Author: tfwee
CDL H-Trust – DMG
At inflection point; on course to a ‘V’ recovery
3Q09 results in-line with expectations. CDLHT reported 3Q09 DPU of 2.04¢ (+7.9% QoQ). Annualised 9M09 DPU came in at 5.9¢, in-line with our FY09 forecast. Net property income rose 11.3% QoQ to S$21.4m on the back of higher RevPARs achieved for all of its hotel properties. RevPAR rose 14.9% QoQ due to a 10.6ppt surge in occupancy in 3Q09. Excluding the S$1.7m income retained for working capital, DPU would have been 2.23¢. Maintain BUY, DDM-derived TP of S$2.15.
At inflection point; trading at mid-cycle valuations. 3Q09’s strong QoQ DPU growth marks the beginning of a ‘V’ recovery, powered by the resurgence in tourism offerings. We are sanguine that CDLHT remains the best proxy to a multi-year tourism boom that will take place next year. We expect systemic occupancies to rise to 84% next year, with ARRs rising to S$250. As such, we estimate CDLHT’s FY10 DPU to spike 35% to 10.8¢, inching above the FY08 levels of 10.6¢.
Gained market share through lower rates. The prospects for Singapore tourism has been augmented with improving visitor arrival statistics. Singapore registered a 7.1% growth in visitor arrivals in Sept 09, its first growth since May 08. Better still, CDLHT’s registered a strong occupancy of 86%, significantly higher than the industry’s average of 79%. CDLHT’s strategy of keeping its ARRs lower (S$179 vs. industry’s S$187) resulted in higher RevPARs (S$154 vs. industry’s S$148). We believe CDLHT’s strategy of gaining market through lower rates will likely beef up its RevPARs in the short-term.
Euphoric aura could see yields compress to 5%. We believe the stabilising global economy and the twin openings of the IRs will remain as euphoric events in 2010, providing sustained performance for CDLHT’s stock price. Despite surging from its S$0.43 March lows, we do not think stock price is fully reflective of the sated impact of the IRs. In the heydays of 2007-08, CDLHT traded at ~5% yield, below the current 6.9% level. We suspect CDLHT could trade towards the 5% level within the next 12 months, implying a recursive fair value of S$2.15. CDLHT is top pick among S-REIT counters.
Cambridge – Phillip
3QFY09 Results
Cambridge Industrial Trust (CIT) reported results for 3QFY09. CIT recorded gross revenue of $18.7 million (+2.1% yoy, +1.2 qoq), net property income of $16.4 million (+0.9% yoy, +2.2% qoq) and distributable income of $11.2 million (-5.5% yoy, +4.6% qoq). DPU for 3QFY09 is 1.344 cents (-9.7% yoy, flat qoq).
Gross revenue showed slight improvement over the quarters on the back of rental escalation of leases and improving occupancy. Correspondingly, distributable income also increased over the quarters, however DPU for 3QFY09 was impacted by the dilution of the placement exercise, which saw 71 million new units being issued.
Current gearing of CIT is 42.6% and CIT total debt of $390.1 million matures in Feb 2012. Total portfolio size is $880.4 million and management expects asset valuation to hold.
Divestment plan to continue. The management of CIT indicates that asset rebalancing is a long-term action plan for CIT. Currently it has identified properties that are non-core to the portfolio and has plan to divest those properties. Aside from divesting assets, management is also considering entering into joint development projects with reputable developers.
Dividend reinvestment plan. CIT has proposed a dividend reinvestment plan (DRP) whereby investors can opt to have their quarterly dividend payout in the form of units instead of cash.
The proceeds from the asset divestment and the DRP will be used to reduce gearing. The management hopes to bring long term gearing down to 30-35%.
Valuation and recommendation. We feel the underlying portfolio has perform better than expectations. Occupancy rate has held up well and arrears average around 1.4% of gross rent. CIT maintains an average of 15.7 months of security deposit. We feel the main overhangs on the REIT are the high gearing and the relatively high interest cost, which are both a drag on DPU. Although both the divestment and DRP could bring down gearing, it has to be balance with accretive acquisitions in order to be value-add to investors. We revise up our occupancy rate and also factor in the dilution of the recent placement. Our fair value is lowered from $0.45 to $0.41. Our FY09F DPU is lowered from 4.93 cents to 4.83 cents. Maintain Hold recommendation.
ART – DBS
Sitting pretty
• Sequential improvement in 3Q09 on the back of improving operational performance
• RevPAU up 4% qoq from higher occupancies
• Maintain BUY, TP S$1.25
Improving operations. Ascott Residence Trust (ART) reported 3Q09 results in line with expectations. While revenues and gross profits were 17% and 21% lower yoy to S$44.4m and S$22.0m owing to a exceptional Beijing Olympics last year, performance showed a sequential improvement from rising demand seen in their Singapore, China, Japan and Indonesian operations. Distributable income came in at S$11.8m (-25% yoy, +7% qoq), translating to a DPU of 1.92 Scts.
RevPAU up 4% qoq – a good sign. We are encouraged by further signs of improvement in ART’s core markets in Singapore, China and Japan. As such, we are adjusting our occupancy estimates upwards by up to 2% to reflect our more positive outlook for travel demand and expansion in annual travel budgets of corporate, thus fueling demand for accommodation. DPU forecast for FY10 and FY11 adjusted up by 2.4% and 2.6%.
Maintain BUY, TP S$1.25. On the back of an improving travel outlook, we are positive that ART will be able to deliver a sustained FY09-11F DPU yield of 6.6 – 7.5%. Maintain BUY, with revised TP of S$1.25 on slightly lower WACC assumptions. (-25 bps). Further upside catalysts will include (i) stronger than expected RevPAU performance in 4q09, (ii) accretive acquisitions.
ART – CIMB
Improving performance, but upside limited
• Downgrade to Neutral from Outperform; unchanged DDM-based target price of S$1.21. ART’s 3Q09 results met Street and our expectations. Although revenue per available unit (REVPAU) improved as we anticipated, and although we remain positive on the hospitality sector, ART has already outperformed since our upgrade early this month, pricing in the positives. Hence we downgrade our recommendation to Neutral from Outperform.
• Results in line. YTD DPU of 5.48cts forms 75% of our full-year forecast. 3Q09 DPU of 1.92cts (26% of full-year forecast) was down 26.4% yoy due mainly to weaker demand for serviced residences in Singapore and China as a result of the global economic slowdown. However, DPU improved 7.3% qoq as REVPAU strengthened across the board. Tighter control of property-related expenses also lifted gross profit by 6% qoq to S$22m.
• Portfolio REVPAU grew. REVPAU, which had been declining since 4Q08, finally grew 4.2% qoq in 3Q09 to reach S$124. The recovery was led by Japan (+24.4% qoq) on the back of a stronger yen, Singapore (+14.9% qoq) and China (+6.8% qoq). REVPAU in three out of its seven countries remained in negative region, including Australia (-6.2%), Vietnam (-1.6%) and the Philippines (-3.5%).
• No changes in assumptions. We continue to expect REVPAU growth to be led by Singapore (+30%), the Philippines (+15%) and Vietnam (+10%) in 2010. Our DPU estimates and DDM-derived target price of S$1.21 are unchanged (discount rate 9.1%).