Author: tfwee
ART – BT
ART’s ATM offering of 8m units fully subscribed
ASCOTT Residence Trust (ART), which is selling 105.3 million new units to raise $199 million, yesterday said that the ATM offering of 8 million units at $1.90 per unit was fully subscribed by retail investors yesterday.
The news follows Monday’s announcement that the 47.3 million new units offered to institutional and other investors on that day were more than 15 times subscribed. Another 49.9 million units are being offered to existing stockholders at $1.88 apiece. The stock offered to existing stakeholders is based on one new share for every 10 they own, ART said. ART is raising the $199 million to finance the acquisition of five properties in Australia, Japan, the Philippines and Vietnam.
‘We are pleased that the ATM offering of 8 million new units was fully taken up, as this demonstrates that retail investors have endorsed our latest acquisitions and equity fund raising exercise,’ said Chong Kee Hiong, chief executive of the trust’s management team. ‘ART will continue to pursue its proven acquisition strategy of acquiring yield-accretive assets in the pan-Asian region to achieve our target portfolio value of about $2 billion by end-2008.’
ART owns some of the properties managed by The Ascott Group, which is the biggest operator of serviced residences in Asia and Europe. Ascott is also expanding to increase the number of apartment units to 25,000 by 2010, from more than 19,000 at present.
Once the acquisitions and the fund raising are complete, unitholders of ART can expect a higher annualised distribution per unit (DPU) of 7.28 cents in 2007. This is an 11.5 per cent increase over the annualised forecast DPU of 6.53 cents in 2007 for the 14 properties in ART’s portfolio before the acquisition.
ART’s shares closed 8 cents down at $2.00 yesterday. The new units are expected to begin trading on March 26.
ART – BT
CapitaLand cuts Ascott trust stake to 37%
SINGAPORE – South-east Asia’s largest property developer CapitaLand said on Wednesday it would sell 100 million units in Ascott Residence Trust, reducing its interest to 37.3 per cent from 53.8 per cent. The property developer said in a statement that it would place out 100 million Ascott trust units at $1.90 each to JP Morgan (S.E.A.) Ltd, which would in turn get buyers for the units. CapitaLand said the sale would result in $30.3 million profit after tax and minority interests.
Ascott trust, a property trust spun off by serviced apartment firm Ascott, said on Monday that it will raise about $199 million for acquisitions by selling new units. The placement includes a non-renounceable preferential 1-for-10 rights offering of 49.94 million new units at an issue price of between $1.83 and $1.88 a unit. The trust will also offer up to 50.17 million new units to institutional investors and 8 million new shares to retail investors, in both cases priced at between $1.85 and $1.90 a unit. JP Morgan is managing the deal. — REUTERS
Cambridge – Phillip
Cambridge Industrial Trust (“CIT”) is the first independent industrial real estate investment trust (REIT) in Singapore, established with the objective of investing directly or indirectly in income-producing real estate related assets, which are used mainly for industrial (including warehousing) purposes. CIT’s initial portfolio comprised 27 properties, which are all located in Singapore. CIT’s key financial objectives are to deliver stable and regular distributions to unitholders, in addition to long-term growth in distribution per unit, by acquiring high yielding properties both locally and overseas.
Diverse Industrial Portfolio. CIT’s initial portfolio comprised 27 properties with approximately 426,725 sq m of lettable area. Majority of the properties are located close to current and future transport infrastructure and designed with building specification that can cater to a wide range of tenant mix. As at Dec 06, the total appraised value of the whole portfolio amounted to S$531m, leading to an annualised gross revenue for FY06A of S$43.2m. All the leases of the properties are structured under a built-in rental escalation model, providing a stable income rise for CIT. The weighted average term of the leases by acquisition value for the properties is approximately 7.9 years.
Positive Industrial Outlook. According to Urban Redevelopment Authority (URA), prices of multiple-user factory space increased by 6.8% and rentals increased by 4.1% for 2006. In addition, occupancy rates improved to 90%. We expect to continue to see more rental and capital growth in the industrial sector. Currently, Singapore has rises to the 20th position in industrial space cost- six places higher than last year.This is due to the strong manufacturing sector as well as the spillover effect from the surging office market. The timing of CIT’s acquisitions is well planned with the upturn of the industrial market. The recent acquistions done after IPO are focused on light industrial buildings. We expect the current high rental rate in the commerical sector to divert some attention to light industrial sector. Moreover, we view the rental escalation model structured into the long leases of CIT positively, due to the expected stability in rental rate .
