Author: tfwee
Suntec – BT
Suntec Reit posted distribution per unit of about 2.92 cents for the third quarter ended Sept 30, 2009, up 2.3 per cent from the same period last year. Income available for distribution rose 8.8 per cent to $47.74 million
PST – OCBC
Lowers DPU payout; no forward guidance
Payout down to 70%. Pacific Shipping Trust (PST) posted a 39% YoY increase in gross revenue to US$15.6m and a 30% YoY increase in distributed income to US$4.8m. The gains were due to contributions from the two CSAV vessels acquired in 2008. On a QoQ basis, revenue rose 1.1% and distributed income fell 17.4%. The trust will pay out 0.818 US cents per unit to investors. This is equivalent to 70% of income available for distribution (2Q: 88%) or 43% of cash earnings (2Q: 48%). PST outperformed our estimates for the quarter as we had already priced in rate concessions to charterer CSAV. But these discussions, which began in April, are still ongoing.
No forward DPU guidance. The Board did not give any forward guidance for DPU payout in 4Q09. The manager said it was not customary for PST to provide guidance, and last quarter’s guidance for 3Q09 was only given because of the sudden drop in payout from 90% to 70%. PST is describing the increased retention as a move to “equip [it] with the financial flexibility to seize value-accretive opportunities” in the next 12 to 18 months. Potential targets include the offshore or chemical tanker asset class. At the briefing, the manager said the Board will continue to review the necessity to retain cash based on market conditions and available opportunities. Our take of these actions is a little different: the shipping sector is still in fairly rough shape, and negotiations with CSAV continue. The increased retention, in our view, is PST’s attempt to build up a defensive war chest in case a negative outcome results. In fact, we don’t believe PST is in any position to consider acquisitions until it can resolve the CSAV issue.
Revising earnings estimates. We had previously assumed a 30% rate cut on the two CSAV vessels in effect from 3Q09. We are now stripping out this assumption in view of the uncertain quantum and timing of any rate concession. This does not mean we believe any action is less likely or less significant – if PST agrees to a renegotiation, it could open the floodgates. Its other charterer, sponsor Pacific International Lines, would be justified in also asking for concessions. We now price in the renegotiation risk in our valuation: valuing PST at a 30% discount to our discounted FCFE value for the trust (prev: 20%). We also assume the
70% payout level continues. Maintain HOLD with revised US$0.26 fair value (prev: US$0.27).
FSL – DBS
DPU guidance maintained at 1.50 Uscts
At a Glance
• Results in line with expectations
• Maintain DPU guidance for 4Q09 at 1.50UScts
• FY10F DPU yield of 13%, best visibility among peers
• Maintain BUY with TP S$0.70
Comment on Results
FSLT delivered another quarter of steady results. Revenue of US$24.6m was stable q-o-q, and the Trust generated cash of US$17.6m, 3% higher than the US$17.1m generated in 2Q09. Of this, the Trust will distribute an aggregate amount of US$8m to its shareholders or a DPU of 1.50UScts for 3Q09.
To recap, a DPU of 1.27UScts for the period 1 July to 16 Sep has already been announced for existing shareholders, while the remaining 0.23UScts for the period 17 Sep – 30 Sep will now be paid to both existing and new shareholders (post placement exercise). The ex-distribution date is 29th October.
Recommendation
Of the US$9.6m cash remaining, the Trust will utilise US$8m towards quarterly prepayment of loans, as per the arrangement following the recent two-year waiver it obtained on its LTV covenants. This will reduce outstanding loans to US$493m, and gearing now stands at 1.3x. Elsewhere, the manager has reiterated that all advance lease payments have been prompt until October 2009 and no request for renegotiation has been received. Hence, risks at FSLT continue to be well managed.
While DPU guidance for 4Q09 has been maintained at 1.50UScts, we continue to project a conservative 1.40UScts DPU per quarter in FY10, given the higher interest costs to be incurred hereon. The Trust is still trading at 13% FY10 dividend yield, more secure and more attractive compared to its peers. Further, the placement proceeds of US$28m, raised during 3Q09, will provide management with a lever to pursue DPU-accretive growth. Thus, we continue to maintain BUY at an unchanged TP of S$0.70.
