Category: MMP
AIG – BT
AIG has direct stake in three listings here
Its largest stake is in Macquarie Prime Reit, followed by First Lease & Jiutian
Ailing insurer American International Group (AIG) has direct and significant stakes in Singapore listings Macquarie Prime real estate investment trust (Reit), First Ship Lease Trust and Jiutian Chemical Group, Bloomberg data showed.
About 10 other firms listed here are exposed to investment funds owned by the world’s largest insurer, which was thrown a life-line on Wednesday in the form of a US$85 billion government loan.
AIG directly owns 10.9 per cent of Macquarie Prime Reit, which works out to $75.3 million based on yesterday’s closing price of 72 cents. It also holds 0.9 per cent stake of the Reit through two AIG-managed international funds, known as the Singapore bond and Acorns of Asia balanced funds.
First Ship Lease Trust has about 8 per cent, or 40.4 million shares, held directly by AIG. This is worth $34.4 million based on the last closing price of 85 cents. AIG also holds an additional 1.6 per cent of First Ship through the same two international funds.
China-based Jiutian Chemical Group has nearly 4 per cent in the direct hands of AIG. The 64.6 million shares is equivalent to $4.84 million, according to yesterday’s closing price of 7.5 cents. Two AIG-managed funds – AIG South-east Asia small companies fund and Southeast Asia small and mid-cap fund – owns another 0.3 per cent.
AIG has not declared changes in shareholding to the Singapore Exchange.
First Ship Lease Trust called AIG late afternoon on Wednesday regarding the company’s shareholding and was told that AIG would be holding on to its stake for now, chief financial office Cheong Chee Tham told BT.
‘We have received no indication from AIG on selling,’ he said.
Macquarie Pacific Star spokesperson said: ‘Macquarie Pacific Star, the manager of MP Reit, maintains regular communications with the Reit’s substantial unitholders,’ adding that AIG has held its stake in the Reit since its listing in September 2005.
‘However, we are not in a position to speak on behalf of them. AIG, as a substantial unitholder, is required to inform the market of any change in their interest in MP Reit.’
AIG-managed funds are also invested in other stocks including S-chips Ferrochina, Fibrechem Technologies and Synear Food Holdings, property firms Ho Bee Investment and Hotel Properties, marine players STX Pan Ocean and Swiber Holdings, as well as Raffles Education Corporation and Raffles Medical Group. All stakes are below 0.5 per cent.
Fibrechem and Raffles Medical have not contacted AIG on their shareholdings, spokesmen said. Ferrochina and Raffles Education declined comment.
As the US Treasury rushes to save AIG, Wall Street has turned its attention to Morgan Stanley, after the Financial Times reported that the US investment bank was in preliminary merger talks with parties including Wachovia, the fourth largest US bank based on assets, and China Investment Corporation. This follows the declared bankruptcy of Lehman Brothers in the same week.
Morgan Stanley directly owns 12 per cent of United Industrial Corporation (UIC), a property unit of Singapore’s second largest bank United Overseas Bank, Bloomberg data showed. It also holds another 1.36 per cent in UIC through its asset management and investment divisions.
Some 10 per cent of logistics firm CWT is also held by Morgan Stanley. It holds 9.79 per cent directly and 0.25 per cent through its asset management arm. ‘Everything remains well and unchanged now,’ CWT chief financial officer Lynda Goh told BT.
Lehman has no significant direct investment in stocks here, according to Bloomberg.
MP REIT – BT
Moody’s downgrades MP Reit’s ratings
Moody’s Investor Services has on Monday downgraded the corporate family and unsecured ratings of Macquarie Prime Reit (MP Reit) to Baa2 and Baa3 respectively. The outlook for the ratings is stable.
The credit rating agency said this concludes the rating review for downgrade which commenced on Feb 26 2008 after MP Reit announced a comprehensive strategic review.
‘The downgrade reflects overall weaker financial flexibility for the trust, which has resulted in its recent refinancing requiring a second ranking security being granted over its assets, due to the strategic review’ says Kathleen Lee, Moody’s vice president and lead analyst for the trust.
‘In addition, whilst the refinancing is welcome, it highlights the relatively limited access the trust has to bank / debt markets given the security and the fact the new loan is only for two years,’ adds Ms Lee.
As a result over 90 per cent of its debt is now maturing at the end of 2010 in a rather unusual lumpy maturity profile and with a large exposure to the currently shut CMBS market.
‘The need for a second ranking security and the large amount of debt maturing at one time is highly unusual for an investment grade entity’, commented Ms Lee.
The rating downgrade was also in part driven by the ongoing strategic review which creates significant uncertainty surrounding the reit’s future operating and strategic profile.
On the other hand, the rating continues to be supported by MP Reit’s good quality asset profile, its ability to generate stable and recurring incomes and its sound financial metrics with TD/TA leverage at 28%, EBITDA/Interest at 4/0x and Debt/EBITDA at 8.3x. This operating profile and financial metrics remain solidly investment grade and counterbalance the weaknesses outlined.
The outlook is stable reflecting these strengths and the limited refinancing risk before 2010.
Upward pressure on the rating is unlikely in the next near term given the ongoing strategic review, the Reit’s limited financial flexibility and the lumpy debt maturity profile.
On the other hand, downward rating pressure could emerge if the strategic review results in asset sales narrowing the Reits operating profile or an increase in leverage.
