial space. As we see little differentiating factors between all the REITs’ acquisition strategies, the only way we see MI-REIT to be able to achieve this target is via pricing. In that context, MI-REIT can afford to be very aggressive. Its gearing remains low at about 8%, meaning any acquisition is likely to be debt funded. We estimate MI-REIT has a debt capacity of about S$117m. More importantly, with its cost of debt at about 3.5%, and with market property being offered at just below 7.0%, MI-REIT has about 350bp to play. However, we do not see MI-REIT to be willing to use up all its ammunition in the short term. Acquisitions at property yields of about 6.0-6.5% are the more likely scenario.
Ideal candidate for takeover. MI-REIT has a fairly fragmented shareholding structure. Its largest shareholders have a stake of about 12.9% but with the majority in 5% range. Its sponsor Macarthurcook only has a 2.3% stake and the vendors collectively own a further 2.7% of the issued units. The implication of this loose shareholding structure is that if the right offer comes along, the possibility of shareholders taking profit is very high. Furthermore with a price to book of about 1.3 times, it remains fairly cheap relative to its larger rivals. We thus see MI-REIT to be an ideal takeover candidate. We do not have a rating on MI-REIT. (Winston Liew)
AllCo – SGX
COMPLETION OF ACQUISITION OF THE CENTRELINK PROPERTY
Singapore, 18 June 2007 – Further to the announcements made by Allco Commercial Real Estate Investment Trust (“Allco REIT”) on 25 June 2007 and 11 June 2007 in relation to the approval of Unitholders at the Extraordinary General Meeting (“EGM”) of the proposed acquisition of a 50.0% indirect interest in the Centrelink Property, the Board of Directors of Allco (Singapore) Limited, as Manager of Allco REIT, is pleased to announce that Allco REIT has today successfully completed the acquisition of a 50.0% indirect interest in the Centrelink Property for A$108.75 million (S$136.5 million 1). Record Realty, a property trust listed on the Australian Securities Exchange (ASX: RRT), will hold the remaining 50.0% indirect interest in the Centrelink Property, which it has acquired for A$109 million.
The purchase consideration is based on the average of two independent valuations2 of the Centrelink Property from CB Richard Ellis Pty Limited and Colliers International Consultancy and Valuation Pty Limited. Cash payment of the purchase consideration will be made upon the close of the Rights Issue which was approved by Unitholders at the EGM on 11 June 2007.
The Centrelink Property is a new contemporary designed, five storey “Grade A” office complex with a net lettable area of approximately 430,556 sq ft. It is strategically located within the core of the Tuggeranong Town Centre, one of four town centres within the city of Canberra, Australia’s capital city and the location of the Federal Parliament House.
The Centrelink Property will be fully leased by the Centrelink National Support Office (a statutory agency of the Australian Federal Government), for an initial period of 18 years, expected to be as and from 4 July 2007. The rental structure incorporates a rental escalation of 3.0% per annum for each year of the lease.
1 Based on an exchange rate of S$1.00 = A$0.7964, being the rate at which Allco REIT has entered into a foreign exchange derivative instrument to purchase the Centrelink Property.
Source : SGX