Author: tfwee
MapleTree – CIMB
Starting up acquisitions
Buying assets in Singapore and Japan
Maintain Underperform with DDM target price of S$0.77 (from S$0.75). MLT has announced acquisitions worth S$145m in Singapore and Japan, to be funded partially with debt, and partially with equity proceeds from a private placement. After factoring in the changes, our DPU forecast for FY09-11 changes -3% to +3%. We maintain Underperform as warehouse properties tend to have more limited scope for higher
rental reversions compared with the other asset types. We are also concerned that there could be more non-accretive acquisitions bundled together with moderately accretive ones in the near future.
Acquisitions a mixed bag. MLT is acquiring two assets in Singapore and one in Japan for a total of S$145m. All three deals will come with long leases of 5-8 years. The Singapore assets come with built-in rental increases of 2% p.a. We view the Singapore assets positively for their net property income (NPI) yields of more than 9%, which are above MLT’s annualised YTD portfolio yield of 6.3%. NPI yields for the
Japanese property have not been announced. However, at a collective EBITDA yield of 8.4% for the three assets, we infer that NPI yields for the Japanese property are likely to be 6.3%, non-accretive to the portfolio.
Weighted average lease expiry (WALE) increases to five years from 4.9 years. After the acquisition, MLT’s WALE based on gross revenue will increase to five years from 4.9 years, increasing its portfolio stability.
Singapore assets funded by equity; Japanese properties by debt
Private placement to raise S$79.4m, diluting share base by 6%. MLT has successfully placed 115m new units in a private placement this morning. This will dilute its share base by 6%. The price of the new units is S$0.69. This represents a 5.6% discount to the VWAP of S$0.731 per unit for trades in MLT’s units on 6 Nov 09. Citigroup is the sole bookrunner. The new units will raise gross proceeds of S$79.4m.
S$80m equity injection implies S$200m of acquisitions. Assuming MLT resorts to 60:40 debt to equity for its acquisitions, it can potentially make acquisitions to the tune of S$200m, based on S$80m of gross proceeds. Some of the debt headroom made available after the private placement will be used to fund the Japanese property. We anticipate another S$55m of acquisitions for FY10, assuming that MLT will make a
total of S$200m of transactions.
Asset leverage still below 40%. After the completion of the three acquisitions, MLT estimates its asset leverage at 38.5%, incrementally higher than its 38.1% leverage as at 30 Sep 09. We believe management will not be so ready to gear up beyond 45% in the near future after its painful refinancing in 2008.
Valuation and recommendation
Changes in assumptions. We factor in: 1) the three acquisitions at a total of S$145m at net property yields of 8.4%, with revenue contributions coming in only in FY10; 2) an additional S$55m of acquisitions in FY10 with 75% revenue contributions at 8.4% NPI yields; and 3) 1% growth in the portfolio from zero earlier, incorporating effects from built-in rental escalation as well as possibly higher rental reversions.
Impact of changes. After our changes, our DPU forecast for FY09 falls 3% from dilution. However, our DPU forecasts rise by 1% for FY10 and 3% for FY11 as the new assets start contributing. Our DDM-derived target price (discount rate 8.6%) rises to S$0.77 from S$0.75. At the rights offer price of S$0.69, dividend yield in FY10 should be 8.6%, above the FY10 diluted yield of 8%. This is still rather attractive.
Maintain Underperform. We are unexcited about the deals as the combined effect of equity issuance with the acquisitions would only be marginally accretive. Warehouse properties tend to have more limited scope for higher rental reversions compared with the other asset types, all things being equal. This explains management’s eagerness to revert to its “growth by acquisition” strategy.
However, as market NPI yields are not much higher than MLT’s current dividend yield of 8%, we are concerned that there could be more non-accretive acquisitions bundled with moderately accretive ones in the near future, due to the difficulty of finding sufficient sizeable acquisitions (as the quantum for a single warehouse property is relatively small) and growing competition for industrial properties from more institutional buyers returning to the market.
Rickmers – BT
Rickmers opts to conserve cash, keeps Q3 DPU at 0.6 US cent
RICKMERS Maritime, the last shipping trust to report its third-quarter results, decided to stay conservative in income distribution despite posting steady results for the three months ended Sept 30.
The group decided to maintain its Q3 distribution per unit (DPU) at Q2’s level of 0.6 US cent. This is 73 per cent lower than the DPU of 2.25 US cents for Q3 2008.
‘While the trust has turned in a strong performance for the third quarter, we do have unresolved financing issues, and until a solution is found, it would be in the interest of the trust and our unitholders to continue our cash conservation efforts,’ said Thomas Preben Hansen, CEO of trustee-manager Rickmers Trust Management.
Rickmers continued to do well operationally in the third quarter, with a 43 per cent year-on-year increase in charter revenue to US$38.1 million from US$26.5 million – resulting in a 46 per cent rise in cash flow from operating activities to US$28.6 million as it maintained a high fleet utilisation rate of 99.9 per cent. Income available for distribution accordingly rose 36 per cent year-on-year to US$19.2 million.
