MLT – OCBC
Closing FY14 on positive note
- 4QFY14 DPU rose by 9.2% YoY
- Healthy rental reversion of 17%
- Revaluation gain of S$105.3m
4QFY14 results within expectations
Mapletree Logistics Trust (MLT) reported 4QFY14 gross revenue of S$80.1m and NPI of S$68.3m, up 5.7% and 4.3% YoY, respectively. The positive showing was due mainly to new income stream from Mapletree Benoi Logistics Hub, contribution from The Box Centre, and robust rental reversions from Hong Kong and Singapore. We note that NPI growth would be even stronger at 5.4%, if not for a weaker JPY. Nevertheless, the forex impact on distribution was mitigated by currency hedges. Together with lower finance costs and a distribution of S$0.6m divestment gain, DPU came in at 1.89 S cents, up 9.2% YoY. As a result, FY14 DPU totalled 7.35 S cents (+7.1%). This is in line with our DPU forecast of 7.26 S cents (consensus: 7.2 S cents).
Operational performance staying resilient
Operationally, MLT has been exhibiting resilience, as evidenced by its stable portfolio occupancy of 98.3% (3Q: 98.4%) and healthy rental reversion of 17% achieved during the year. For FY15, we note that ~18.0% of MLT’s leases will be expiring, of which 14.0% has been renewed ahead. Going forward, management expects the demand for logistics facilities in its markets to remain robust. In addition, rental reversion is expected to stay positive, albeit at a moderate pace.
Maintain HOLD on valuation grounds
MLT also reiterated its focus on driving organic growth through proactive leasing efforts and asset enhancements, such as the redevelopment of 5B Toh Guan Road East.
However, unlike previous quarter, management now raises the possibility of growth through acquisition. Specifically, MLT highlighted that it has signed an MOU for a Korea-based property from a third-party vendor, and is currently performing its due diligence for potential purchase. From its sponsor’s pipeline, MLT is eyeing two China-based assets. We believe MLT may carry out capital recycling to partially fund the potential investments, given that it has identified a few lower yielding assets for divestment. We lift our fair value from S$1.06 to S$1.10 as we roll our valuation to FY15. However, as the stock appears fairly priced, we maintain our HOLD rating.
FCT – OCBC
Performance to get better
- 2QFY14 DPU up 6.7% YoY
- Portfolio stable despite volatility within
- Proposed acquisition to propel growth
Consistent set of 2QFY14 results
Frasers Centrepoint Trust (FCT) reported its 2QFY14 scorecard last evening. NPI and distributable income grew by 2.0% and 1.4% YoY to S$29.3m and S$23.8m respectively. The better performance was driven mainly by higher revenue from Causeway Point (CWP), though partially offset by higher property taxes, maintenance costs and property manager's fees. No cash was retained during the quarter, as opposed to S$1.2m cash reserved in prior year. As such, DPU grew at a faster pace of 6.7% YoY to 2.88 S cents. This is largely within our view, given that first-half DPU of 5.38 S cents met 47.8% of our FY14F DPU (consensus: 48.9%).
Disruptions from Bedok Point; portfolio steady
On first look, headline figures such as a 7.6% YoY decline in shopper traffic to 20.4m and 19.5ppt YoY drop in Bedok Point's occupancy to 77.0% have raised concerns. However, we understand that the fall in shopper traffic was mainly impacted by on-going refurbishment works at Bedok Point and CWP. Management projects the occupancy at Bedok Point to recover to above 95% in 2HCY14 after the lease commencement of several new tenants, which we believe will bring about improvements in occupancy and footfall. Overall, we note that portfolio occupancy has maintained steady at 96.8% (1Q: 96.7%), while rental reversions stayed robust at 9.3% (1Q: +2.5%) for the leases renewed during the quarter.
Maintain BUY with unchanged S$2.02 fair value
Looking ahead, FCT reiterated that CWP and Northpoint are expected to underpin growth within its existing portfolio, as both malls contribute to the bulk of the lease renewals in FY14-15. As announced on 8 Apr, FCT has proposed to acquire Changi City Point for
S$305.0m. No additional colour was given on the transaction, except that FCT intends to finance it using a combination of debt and equity (via private placement), and that the deal is expected to be DPU-accretive. We view this addition as timely, as it will provide another boost to DPU in an otherwise moderating growth portfolio. Maintain BUY with unchanged S$2.02 fair value on FCT.
MLT – Maybank Kim Eng
In dire need of growth
- FY3/14 results in line with our and market expectations.
- Japan portfolio still a drag on top line; aggregate revenue and NPI for the past four quarters fell 17% YoY.
- FY3/14-17E DPU CAGR to be an unexciting 0.3% without concrete growth catalysts. Maintain SELL with TP of SGD1.00.
FY3/14 results largely in line
MLT reported a mere 0.9% YoY growth in FY3/14 revenue to SGD310.7m, aided by 17% positive rental reversion for leases secured during the year, but offset by a weaker yen and lower translated revenue from the Japan portfolio. It expects rental reversions to moderate going forward. Full-year DPU rose 7.1% YoY to 7.35 cts, with the SGD2.48m gain from the divestment of 30 Woodlands Loop contributing 0.1 cts. MLT has about 18% of leases (in terms of NLA) due for renewal this year. The all-in-financing cost for 4QFY3/14 averaged 1.9% (4QFY3/13: 2.4%) with an average term of debt of 3.6 years. According to MLT’s interest rate sensitivity analysis, its DPU would decline ~0.5%, or 0.01 cts per quarter, for every 25bps increase in interest rate.
