Author: tfwee
CCT – DBS
Out of the picture
1Q07 in line, kick starting AEI for Raffles City. CCT announced 1Q07 DPU of 2.11 cents, which translates to an annualised yield of 3.1%, within expectations. Along with 1Q07 results, CCT also announced plans for phase 1 of asset enhancement works at Raffles City, creating an additional 41,000 sf of retail NLA. We expect Raffles City to progressively roll out AEI initiatives over a 2-3 year time frame and add another 150,000 sf of retail space, which we have factored into our projections.
Out of the picture for Capitaland’s Singapore assets. Following the sale of 12 floors of Springleaf Tower to MGPA for S$1,240 psf and 9 floors of Samsung Hub to Ho Bee and Chinese Chamber Realty for S$1,388 psf by Capitaland, we note from brokers that recent billion dollar transaction of the sale of Temasek Tower to MGPA at S$1,550 psf was yielding below 3%, against CCT’s current yield of 3.1%. While we recognize CCT could leverage on Capitaland’s network to source for acquisitions, CCT is passing out on office transactions with parent Capitaland cherry picking for the best deals in town. Low transacted physical yields are pricing CCT out of the market with competition from property funds that have more flexibility and less stringent regulations on investment and access to funds.
Positive reversions remain primary source of growth. Moving forward, we continue to see broad based rental recovery of the office sector, with both Grade A and prime office rents showing sequential growth 10.1% and 21.4% respectively for 1Q07, keeping up the bullish momentum into 2007. We expect DPU growth of 17% and 29% respectively for FY07 and FY08 to be mainly driven by strong reversions from CCT’s portfolio of office assets with 50% of leases up for renewal over the next two years, highlighted by asking rents for 6 Battery Road already hitting S$16 psf pm.
Maintain Hold, TP S$ 2.97. We are raising our DCF based target price from S$2.64 to S$ 2.97, factoring in higher reversion rents for CCT’s portfolio. While its 30% strategic stake in Quill Capita Trust (QCT) provides an additional platform for growth into the Malaysian market, we see minimum impact for CCT in the near term. Upside risks to our recommendation include acquisitions from both asset injections by Capitaland as well as 3rd party acquisitions, of which CCT has been quiet since the HSBC acquisition in 2Q05.
A-REIT : UOBKayHian
BACKGROUND
Ascendas Real Estate Investment Trust (A-REIT) is the largest industrial REIT in Singapore in terms of market capitalisation and portfolio size, with exposure to Singapore alone. It has some of the best attributes among Singapore REITs: strong parental support, solid track record and execution capabilities, quality tenant profile, and a large and diversified portfolio. AREIT posted good FY07 results, with net distributable income up 14.9% yoy to S$163.8m, translating into a DPU of 12.75 cents. Portfolio occupancy also hit a high of 96.6% vs 95.0% in FY06.
OUTLOOK/RECOMMENDATION
Cambridge – SGX
Cambridge Industrial Trust acquires 28 Senoko Drive for S$12.0 million
25th April 2007, Singapore – Cambridge Industrial Trust (“CIT”) announced that it has signed a Put and Call Option Agreement to acquire 28 Senoko Drive (the “Property”) for S$12.0 million from SGX-listed company Tat Seng Packaging Group Ltd (“Tat Seng”).
The acquisition is expected to be financed by debt or alternative funding sources in line with the Manager’s capital management strategy to optimize the funding of the Trust.
Mr Wilson Ang, Chief Executive Officer of the Manager, said, “We are pleased to partner Tat Seng in this sale and leaseback deal. Tat Seng has a long history in the paper industry with sound financial standing. The 15 years lease term of the property shows the strong commitment by Tat Seng. As a result, this transaction brings our weighted average lease term from 7.41 years to 7.67 years.”
Tat Seng’s Managing Director, Mr Loh See Moon said,” We are pleased to enter into this transaction with Cambridge Industrial Trust as it provides an opportunity for Tat Seng to unlock the value of the Property and enable our resources to be more efficiently redeployed towards the expansion of our business.”
