Author: tfwee

 

Allco – ML

ALLCO, ml remains a BUY with target price $1.93

– Acquires 50% interest in Centrelink Property, Canberra . Allco Commercial REIT has announced the acquisition of a 50% interest in the Centrelink Property Canberra, Australia for a consideration of S$136.5mn. The office building will be completed in June 2007 and is being acquired jointly with Record Realty on an initial yield of 7.7%.


– Renounceable rights offer to existing shareholders . To finance the acquisition and pay down existing debt, Allco intends to raise S$210mn through a renounceable rights offering to existing shareholders. The rights issue price will be offered at a discount of between 15% and 35% to share price. The acquisition is yield accretive; however, together with the rights issue it will not have a material impact on FY07 DPU.


– Acquisition capacity now at S$1bn. Allco’s gearing post acquisition and rights issues will fall to approx. 23%. This is the lowest gearing level amongst the office exposed S-REITs and equates to an acquisition capacity of approximately S$1bn. We believe this enhances Allco’s ability to expand, and we would expect them to acquire again before year-end.


– Maintain BUY. We maintain our Buy rating on Allco and PO of S$1.93. We expect the share price to rally pre books closure date given the implied value of the rights. We continue to believe that Allco is the most undervalued of the Singapore office plays and remains a top pick within the Singapore REIT sector.

May 29, 2007 AllCo, FCOT No Comments »

ALLCO – Nomura

ALLCO – Nomura remains STRONG BUY with target price $1.61

– Allco has innovatively proposed a renounceable rights issue to facilitate the acquisition of a 50% stake in a Canberra office building. The deal lengthens Allco’s average lease term to 12.8 years. With cashflows underpinned, with think the deal is a precursor to more opportunistic deals in Asia. Our STRONG BUY call stands.

– Allco proposes yield-accretive deal, NAV raised to S$1.61 . Allco has proposed to acquire a 50% stake in a Canberra office building for S$136.5mn, with the deal to be funded via a proposed S$210mn renounceable rights issue. The targeted property is being acquired on a cash yield of 6.0%, with the property leased for 18 years to the Australian federal government agency Centrelink (unlisted). The acquisition will increase the weighted average lease term of the Allco portfolio from 5.4 years to 12.8 years. With the portfolio having a secure cashflow, we believe the deal will enable Allco to pursue more opportunistic acquisitions in Asia. We have analysed the deal and rights issue and believe it to be yield accretive by 5.6% in FY07F, 4.0% in FY08F and 3.8% in FY09F.

Note
1) As the deal has yet to be sealed, we have not incorporated it into our official forecasts, though our analysis is presented in Exhibit 1.
2) Our yield-accretion calculation is based on our estimated theoretical ex-rights price of S$1.24/unit (see Exhibit 2).


– Independent of the proposed acquisition and rights issue, we have raised our SOTP NAV (pre rights) to S$1.61/unit (from S$1.53/unit), on the basis of 1) higher valuations for its Singapore property assets, given recent transactions — we now value them at S$1,404/psf (versus S$1,361/psf previously), and higher translated valuations of the group’s interest in Central Park Perth, given the strength of the Australian dollar.