Among the challenges that Rickmers is facing is that Maersk, the charterer of Maersk Djibouti, has given notice of early termination of its charter and will re-deliver the vessel to the trust on Feb 1, 2010. Rickmers is in the process of marketing the vessel for future employment but, given the global economic and trade slowdown and the oversupply of tonnage in the container industry, ‘this will not be an easy task and Maersk Djibouti will definitely be at a charter level lower than she was at’, said Mr Hansen. There is a risk the vessel may not find immediate employment or will secure employment only at a significantly reduced charter rate.
Financing issues are also impacting on the deliveries of Rickmers’ series of 4,250-TEU newbuildings. One of them, Hanjin Milano, has been completed and delivered to Polaris Shipmanagement, a Rickmers Group unit, from which the vessel was purchased. Hanjin Milano has begun its charter with Hanjin Shipping and is currently warehoused by Polaris until discussions with the banks have been finalised.
The future delivery of two 4,250 TEU vessels chartered to Hanjin, which are expected in December and early 2010, may likewise be affected, pending finalisation of discussions with the banks.
Rickmers has previously highlighted its value-to- loan covenants, the refinancing of its US$130 million top-up loan facility maturing in April and the financing of its existing order book as key issues to address. No agreement has been reached yet.
MapleTree – BT
MapletreeLog to raise $79m-82m for acquisitions
It will issue 115m new units through private placement
MAPLETREE Logistics Trust (MapletreeLog) yesterday launched a private placement to raise between $79 million and $82 million for acquisitions.
It plans to issue 115 million new units, which represent 5.9 per cent of all units in issue as at Sept 30. The new units will be priced at between 69 cents and 71 cents each, carrying a discount of 3.9 per cent to 6.6 per cent to the volume-weighted average unit price of 73.9 cents for trades in MapletreeLog’s units last Friday.
The trust manager and the placement agent Citigroup Global Markets Singapore will determine the issue price after a book-building process.
About $78 million from the private placement will go towards two yield-accretive acquisitions in Singapore. In one deal, MapletreeLog will buy a warehouse at 7 Penjuru Close for $43 million. The facility will have a gross floor area of around 41,253 square metres, and the land tenure will expire in May 2035.
MapletreeLog signed a put and call option agreement to buy the ramp-up six-storey single-user warehouse from SH Cogent Logistics.
SH Cogent will lease the property back for an initial 7-year term, which builds in an annual rental escalation of 2 per cent from the second year onwards. It will also have the option of extending the lease for another three years and thereafter, for four years.
According to MapletreeLog, the acquisition will add, on a proforma basis, 0.04 cents or 0.7 per cent to the annualised distribution per unit (DPU) for the period Jan-Sept.
In the second deal, MapletreeLog will be buying a multi-storey warehouse in the east for around $34 million. The trust manager signed a letter of interest for this asset on Oct 15.
MapletreeLog expects both local acquisitions to be completed by end-December, and their total returns will exceed 10 per cent. The trust’s annualised distribution yield as at Nov 9 was around 8.1 per cent.
Funding these two purchases through equity will leave MapletreeLog with enough debt headroom to buy a third asset in Japan. It signed a letter of intent and will pay about $68 million for a multi-storey single-user warehouse in the Greater Tokyo region.
The deal should be completed by the first quarter of next year. The trust expects the net property income yield of this acquisition to exceed 7 per cent, which is above that of its Japanese asset portfolio.
After these three purchases, MapletreeLog’s estimated gearing level will be around 38.5 per cent. Its gearing as at Sept 30 was 38.1 per cent.
The private placement is likely to reduce the stake held by MapletreeLog sponsor, Mapletree Investments, from 46.9 per cent to 44.3 per cent.
MapletreeLog units lost half a cent to close at 73 cents yesterday.
MapleTree – BT
Mapletree Logistics Trust on Monday launched a private placement of 115 million units to raise gross proceeds of between $79-82 million. The units would be priced between 69-71 cents apiece.
Net proceeds would go towards financing two proposed acquisitions in Singapore with. The estimated aggregate purchase price (including acquisition related costs) comes up to around $78 million.
Resulting debt headroom from the private placement would also be used to finance a proposed acquisition in Japan. The estimated purchase price (including acquisition related costs) is around $68 million.
MapleTree – BT
SINGAPORE- Mapletree Logistics Trust (MLT) has signed a put and call option agreement to acquire a warehouse in Singapore for $43 million (US$31 million), the property trust said on Monday.
The vendor of the property, located at 7 Penjuru Close, is SH Cogent Logistics Pte Ltd, which will lease back the property for an initial term of seven years with a rental escalation of 2 per cent per year from the second year onwards – with an option to extend for another three years and thereafter, for another four years.
SH Cogent is a total logistics solutions provider, providing services such as sea freight-forwarding, container leasing, hazardous cargo and chemical handling & storage and supply chain management, storage and packing services for import and export of vehicles.
The acquisition will be accretive to MLT’s distribution per unit (DPU). The pro forma financial effect of the acquisition on the annualised DPU (based on actual nine months financial results for 2009) is an additional 0.04 Singapore cents.