First independent industrial REIT. Both CIT and its manager are not controlled by or dependent on any property developer. CIT will be viewed more positively when it approaches property owners who are also property developers, as they would not be perceived as being in competition with the property owner’s property related development businesses. Moreover, some of the property owners themselves will become unitholders as well as tenants of CIT. This aligned interest creates advantages and flexibility for CIT to access a large pool of potential properties located locally or overseas.
Stable and high distribution. At the current share price of S$0.81, our forecasted annual yield is 6.8% and 7.5% for FY07 and FY08 respectively. This is much higher than the Singapore REITs average yield. FY07F yield represents a healthy spread of 3.73% as compared to a risk free rate of 3.07% (Singapore 10-year bond as of 12 March 2007), and is above the market average spread of 1.10%. Compared to the other listed REITs in Singapore as well as other major REITs markets, CIT REIT offers an attractive risk adjusted investment with high distribution.
Valuation. Using Dividend Discount Model (DDM), our derived fair value for CIT is S$0.95. This translates to a 5.7% yield and a price to net asset value of 1.43x for FY07F. In our relative comparison, our fair value is above the average S-REITs/industrial yield and below the average price to net asset value. At the current price of S$0.81, we recommend a Buy for CIT with a 18% return.
FirstREIT – ML
Initiating with a Buy rating, PO of S$0.88/share
We are initiating coverage on First REIT with a Buy rating and a 12-month price objective of S$0.88/share, which implies a total return of 25%. Our price objective is based on a 5% premium to our DCF valuation, which is calculated using a discount rate of 11.3%. Further upside could come from acquisition growth.
Healthcare focus
First REIT is the only Singapore REIT (S-REIT) focusing on the Asian healthcare industry. We are positive on the outlook for the Asian healthcare industry. The strong fundamentals reflect rising disposable income, growth in elective surgeries, rising new investment, and the need for REITs to assist industry growth.
Strong acquisition pipeline
We believe First REIT is in a strong position to double its IPO investment portfolio from S$257mn to over S$500mn in the next three years. First REIT has a conservative gearing level, and can benefit from sponsor Lippo Karawaci’s regional contacts in the healthcare industry.
Investment risks
A sustained downturn in hospital operations, which may reduce the ability of Lippo Karawaci (87% tenant) to pay rental commitments to First REIT. Any deterioration in the Indonesian economic environment may also restrict the ability of special purpose companies domiciled in Indonesia to repatriate funds to Singapore.
AllCo – DBS
Well positioned here and Down Under
FY06 distribution slightly below expections. Allco has reported FY06 results slightly below expectations, delivering DPU of 1.52 cents for 4Q06 and 4.58 cents for the full year which is 5.3% above the REIT manager’s forecast. This translates to annualised distribution yield of 4.8% for FY06. Rental revenue grew 40% y-oy, mainly attributed to higher contributions from Central Park (Perth). Allco also reported higher assessment of revaluation of its asset portfolio which brings about accretion to asset values by S$125.3m or rise of 17.9% to S$823.6m which raised NAV per unit to S$1.17. The increase in portfolio asset value is mainly contributed by revaluation of Central Park by 32.5%, with the rest of the Singapore properties bringing about increase in value averaging 10.6%.
Upward revaluation reflects strength of physical market. The upward valuation of its assets come as no surprise as rental growth provides the lead-up to rise in capital values. This is exemplified by the Perth asset – the long lease secured with Hamersley Iron increased in rentals by 20% to A$360 psm, topped with stepped rental increments. We would expect the strength of the office market to lead to continual trend of rising capital values, thereby increasing Allco’s debt capacity and is well-positioned for acquisitions moving forward.
Asset enhancement delayed. We previously expected retail asset enhancement for China Square Central to commence this year. However, we understand the time line for the enhancement is delayed, with possibly more updates by 3Q07. To recap, China Square Central is under a master lease expiring in 2012 with yearly income support of S$17.55m with Allco attributing 40% of any upside in excess of the rental support. Despite the delay for the asset enhancement, we expect office rental reversions to be strong with 70% expiring in FY07 and FY08 and NPI to exceed the income support by FY08. Leasing activities for maiden acquisition 55 Market Street is on-going and currently about 50% committed.
Maintain Buy, TP upgraded to S$ 1.45 on higher expectations of office rental growth. We continue to be positive on Allco’s rental growth prospects, with assets well leveraged to strong fundamentals in the Singapore and Australian office markets. With 70% of China Square Central’s office leases up for renewal in the next two years, Allco is poised to benefit from the rising Singapore office market. We are maintaining our Buy recommendation for Allco with raised target price of S$ 1.45 after raising our office rental assumptions.