FCOT – Phillip
FY09 Results
Frasers Commercial Trust (FCOT) announced results for 9MFY09, which is also the full year result for FY09 because the financial year-end was changed from 31 Dec to 30 Sep. For the 3 months ended 30 Sep 09, gross revenue came in at $25.7 million (- 3.4% yoy, +13.3% qoq), net property income was $20.0 million (-0.6% yoy, +12.3% qoq) and distributable income was $6.1 million (-23.9% yoy, +10.4% qoq). Distribution per unit (DPU) for the quarter was 0.2 cents and for the 9 months, total DPU was 1.65 cents.
On the overall, financial performance was better in FY2008 compared to FY2009. The reasons were due to the cessation of income support from Central Park and Keypoint, and also the average exchange rate was stronger in FY2008. Exhibit 1 and 2 show the corresponding dip in earnings contribution from Singapore and Australia when the income support ended. For 3QFY09, revenue from Singapore was boosted by the addition of Alexandra Techno Park’s contribution. Favourable foreign exchange movement in the AUD in 3QFY09 over 2QFY09 also contributed to the better quarterly Australia properties performance. Revenue contribution from the Japan properties registered slight increase, however a key tenant of Cosmo Plaza continues to be in distress, thereby affecting Japan properties performance.
FCOT took a further $29.9 million revaluation write-down on its assets in this quarter. FY2009 revaluation loss totals $174.8 million. With the addition of Alexandra Techno Park, current portfolio size is $1.94 billion. Management is still looking to dispose of the AWPF investment and Cosmo Plaza. FCOT has total borrowings of $803.0 million and gearing is currently 38.9%. The debt will mature in 2012.
Valuation and recommendation. In our opinion, the office market remains weak and should remain subdued at least in the next quarter. For FCOT, master leases of Alexandra Technopark and China Square as well as the annual rent increment of Caroline Chisholm provide stability to its revenue. We estimate this contribution to be approximately 46% of FY10F revenue. FCOT will also be drawing down its AUD loan facility so as to create a natural hedge of its revenue contribution from Australia, this will then minimize foreign exchange uncertainty leading to greater stability of DPU. As mentioned in our previous report, the repositioning of FCOT by management takes time to crystallize and we are now seeing plans being implemented into action. We roll forward our DCF valuationinto FY10F, which gives us a fair value of $0.17. Our DPU forecast for FY10F is 1.11 cents, which translates to a dividend yield of 7.16%. Maintain Hold recommendation. Our valuation has not factor in the conversion of the Convertible Perpetual Preferred Units (CPPU). The conversion price of the CPPU is $0.2369.
FCOT – BT
FCOT Q3 distributable income falls 23.9%
Factors include lower revenue and higher finance costs
FRASERS Commercial Trust (FCOT) has reported a 23.9 per cent fall in third-quarter distributable income to $6.1 million, dragged down by lower revenue and higher finance costs. Distribution per unit – after adjustment for rights units – slipped to 0.2 cents per unit from 0.27 cents.
For the three months ended September, gross revenue dipped 3.4 per cent to $25.7 million. This was mainly due to revenue declines in KeyPoint, Japan’s Cosmo Plaza and Australia’s Central Park. In particular, Cosmo Plaza had lost a major tenant, while takings from its Australian properties were affected by the weakening of the Australian dollar and expiry of leases. However, the loss of revenue was partially offset by a $2.2 million contribution from Alexandra Technopark, which was acquired in August.
Property operating expenses went down 11.9 per cent to $5.7 million. This resulted in a net property income of about $20 million, little changed from the same quarter last year. Finance costs, however, went up 15.8 per cent to $12.7 million due to higher borrowing costs. ‘Under terms of the debt facilities extension negotiated in 2008, the interest margin of these facilities increased with effect from 1 July 2009,’ the trust’s manager Frasers Centrepoint Asset Management said.
FCOT’s portfolio consists of ten properties spanning Singapore, Japan and Australia. As at Sept 30, their combined asset value amounted to $1.9 billion.
‘For the coming year, management will seek to improve the portfolio through asset enhancement initiatives for some of the properties,’ said Low Chee Wah, CEO of the trust’s manager. ‘This, along with rigorous expense control and proactive tenancy management, will be key to lifting portfolio performance in the coming periods.’
For the first nine months, distributable income was $17.1 million. Gross revenue was $72.3 million. The trust has changed its financial year end to September, from December. Unitholders will receive the distribution of 0.20 cents on Nov 26. Distributions will resume to half-yearly payment from the end of the first half of FY2010. FCOT was last traded 15.5 cents.