Author: tfwee
LMIR – OCBC
DPU falls QoQ on realized forex losses
DPU falls on realized forex losses. LMIR Trust reported 5% QoQ gains in 3Q revenue and net property income to S$20.6m and S$19.4m respectively. Distributed income, however, fell 6% QoQ to S$13.1m or 1.22 S cents per unit. Revenue and NPI were in line but DPU was below our expectations. The manager attributed the QoQ decline to the dramatic appreciation of the Indonesian Rupiah, which caused the gap between the hedged rate on distributions and the physical rate to reverse unfavorably in 3Q09. Consequently, LMIR booked a realized (cash) forex loss this quarter of S$0.4m versus a gain of S$1.2m in 2Q09. This pushed distributed income down despite a roughly 3% (our estimate) increase in revenue and NPI in IDR terms.
Rimo exit hits occupancy… A QoQ pick-up in casual leasing was partially offset by an anchor tenant’s exit from two LMIR malls. Rimo department store was occupying about 4,000 sq m in Istana Plaza (IP) and about 3,250 sq m in Gajah Madah Plaza (GMP). As a result, occupancy as at 30th September fell 8.5 percentage points to 89.8% at GMP and fell 15.4 percentage points to 80.1% at IP. Despite this gap, overall retail mall occupancy of 93% continued to outperform the industry average of 83% (Cushman & Wakefield).
… Adversely affects 4Q. The vacant space at both malls is being taken over by LMIR’s sister company and key tenant Matahari Department Store but the fitting out process takes time. With the timing gap between Rimo’s exit and Matahari’s official opening in December, the manager guided that 4Q09 revenue is likely to be adversely affected by the loss of income from Rimo. The unfavorable gap between the hedged rate on distributions and the physical rate could further weigh on 4Q09 distributions. Note the manager is guiding for roughly 99% occupancy at GMP and IP once Matahari opens.
Re-assessing call. We now estimate a 5% QoQ decline in 4Q DPU to 1.16 S cents. While we still like the LMIR portfolio and the medium-term Indonesia retail story, the 2H recovery we had hoped for is not taking shape as planned. The retail property sector also remains soft and we believe rents and occupancy may take longer to recover than we had previously anticipated. Realized forex losses may act as an additional drag. Yields are compelling but we think this is a good time for a breather as near-term catalysts appear anemic. Downgrade to HOLD with revised fair value of S$0.48 (prev: S$0.51).
Saizen – BT
Saizen Reit defaults on 7.25b yen loan
Property trust says maturity default not likely to affect its ability to operate
Singapore-listed property trust Saizen Reit said yesterday it had defaulted on a 7.253 billion yen (S$112.65 million) commercial mortgage-backed securities loan.
The company said in a statement the ‘maturity default’ was not expected to affect Saizen Reit’s ability to operate as a going concern nor impair its ability to get further financing.
A maturity default occurs when the borrower fails to pay the lender the balloon payment, or principal balance, at maturity.
‘The main impact of this maturity default is an increase in the interest rate from 3.07 per cent to a default rate of 7.07 per cent per annum,’ Saizen said in a statement.
The loan, known as ‘YK Sintoku’, is a non-recourse and not cross-collateralised against other properties in Saizen Reit’s portfolio. It was originally provided by Credit Suisse Principal Investments Ltd, a unit of Credit Suisse, in 2005 and was later securitised and transferred to an issuer of the commercial-mortgage backed securities, the statement said.
Saizen, which went to market in November 2007, is the only Singapore-listed real estate investment trust (Reit) with purely Japanese regional residential properties. — Reuters
Saizen – CNA
Saizen REIT defaults on S$113m loan but unlikely to affect other portfolios, loans
Mainboard-listed Saizen Real Estate Investment Trust said it has defaulted on a commercial mortgage-backed securities loan worth 7.3 billion yen or about S$113 million.
It said despite efforts since early last year, it was unable to find a commercially viable solution before the maturity of the YK Shintoku loan.
The loan is non-recourse and Saizen said the default is not expected to affect its other portfolios or loans.
And it said this is also not expected to affect its ability to operate as a going concern or impair its ability to obtain further financing from financial institutions.
Saizen said the main impact of the maturity default is an increase in the interest rate from 3.07 per cent to a default rate of 7.07 per cent a year.
It doesn’t expect immediate foreclosure by the lender and it said refinancing of the loan is still possible with the consent of the lender.
