Category: AIMSAMPIReit
Industrial REITs – OCBC
Expecting firm performance
• Poised for firm results
• Positive asset revaluation likely
• DPU yields remain attractive
Likely to witness healthy quarterly results
Industrial REITs are expected to kick off the reporting season for the financial quarter ending 31 Mar in mid-April. We believe the REITs will continue to post healthy YoY growth in distributable incomes and DPUs, driven by completion of acquisitions, sound occupancy rates and possibly positive rental reversions. On a sequential basis, the financial performances are expected to stay firm, as contributions from new acquisitions are anticipated to be partially offset by higher operating and financing expenses.
Asset revaluation to provide relief on gearing?
Four industrial REITs, namely AIMS AMP Capital Industrial REIT (AAREIT), Ascendas REIT, Mapletree Industrial Trust and Mapletree Logistics Trust (MLT), will also be concluding their financial years. This will likely be accompanied by a revaluation of their investment properties. Looking at the trend of URA rental and price indexes over the past year, we believe the REITs may likely experience revaluation gains in their portfolios. This may in turn provide some relief on their aggregate leverages, which have mostly been rising amid a spate of acquisitions. In fact, we note that MLT had already announced the completion of the valuations of its 98 properties late this week. The aggregate portfolio amount of S$3.9b, which will be reflected in its upcoming results, was 3.1% and 8.4% respectively to the book values of its investment properties QoQ and YoY.
Subsector yield the highest in S-REIT sector; Cache Logistics is our pick We also revisit the valuations and yields of SREITs, following the recent run-up in the general market. Based on Bloomberg consensus estimates and prices as at 19 Mar 2012, we note that the industrial subsector offers the highest current yield (8.1%), compared to 6.1-7.1% for other subsectors and 6.9% for the overall sector average. We are maintaining OVERWEIGHT on the industrial REIT subsector. Cache Logistics remains our preferred pick, given its attractive FY12F DPU yield of 8.5% and robust portfolio.
AIMSAMPReit – SGX
RECEIPT OF APPROVAL IN-PRINCIPLE
FOR PRIVATE PLACEMENT OF 12,195,122 NEW UNITS IN AIMS AMP CAPITAL INDUSTRIAL REIT TO CWT LIMITED
AIMS AMP Capital Industrial REIT Management Limited, as manager of AIMS AMP Capital Industrial REIT (“AIMSAMPIREIT”, and the manager of AIMSAMPIREIT, the “Manager”), is pleased to announce that further to its announcements dated 26 July 2011 and 15 August 2011 in relation to, among others, the private placement of 12,195,122 new units in AIMSAMPIREIT (the “Placement Units”) to CWT Limited (“CWT”) or its subsidiary (the “CWT Private Placement”), the Manager has today obtained the approval in-principle from Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing of, dealing in, and quotation on the Main Board of the SGX-ST of, the 12,195,122 Placement Units to be issued pursuant to the CWT Private Placement at an issue price of S$0.205 per Placement Unit.
The Placement Units are expected to be issued to CWT on 5 September 2011. Subject to applicable laws and regulations, the Manager intends to use the entire gross proceeds of S$2,500,000.01 from the CWT Private Placement for working capital and general corporate purposes of AIMSAMPIREIT. The SGX-ST’s approval in-principle is subject to, inter alia, compliance with the SGX-ST’s listing requirements.
The SGX-ST’s approval in-principle is not to be taken as an indication of the merits of the CWT Private Placement, the Placement Units, AIMSAMPIREIT and/or its subsidiaries.
AIMSAMPReit – BT
Aims AMP Capital proposes 5-into-1 share consolidation
AIMS AMP Capital Industrial Reit Management Limited yesterday proposed a five-into-one share consolidation, which will see shareholders receive one new share for every five existing shares held as at a book closure date to be announced.
The company currently has 2.207 billion issued units.
The company believes that the proposed share consolidation ‘may serve to reduce the magnitude of volatility of (the Reit’s) unit price and market capitalisation’ as well as ‘improve the profile of (the Reit) among institutional investors’ and ‘improve the coverage of (the Reit) among research houses’.
Said Tang Buck Kiau, head of finance at Aims AMP Capital: ‘Based on the current units, a volatility of 0.5 cents in unit price impacts market capitalisation at 2.38 per cent. After consolidation, volatility will go down to 0.5 per cent.’
The company said that it is seeking unit-holders’ approval for the implementation of the unit consolidation by way of an ordinary resolution at an extraordinary general meeting to be convened.
Following this, it will make an application to SGX for approval for the listing and quotation of the new shares arising from the consolidation and will despatch a circular to shareholders setting out the details of the move.