Credit metrics that may evidence such pressure could include fixed-charge coverage (EBITDA/ interest) falling below 3.0x, debt to EBITDA exceeding 10.0x and total debt to assets exceeding 45% on a sustained basis. A change in the ownership of the manager or the relationship with Macquarie Bank might also be negative but would depend on who was replacing them.
MP Reit was listed on the main board of the Singapore Stock Exchange in September 2005. Its original portfolio consists of strata ownership of two parts of two landmark retail /office properties, Wisma Atria and Ngee Ann City, both on Orchard Road, Singapore’s premier street for shopping and tourism. In 2007, MP expanded its geographical reach by adding 7 retail properties in Japan and another retail property in Chengdu (China) which raised the value of its portfolio from S$1.93 billion to S$2.21 billion as at end-2007.
MP REIT – DBS
Prime Orchard Landlord
Story: MP Reit announced their 2Q08 in line with expectations. Gross revenues grew 27.8% yoy to S$30.2m while NPI increased 29.2% yoy to S$23.1m. Distributable income came in 18.7% higher yoy at $33.3m, resulting in a DPU of 1.78 cts.
Balance sheet remains strong with a gearing ratio of 28.9%as at 30 Jun 08 and interest cover of 4.8x. Interest costs remain relatively low at 2.76%. In the near term, MP Reit is in the process of renewing c$220m of expiring debt.
Point: Performance was largely organic in nature arising from higher rental reversions and contributions from its overseas properties despite some disruptions at their Chengdu asset resulting from the earthquake. Moving forward, DPU growth is likely to grow even stronger with (i) rental reversions from another 13% of portfolio NLA up for renewal in FY08, 15% in FY09, (ii) impact of 19.75% increase in rent from Toshin lease, and (iii) AEI activities done on Ngee Ann City will start contributing in 2H08. Key data points to look out for in the near term will be the outcome of the strategic review which management of MP Reit has yet to conclude.
Relevance: Maintain BUY, TP adjusted to $1.39 from $1.61. We have adjusted our DCF valuation downwards to take into account a higher risk free rate of 3.9% and a lower terminal growth of 1%. At current price, MP Reit is trading at an attractive 0.7x P/BV, backed by quality assets and offers a FY08-09 DPU yield of 7.0% and 7.2% respectively.
MP REIT – BT
MP Reit raises rent by 19.75% at Ngee Ann City
Rent hike for 226,000 sq ft prompts DBS Vickers to raise DPU estimates
MACQUARIE Prime Real Estate Investment Trust (MP Reit) said yesterday that it has raised rent by 19.75 per cent for about 226,000 square feet of retail space in Ngee Ann City.
The Orchard Road space, of which Toshin Development is master lessee, is occupied by luxury retailers such as Louis Vuitton and Chanel, as well as brand name retailers.
MP Reit – formerly known as Macquarie MEAG Prime Reit (MMP Reit) – said that this is expected to push annualised DPU (distribution per unit) up by 7.2 per cent, based on an annualised DPU of 7.08 cents for the first quarter of 2008.
The rental increase for a period of three years starting on June 8 came after a review with Toshin, which is wholly owned by departmental store operator Takashimaya.
‘The announcement is above our estimates of 15 per cent and is largely positive for the Reit given its positive impact on earnings,’ DBS Vickers said in a research note.
The broking house raised its DPU estimates to 7.54 cents for the financial year 2008, translating to a DPU yield of about 6.7 per cent based on yesterday’s closing price of $1.13.
DBS Vickers also upped its DPU estimates for financial year 2009 to 7.81 cents.
The lease under Toshin contributed to a quarter of the Reit’s portfolio gross rent, as at end-March this year.
But the broking house lowered its target price to $1.61 from $1.63 to account for ‘a higher risk-free rate of 3.9 per cent against (its) previous estimate of 3 per cent’.
MP Reit holds a 27.23 per cent strata title interest in Ngee Ann City, comprising 256,000 sq ft in retail net lettable area and 141,000 sq ft in office net lettable space.
The 30,000 square feet of retail area that is not covered by the Toshin master lease is directly rented out and managed by the Reit.
MP Reit’s portfolio consists of 10 properties that are worth more than $2 billion.
MMP – UOBKH
Minor disruption from earthquake in Central China
Minor disruption from earthquake in Central China. MMP REIT owns Renhe Spring Department Store located in Chengdu, the capital city of Sichuan Province. The mall experienced tremors and aftershocks during the recent earthquake. The building was successfully evacuated. Preliminary assessment indicates no major damages for the new five years old building. The company has engaged structural engineers to conduct a detailed inspection. The mall will be open for business once MMP REIT secures clearance from the local authorities.
The earthquake is unlikely to have a material impact on financial performance in FY08 due to profit guarantee from Renhe Spring Group. Renhe Spring Departmental Store contributed 11% of total revenue in 1Q08.
Renhe Spring Department Store. The acquisition of Renhe Spring Department Store for Rmb350m, or S$70m was completed in Aug 07. The mall houses premium foreign brands such as Burberry, Prada, Dunhill, Ermenegildo Zegna, Gucci and Hugo Boss. The property achieved sales of Rmb263m in 2006, an increase of 23%. The mall will be linked to Chengdu’s new subway system in 2010. The vendor Renhe Spring Group provided guaranteed net profit of Rmb26.4m for four years, equivalent to a net distribution yield of 7.5%.
Maintain BUY. MMP REIT provides FY08 distribution yield of 6.41%, an attractive spread of 4.06% over 10-year Singapore government bond yield at 2.35%. Our target price is S$1.55 based on two-stage dividend discount model (required rate of return: 7.85%, terminal growth: 2.5%).