– Allco to acquire 50% stake in Canberra office for S$136.5mn. Allco has agreed to acquire a 50.0% indirect interest in “the Centrelink Property” for A$108.75mn (S$136.5mn). The property has a projected cash yield of 6%. (Note the reported initial yield of 7.7% and assumed income of A$5.2mn for FY07, and 7.4% yield and assumed income of A$10.1mn for FY08, are accounting yields, due to the long lease revenue being recorded on a straight-line basis). According to the Property Council of Australia, as at end 2006, Canberra had an office vacancy of only 1.8%, the lowest in 16 years. While vacancy is low, supply is on the rise, with an expected 260,000sm due for completion in 2007 and 40,000sm over 2008-09. While the supply/demand balance is expected to shift, the Centrelink Property is to be leased by an Australian Federal government entity, Centrelink, for an initial term of 18 years from 4 July, 2007, protecting Allco’s cashflow from near-term market fluctuations. The lease incorporates a 3% annual rental escalation for the initial 18-year term. The office building has been purpose designed for Centrelink. In addition, Centrelink has an option to renew its lease for two additional consecutive terms of five years each. The Centrelink Property has a land area of approximately 575,869sf (53,500sm) and forms part of the Tuggeranong town centre in Greenway, Canberra. It is located in the western section of the Tuggeranong Town Centre, immediately to the south of the Tuggeranong Office Park, approximately 25km south of the Canberra CBD. According to Allco, the Centrelink Property comprises a contemporary designed, five-storey (basement and four upper levels) commercial office building with an NLA of approximately 430,556sf (40,000sm) and 1,093 car parking bays. The property is due for completion in June 2007.

– Renounceable rights issue to raise S$210mn. Allco is proposing a renounceable underwritten rights issue of new units. It expects to raise gross proceeds of up to S$210.0mn. Allco intends to use S$138.6mn to finance the proposed acquisition in Canberra, and the rest to repay existing debt/partly refinance the existing portfolio. We expect FY07F debt to fall from our current forecast of 0.35x to 0.31x, giving opportunities for more leveraged acquisitions. We estimate the deal to be yield accretive, by 5.6% in FY07F, 4.0% in FY08F and 3.8% in FY09F. Note our yield accretion calculation is based on our estimated theoretical ex-rights price of S$1.24/unit, assuming the rights are issued at a 25% discount to the current share price (the manager has indicated a 15-35% discount) (see Exhibit 2).

– Looking to fund more growth; suggests more acquisitions. Within the circular, the manager is proposing to seek a general mandate for issuing of additional new units in 2007, provided that the number of new units does not exceed 50.0% of the number of units in issue as at 31 December, 2006. The general mandate would allow Allco REIT to issue an additional 247.7mn new units. Assuming these units were issued at a 15% discount to the current share price, Allco would be facilitating the raising of about S$280mn. Given the nature of the mandate sought, it suggests Allco is looking to make further acquisitions in the next six months.

May 29, 2007 AllCo, FCOT No Comments »

MapleTree – OCBC

Downgrade on valuation

Announced S$181m worth of new acquisitions. Mapletree Logistics Trust (MLT) recently announced three further acquisitions for a total value of S$180.5m. Two of the assets are situated in Malaysia with the third located in Hong Kong. In terms of size, the Hong Kong property is larger, valuing at S$151.0m, while the Malaysian properties collectively make up
only about S$29.5m. This new set of acquisitions, together with those completed since its 1Q07 results, means that MLT asset size has increased to S$2.1b. Moreover at S$2.1b, MLT is ahead of its planned asset acquisition of S$1.0b per year or S$1.9b for FY07. Going forward, we do
not expect this pace of acquisition to relent anytime soon.

Expect 0.19-cent accretion. In 4Q06 MLT successfully raised fresh equity worth about S$349m with the issue of 296.822m new units at a weighted cost of S$1.176 per unit. With the new equity, MLT’s gearing has fallen back to about 40% range. More importantly, it means MLT has a total debt capacity worth S$300m. On that basis we see no issues with the debt
funding the latest acquisition. As for accretion, if we assume full debt funding, we expect the full year DPU accretion to be about 0.19 cent, or about 3% increase to our FY08F estimate. We have thus adjusted our forecasts accordingly, bumping up our FY07F and FY08F DPU from 6.2
cents and 6.5 cents to 6.3 cents and 6.7 cents, respectively.

Next markets in South Korea and Vietnam. Presently MLT has country/territory exposure in Singapore, Malaysia, China, Hong Kong and Japan. In 2H07 we expect it to enter more new markets, namely South Korea, Vietnam and possibly even India.

