Category: ESR
SREITs – ML
S’pore REITs: High quality dividends and a strong currency
Singapore REITs have high single digit dividend yields that are relatively secure due to long lease tenure, conservative balance sheets and exposure to the property sector’s strong fundamentals.
We also expect the Singapore dollar to appreciate by as much as 5% this year.
In sum, this is a safe place to be.
CapitaCommercial Trust (CMIAF; S$2.12; B-1-7) Top pick for office sector, significantly undervalued. High organic growth from rental reversions.
We have a Buy rating on CCT and 12-month price objective to S$2.70/share. Our price objective is based on our DCF valuation derived from 10 years of forecasts. Key assumptions include a risk free rate of 3.0%, an equity risk premium of 5.7% and a beta of 1.0. Risks are a downturn in the economy, higher interest rates, lower than forecast rental and occupancy rates and the possibility that future acquisitions may provide lower-than-expected returns.
Macquaire Meag Prime REIT (MQPRF; S$1.25; B-1-7) Top pick for retail sector. M&A target with near term potential to trade to NAV.
We are setting our price objective with reference to current NAV of S$1.61/share.The NAV is derived from 4% cap rates for Singapore office exposure and 5% cap rates for Singapore retail exposure. Risks are a downturn in the economy, higher interest rates, lower-than-forecast rental and occupancy rates and the possibility that future acquisitions may provide lower than expected returns.
CDL REIT (CEHSF; S$2.33; B-1-7) Top pick for hotel sector. Singapore hotel room rates continue to rise, strong balance sheet.
We have a Buy rating on CDL Hospitality Trusts (CDLT) and a 12 month price objective of S$2.88/share. Our price objective is based on our DCF valuation derived from 10 years of forecasts. Key assumptions include a risk free rate of 3.4%, an equity risk premium of 5.7% and a beta of 1.2. Risks are a downturn in the economy, higher interest rates, lower than forecast rental and occupancy rates and the possibility that future acquisitions may provide lower-than-expected returns.
Cambridge Industrial (XCMBF; S$0.70; B-1-7) Top pick for industrial sector. Most defensive asset class. Long lease expiries support income security.
We have a Buy rating on CREIT and a 12-month price objective of S$0.88/share. Our price objective is based on our DCF valuation derived from 10 years of forecasts. Key assumptions include a risk free rate of 3.0%, an equity risk premium of 5.7% and a beta of 1.0. Risks are a downturn in the Singapore economy, higher interest rates, lower-than-forecast rental and occupancy rates and the possibility that future acquisitions may provide lower-than-expected returns.
First REIT (FESNF; S$0.74; B-1-7) Investors reluctant to take Indonesian risk, yet the Indonesian stock market itself is one of the best
We have a Buy rating on First REIT and a 12 month price objective of S$0.84/share. Our price objective is based on our DCF valuation derived from 10 years of forecasts. Key assumptions include a risk-free rate of 5.5%, an equity risk premium of 7.1%, and a leveraged beta of 0.90. Risks to our price objective are an increase in short-term interest rates which may result in higher interest costs on existing borrowings; increases in long-term interest rates which could impact our DCF valuation due to the assumption of risk-free rates; and a deterioration in economic activity that may impact occupancy and rental growth of assets held within the investment portfolio.
Cambridge
OXLEY GROUP ACQUIRES STRATEGIC STAKE IN CAMBRIDGE INDUSTRIAL TRUST MANAGEMENT
Singapore, 20 February 2008 – Cambridge Industrial Trust Management Pte Ltd (“CITM”) wishes to announce that Oxley Group (“Oxley”) has acquired an effective 20 percent interest in CITM by acquiring 33 percent of the equity in Cambridge Real EstateInvestment Management (“CREIM”). CREIM holds a majority stake of 60 per cent ofCITM.
CITM is the manager of Cambridge Industrial Trust (“CIT”), which is the first independent industrial REIT to be listed on the Stock Exchange of Singapore with a market capitalization of approximately S$ 552 million and total assets of S$ 949.8 million.
Oxley’s interest was acquired from Mr Chan Wang Kin, who has sold his entire 28 percent stake in CREIM to Oxley. Oxley has acquired an additional 5 percent from Mr Ang Poh Seong, CEO of CITM. Mr Ang retains a 20 percent stake in CREIM.
With the sale of his interest in CREIM, Mr Chan Wang Kin will cease to be a director of CREIM and CITM Mr Ang welcomed Oxley as a strategic shareholder of CREIM adding, “We are excited
with this new development particularly in light of the regional networking and depth of experience that Oxley will bring to this partnership.”