The REIT said in the event of a foreclosure, the pro forma impact on its net asset value will be a reduction of about 10 per cent.
Meanwhile, CEO of the REIT’s manager, Chang Sean Pey, said efforts to refinance the loan will continue.
He said: “CMBS default is not uncommon in Japan in the past one year. And all this is because the CMBS market basically shut down after the credit crisis. We are continuing talks with banks on the refinancing. It’s just that we need time but we’re continuing to work on that.”
Mr Chang added that the lender is currently in talks with four banks about the refinancing of this loan.
The property trust said it expects to fully repay its other loans maturing over the period from this month to January next year.
CDL H-Trust – CIMB
Ripe for a picking
• Downgrade to Underperform; target price raised to S$1.48 (from S$1.41). CDLHT’s performance met both the Street and our expectations. We lower our interest rates assumptions and roll our target price one year forward, resulting in an augmented DPU and target price. Nonetheless, as its share price has rallied since our last Neutral recommendation, we believe it is time to lock in profits.
• DPU in line. YTD 3Q09 distributable profit (S$49.3m) and DPU (5.9cts) formed 73% of our previous full year forecast of S$67.7m and 8.1cts respectively. Payout to unitholders remained at 90%. 3Q09 DPU of 2.04cts declined 30% yoy due to lower revenue per available room (REVPAR) achieved by the Singapore hotels to S$154 in 3Q09 compared to S$214 in 3Q08. However, on qoq basis, DPU was up 7.7% due to strong recovery in REVPAR.
• Visitor arrivals growth positive, REVPAR up. REVPAR for CDLHT’s Singapore portfolio jumped 15% qoq. This is mainly the result of sharply recovering occupancy (86.1%, +10.6% qoq) in 3Q09 as visitor arrivals to Singapore recovered 7% after 15 months of decline. Average room rates remained relatively flat at S$179 (+0.6%).
• Working to refinance at lower interest rates. Management hopes to capitalise on declining borrowing spreads and refinance its debt on lower borrowing cost. We believe that it would be possible to see lowered interest rates by 1Q10.
• Room rates could move up in the last quarter. As CDLHT’s rooms move towards full occupancy, we believe room rates would be ready to move in tandem in 4Q09. Both integrated resorts have indicated that they intend to price their new hotel rooms at a premium to existing hotels. With the key competition holding up on prices, we believe that CDLHT is well-positioned to move room rates up soon.
• Changes to assumptions. We moderate our cost of debt assumptions from 4% to 3.5% in FY09 and 3% in FY10. Our DPU estimates increase 2-4% in FY09-10. We roll our target price one year forward, and have a higher DDM-derived target price of S$1.48 from $1.41 (discount 9.1%). Whilst we are confident that CDLHT is able to meet our expectations for FY09, its share price has continued to rally up strong even after our last downgrade to a Neutral recommendation. We believe it would be timely to lock in profits at this time. Downgrade to Underperform.
CDL H-Trust – DBS
A fantastic run
• Results signify a demand recovery
• Positive vibes on sector should be priced in
• Looking for further catalysts for re-rating, downgrade to HOLD, TP S$1.57
Easing declines from demand recovery. Gross revenues of S$22.9m (-21.4% yoy , +11.9% qoq) and net property income of S$21.4m (-21.5%yoy, +11.5% yoy) were in line. Sequential growth in 3Q09 was on the back of a 15% growth of average portfolio RevPAR to S$154. Income available for distribution of S$16.9m translated to a DPU of 2.04 Scts after deducting income retained. Balance sheet remained strong at a gearing of c20.2% with interest cover of 10x.
Occupancy driven recovery a good sign. While performance still lagged compared to a year ago, we are encouraged from the sequential improvement in RevPAR. Note that average RevPAR of S$154 (-26 % yoy, +15% qoq) was driven largely by higher average occupancies, which in our view should be more sustainable in the longer run and a signal of a return of business confidence and travel. In addition, we believe that the Formula One race in Sept’09 also helped bumped up performance slightly.
Positive vibes should have been priced in. While we continue to like CDL HT for its exposure to the local tourism scene, at a P/NAV of 1.1x and FY09F-10F DPU yields of 5.1- 6.3%, we current stock price should have already priced in a fair amount of optimism and expectations faced by the local tourism industry. As such, we downgrade CDL HT to a HOLD given limited upside from our target price. TP S$1.57
is maintained. Further re-rating catalysts will hinge on (i) higher than projected tourism performance, (ii) acquisitions