General Description of the Property
Completed in March 1997, the 4-storey ancillary office with an extended single storey warehouse/industrial block sits on a land area of 20,070.9 square metres and has a gross floor area of 14,803.0 square metres. The Property has a land lease duration of 30 years with effect from 16 Dec 1979, with an option to renew for a further term of 30 years.
Located along Senoko Drive, off Admiralty Road West and within Woodlands East Industrial Estate. The Property is approximately 25.5 km away from the city centre at Collyer Quay. Public transport facilities are available along Admiralty Road West and the Admiralty MRT is about 4 km away.
Upon completion of the Sale and Purchase, Tat Seng will leaseback the Property for a 15-year term. The rental escalation is 7% on the commencement of the fourth, seventh, tenth and thirteenth year. Tat Seng will bear the cost of maintaining the Property while CIT will bear the cost land rent and property tax.
Cambridge – SGX
Cambridge Industrial Trust acquires 9 Bukit Batok Street 22 for S$18.3 million
24th April 2007, Singapore – Cambridge Industrial Trust (“CIT”) announced that it has signed a Put and Call Option Agreement to acquire 9 Bukit Batok Street 22 (the “Property”) for S$18.3 million. The acquisition is expected to be financed by debt or alternative funding sources in line with the Manager’s capital management strategy to optimize the funding of the Trust.
Mr Wilson Ang, Chief Executive Officer of the Manager said, “Bukit Batok is a niche industrial locale with an immediate catchment to manpower due to its close proximity to the Bukit Batok HDB estate, a major housing estate in Singapore. Although the building is more than 10 years old, considerable Addition and Alteration works were completed recently in 2006, enhancing the value and marketability of the Property. More importantly, the Property provides a stable income stream and will further enhance the current CIT portfolio.”
General Description of the Property
Completed in 1994, the 5-storey industrial building with a basement carpark sits on a land area of 6,258.2 square metres. The Property has a gross floor area of 14,666.0 square metres. Inaddition, it has a long land lease duration of 30 years effective from 1 February 1993, with an option to renew for a further term of 30 years.
The Property is located along Bukit Batok East Avenue 6 and is about 5 to 7 minutes’ walk to the nearby Bukit Batok MRT station. More importantly, it is easily accessible to other parts of the island via the Pan-Island Expressway (PIE).
Upon completion of the Sale and Purchase, Ascender Investment Pte Ltd (“Ascender”) will leaseback the Property for a 7-year term. The rental escalation is 5% at the beginning of the third and fifth years. The Property houses tenants from industries such as electronic manufacturing, trading and furniture sectors. Ascender will bear the cost of maintenance of the Property while CIT will bear the cost of land rent and property tax.
FrasersCT – BT
FCT posts Q2 income of $10.3m
FRASERS Centrepoint Trust (FCT) yesterday said that its distributable income for the second quarter ended March 31 came to $10.3 million, or 1.67 cents per unit. The figures were higher than the forecast distributable income of $9.1 million, or 1.46 cents a unit. There were no comparable figures for 2006 as FCT was only listed on July 5 last year. Net property income for the three months came to $13.4 million.
The trust said that the stronger than expected performance was mainly due to higher turnover during the festive period. ‘Historically, increased shopper activity during the festive period has provided a seasonal boost to turnover rent during the January to March quarter,’ said FCT. ‘On average, turnover rent for the January to March quarter has been three-fold higher than that of a normal quarter.’
The increase was also helped by improved carpark income due to higher vehicle count, and additional income derived from casual leasing resulting from the increase in demand for atrium space, kiosks and advertising.
FCT said that it has four assets lined up for acquisition: Northpoint 2, YewTee Point, Bedok Mall and The Centrepoint. ‘It is our plan to start acquiring Northpoint 2 and YewTee Mall by the fourth quarter of 2008,’ said Christopher Tang, chief executive of the Reit’s management team.
FCT shares closed one cent up at 1.71 yesterday. The trust’s stock price has climbed 11.8 per cent since the start of the year.