The counter closed down 0.1 cent at $0.199 yesterday.
AIMSAMPReit – BT
Sale of AIMS Reit’s Japan property completed
AIMS AMP Capital Industrial Reit has completed the sale of Asahi Ohmiya Warehouse – at an effectively lower price of 1.483 billion yen (S$23 million).
The price of the warehouse was effectively reduced from 1.49 billion yen after a joint inspection by the interested parties and an independent engineer indicated 6.9 million yen worth of repairs were required on the property following the massive earthquake on March 11.
The completion of the sale of the warehouse, which is located about 345 km from the epicentre of the earthquake, was earlier delayed pending inspections.
The trust said in late February that it was selling the property to ‘free up capital to provide the trust with greater financial flexibility for future investment opportunities’. It added that the sale was consistent with the manager’s strategy to dispose of its single Japan-based asset.
The net sale proceeds, after repayment of a 989 million yen debt and payment of sale-related costs, will be used to reduce aggregate leverage from 33.6 per cent to 32 per cent.
Based on valuations obtained as at Sept 30, 2010, AIMS Reit consisted of 26 industrial properties located throughout Singapore and one property in Japan (Asahi Ohmiya Warehouse), with an appraised total value of $803.9 million.
Reits with Japanese exposure have been in the spotlight this fortnight.
Saizen Reit sold Johnan Building III in Fukuoka to an independent private investor for about $4.9 million. The building accounted for about 0.9 per cent of the trust’s revenue for the financial year ended June 30 last year. It is not expected to have a material impact on the trust’s financial position.
Proceeds will be used for the partial repayment of a loan that had gone into maturity default in November 2009.
Mapletree Logistics last announced that 13 of its 14 Japanese properties escaped with either no or minimal damage. It was estimated that the worst hit, Sendai Centre, would cost some $9 million to reinstate.
Frasiers Commercial Trust’s three properties in Tokyo and Osaka are intact with minimal damage. Ebara Techno-Serve Headquarters Building and Galleria Otemae Building in Tokyo and Osaka respectively, incurred minor damage with estimated costs of 1.25 million yen as at March 14.
Starhill Global Reit has seven malls in Tokyo. The manager stated that there was no known damage to the malls.
The AIMS AMP Reit counter closed at 20.5 cents yesterday, up half a cent.
SREITs – OCBC
Impact of Japan’s earthquake & tsunami
Residential REITs. Saizen REIT (Not Rated), with 146 properties all over Japan, will be the most affected S-REIT, in our opinion. The impacted region includes the cities of Sendai with 22 properties, Koriyama and Morioka with three properties each, making up 15.5% of its portfolio value (PV). Most notably, Sendai (nearest quake epicenter) constitutes 11.2% of Saizen’s total portfolio value and 10.6% of rental income. The full extent of the damage is still unknown as access to these areas has been cordoned off due to safety concerns.
Industrial REITs. MLT has 14 properties in Japan (26.4% of PV) of which 13 escaped with either no damage or minimal damage. Sendai Centre (2-storey chilled and frozen facility, contributing 0.75% of PV & 0.7% of MLT’s gross revenue), is located along the coastal area of Sendai, and appears to be most affected. However, the full extent of damage can only be ascertained when access into the property is allowed. The total cost of reinstating the building is ~S$9m (0.37 S-cents per unit), but MLT does not expect the cost of repairs will come to this amount. We place our BUY rating and fair value of S$1.03 under review pending more updates and clarity from management. AAREIT (Not Rated) also has a warehouse at Saitama (4% of PV) to be sold pending sale completion in Mar 2011. AAREIT has announced that there appears to be no structural damage to the property.
Office REITs. FCOT has three commercial properties in Tokyo and Osaka (6.9% of PV). We understand from the manager that all properties are away from the affected areas and thus did not suffer any damages. With FCOT’s limited exposure in Japan, we maintain our BUY rating and fair value of S$0.92.
Retail REITs. Starhill Global REIT has seven malls in Tokyo (6.6% of PV, 4.6% of total gross revenue). The manager has stated that there is no known damage to the malls. In addition, the properties were also partially covered by earthquake insurance (unlike properties in other REIT subsector), providing some form of assurance for unitholders. We expect retail sales in Japan to be impacted somewhat but maintain our BUY rating and target price of S$0.74.
Taking a cautious stance. Nevertheless, we remain cautious as events in Japan are still unfolding and at this stage, it is hard to predict the extent to which the quake and the nuclear fallout will hurt the economy. There is also the possibility of more quakes (likely 7.0 or higher magnitude), aftershocks and even tsunamis taking place in the coming days.