“We are delighted with this transaction and look forward to working with the management of CITM to further develop CIT as a leading player in the Asian Industrial Property space.” said Michael Dwyer, Executive Chairman of Oxley.
Cambridge – SGX
The details of the IRS are:
• Notional Amount : S$358 million
• Tenor : 5.5 years
• CIT Pays : 2.58% per annum
• CIT Receives : Singapore Dollar Swap Offered Rate (“SOR”)
• Current Debt Hedged : 100%
The swap will provide an all-in, fixed cost of borrowing of 3.32% per annum for CIT’s entire current outstanding debt from February 2008 until July 2013. This compares to an all-in cost of debt of 4.10% per annum forecast for 2008 in the Offering Circular dated 15 October 2007.
Mr Ang Poh Seong, Chief Executive Officer of the Manager, said “This transaction represents another milestone in CIT’s strategy of prudent capital management. We have taken advantage of the current low interest rate environment to lock in additional returns for unitholders.”
It is the intention of the Manager to fully hedge interest rates, subject to market conditions.
Cambridge – Phillip
Still Attractive
CIT reported its FY07 results that were largely in-line with our projections, backed by properties acquired during the past year. Gross revenue came in at S$53 million and net property income is S$45.8 million. CIT achieved a full year DPU of 6.262 cents. Net asset value increased from $0.67 to $0.76.
Results in-line with our estimates. Revenue came in within 1.5% of our forecast of S$52.3 million, net property income of S$45.8 million versus our forecast of S$45.9 million. Full year DPU is higher by 4% than our forecast of 6.02 cents.
Revenue growth backed by accretive acquisitions. CIT expanded its portfolio from 27 properties with an asset value of S$531 million to 40 properties worth S$928 million at year-end with the acquisition of 13 properties during the year. In January this year, CIT managed to seal another 2 deals and has signed $125.6 million worth of MOU.
Capital management strategy. During the results briefing, management laid out their capital management plan for the year. Since the successful equity fund raising in October last year, CIT gearing has lowered to 36% and it has $131 million in undrawn facility available. Management intends to take advantage of the low interest rate environment so as to lock in the low rate whenever possible. In the longer term, management intends to refinance through CMBS issues.
Plans ahead. Management remains confident on growing via acquisition whether locally or venturing overseas and reiterates its target of S$500 million worth of acquisition p.a.
Valuation and recommendation. The current market conditions may prove difficult for REIT to pursue growth via acquisition as the cost of equity increases. On hindsight, CIT managed to raised S$193.9 million and completed 7 acquisitions just before market sentiment turns awry. With gearing at 36% and $131 million in available credit facility, CIT has no worries about funding in the short term. We maintain our favourable stance on CIT. Our optimism in CIT stems from the stable underlying cash flow and DPU growth from potential accretive acquisitions. Fair value is lowered from $1.07 to $0.89 as we raised our assumptions for beta and risk premium to reflect volatile market condition and factor in conservatism.
Cambridge – BT
CIT distributable income for Q4 surges 59%
Distributable income for full year 31.7% more than forecast
CAMBRIDGE Industrial Trust (CIT) has posted distributable income of $11.59 million – 59 per cent higher year on year – for its fourth quarter ended Dec 31, 2007.
The figure comprised $1.6 million distributed to unit holders for the period Oct 1-17, just ahead of an equity fund-raising exercise completed on Oct 18, and distributable income of almost $10 million for the rest of the quarter.
The $10 million reflects distribution per unit (DPU) of 1.258 cents, which works out to an annualised figure of 6.122 cents and a resulting distribution yield of 9.2 per cent based on CIT’s closing price of 66.5 cents yesterday. The counter ended the day half a cent lower.
Net property income for Q4 rose 46.3 per cent year on year to $13.9 million on a 49.1 per cent rise in gross revenue to $16.1 million.
For the year ended Dec 31, 2007, CIT posted distributable income of $35.7 million, which was 31.7 per cent higher than forecast by the trust’s manager, Cambridge Industrial Trust Management.
Net property income of $45.8 million was 28.3 per cent above forecast, while gross revenue of $53 million surpassed the forecast by 22.7 per cent.
CIT’s portfolio comprised 40 properties at end-December 2007, up from 27 assets a year earlier. The 40 properties, valued at $927.8 million at end-2007, were fully occupied as of that time.
The trust’s manager said it ‘believes the demand for quasi-offices will spill into demand for light industrial space resulting from current rental pressure on prime office space in the Central Business District’.
The latest DPU of 1.258 cents for the period Oct 18-Dec 31, 2007 will be paid on Feb 29.