Unexciting DPU growth
We forecast DPU to grow at an unexciting CAGR of 0.3% over FY3/14-17E. Management said it will proactively seek to divest low-yielding assets to recycle capital. As for sponsor injections, the Mapletree Shah Alam Logistics Park in Malaysia is unlikely to be acquired this year due to ongoing defect rectification at the property. However, MLT cited opportunities in Mapletree Yangshan and Mapletree Zhengzhou in China. It has also signed a third-party MOU for a hi-specs warehouse in South-Korea and a purchase agreement may be forthcoming. As these prospective acquisitions have yet to materialise, we adjust our FY3/14-16E DPU forecasts by 1.2% on lower borrowing costs and better reversion rates. Maintain SELL with a DDM-derived TP of SGD1.00 (previously SGD0.98), given high valuations (1.2x P/BV) and lack of concrete growth catalysts.
MLT – CIMB
Continue to wait for drivers
MLT’s 4QFY3/14 results were in line with consensus and our expectations, with this quarter’s DPU accounting for 26% of our full-year forecast and FY14 for 102%. Revenue for the quarter grew by 5.7% yoy, mainly due to new contributions from Singapore, Japan and Korea properties. We maintain our Hold rating with a slightly higher DDM-based (discount rate: 8.1%) target price of S$1.13 as we raised FY15-16 DPS by c.2.5% to reflect the slightly
better-than-expected results.
A good quarter
Mapletree Logistics Trust (MLT) reported its FY14 results, with revenue coming in at S$80.1m (+5.7% yoy) and DPU at 1.87 Scts (+7.8% yoy). The growth in revenue was dampened in part as a result of the weaker yen. Excluding forex losses, gross revenue would have increased to S$81.0m (+6.9% yoy) due to new attribution from the newly completed AEIs in Singapore and Japan, and contribution from the Box Centre in Korea that was acquired during the year (Jul 13). Lower borrowing costs and the partial distribution of the net gain from the divestment of 30 Woodlands Loop further boosted its earnings, bringing the total DPU to 1.89 Scts (+9.2% yoy).
Relying on inorganic growth
Rental reversion in FY13/14 remained healthy at 17%, mainly from Hong Kong and Singapore properties. Looking ahead, with positive rental reversion expected to moderate, together with only 18% of NLA (of which 14% has been renewed ahead of expiry) to be renewed in FY14/15, we believe MLT to rely more on acquisition and redevelopment for growth. In FY14/15, MLT is likely to benefit from the completed redevelopment project at Mapletree Benoi Logistics Hub (100% pre-committed), and the recently announced S$34.3m acquisition in Iskandar.
We maintain a Hold rating
With the current leverage ratio of 33.3%, MLT continues to have the financial ability to capitalise on further inorganic opportunities. Although it is well poised to grow in FY14/15, we believe that the positivity of MLT may be dampened by the continual weakness in the yen. We maintain our Hold rating with a slightly higher DDM-based target price of S$1.13 as we wait for more impactful acquisitions/redevelopments.
A-REIT – CIMB
As steady as it gets
AREIT’s 4QFY3/14 revenue rose by 7.7% and DPU by 16.0% yoy. FY14 DPU was in line at 101% of our FY14 forecast. As the industrial market in Singapore remains challenging on the back of relatively high supply, we maintain our Hold rating with an unchanged DDM-based (discount rate: 7.7%) target price of S$2.36.
Strong portfolio…
Ascendas REIT (AREIT) reported 4QFY14 revenue of S$156.5m (+7.7% yoy) and DPU of 3.55 Scts (+16.0% yoy). The strong growth was mainly attributed to the new income contribution from The Galen, Nexus@One-North, A-REIT City@Jinqiao and Four Acres Singapore. Together, these new assets account for c.70% of the total growth, while other factors such as positive rental reversions due to renewals also contributed to the strong growth. AREIT’s portfolio occupancy held steady at 89.6% in 4QFY14, lower than the 94.0% in 4QFY13 due to the addition of c.114,500 sq m of NLA from its new properties. The cap rates for the period compressed slightly to 6.57% (vs. 6.6% in FY13), while the portfolio revaluation gained by S$131.1m.
… and balance sheet
The leverage ratio increased slightly to 30.0% from 28.3% in 4QFY13. This is expected to grow to 31.2% after funding the committed investments. To date, c.65% of the total debt due this year has been financed at a competitive rate. Currently, all-in borrowing costs remain steady at 2.7% (and is expected to creep up to c.2.8% after the refinancing of loans due this year), while c.65% of total debt are hedged under a fixed rate for an average of 3.5 years.
We maintain a Hold rating
We remain mildly cautious on its outlook with c.21.3% of total leases (as a percentage of AREIT’s property income) set to expire in FY14/15, coupled with rising operating expenses and a relatively large supply of industrial space. Having said that, any short-term drop in vacancy is expected to be mitigated by positive rental reversions. We expect it to achieve mid-to-high single digits for the renewed leases in the coming year. We maintain a Hold rating with an unchanged target price of S$2.36.