Downgrade to HOLD on valuation. MLT has done very well since our last report; appreciating from S$1.33 to last traded value of S$1.48, or over 11% within a month. However at present price, it is a stone’s throw from our fair value of S$1.50. More importantly, our valuation is based on a target asset size of S$4.0b while MLT’s present asset size is only S$2.1b.
So the market has obviously factored in future asset growth. At present valuation we would prefer to be cautious and let MLT catch up in terms of its pace of asset acquisition. We thus downgrade MLT purely on valuation grounds to HOLD but maintain our fair value of S$1.50.

May 29, 2007 MLT No Comments »

AllCo – SGX

ALLCO REIT ANNOUNCES A PROPOSED YIELD ACCRETIVE PROPERTY ACQUISITION AND A RIGHTS ISSUE

KEY HIGHLIGHTS

  • PROPOSED YIELD ACCRETIVE ACQUISITION OF A 50.0% INTEREST IN THE CENTRELINK PROPERTY LOCATED IN CANBERRA, AUSTRALIA FOR S$136.5 MILLION
  • PROPOSED RENOUNCEABLE UNDERWRITTEN RIGHTS ISSUE TO RAISE UP TO S$210.0 MILLION TO ACQUIRE THE CENTRELINK PROPERTY AND TO REPAY DEBT

Singapore, 25 May 2007 – Allco (Singapore) Limited (the “Manager” or “Allco Singapore”), the manager of Allco Commercial Real Estate Investment Trust (“Allco REIT”) (SGX:ALLC) wishes to announce that it has today obtained clearance from the Singapore Exchange Securities Trading Limited (“SGX-ST”) to dispatch a Unitholders’ Circular (the “Circular”) to the Unitholders of Allco REIT. The Circular seeks Unitholders’ approval in relation to:

1) The proposed acquisition by Allco REIT of a 50.0% indirect interest in a new office complex located in Canberra, Australia and which will be leased to the Centrelink National Support Office (“Centrelink”), a statutory agency of the Australian federal government (the “Centrelink Property”);

2) The signing of certain documents relating to the acquisition of the Centrelink Property;

3) The proposed renounceable underwritten rights issue of new units (the “Rights Issue”); and

4) The proposed general mandate for the issue of new units

An Extraordinary General Meeting (“EGM”) of the Unitholders of Allco REIT will be held at The Straits Room, Level 4, The Fullerton Hotel, 1 Fullerton Square, Singapore 049178 on Monday, 11 June 2007 at 09.30 a.m.

SGX1, SGX2

May 25, 2007 AllCo, FCOT No Comments »

K-REIT – UBS

Pure office play with strong organic growth

  • Initiate coverage with a Buy 2 rating K-REIT
Asia, a pan-Asian commercial REIT, was listed on 28 April 2006 with an initial portfolio of four office buildings in Singapore valued at S$630.7m. Keppel Land, K-REIT s sponsor and manager, is one of the largest listed developers in Singapore by asset size.
  • DPU CAGR of 18.7% in 2007-12E on office rental reversions
We believe the signing rent for K-REIT s portfolio could reach S$8.2 per square foot per month (psfpm) by the end of 2007, more than double the passing rent of S$3.74psfpm in 2006. Over the next five years, we expect rental reversion to lift net property income CAGR 17% and distribution per unit (DPU) CAGR 18.7%.
  • Possible sponsor acquisitions are not priced into our model

While K-REIT does not have the right of first refusal over Keppel Land s five office assets, we believe Keppel Land is committed to growing K-REIT’s portfolio value to S$2bn over the next few years from the current S$677m.

  • Valuation: one-year forward DCF price target of S$3.65

Our DCF valuation is S$3.53 per unit, with our one-year forward DCF-based price target at S$3.65 per unit. At its current price, our estimated 2007 DPU yield for KREIT is 2.8%. Among S-REITs, K-REIT provides the second lowest DPU yield to CapitaRetail China, but the highest DPU CAGR (2007-12E).

May 24, 2007 KepREIT No Comments »