CMT – MayBank Kim Eng
Fairly valued; uninspiring catalyst
- FY13 results in line with our and market expectations.
- No material impact from Westgate Tower sale with only marginal 1 SGD cts/share accretion. Capital distribution unlikely.
- Maintain HOLD on valuation grounds and uninspiring DPU growth prospects as most of the eligible malls in its portfolio have already undergone asset enhancements.
Results in line with expectations
CMT’s FY13 revenue grew 10.2% YoY to SGD729m, attributable to the reopening and completion of AEIs at JCube, Bugis+ and Atrium, as well as the opening of Westgate on 2 Dec 2013. Full-year DPU, which grew 8.6% to 10.27 SGD cts, was within our expectations. CMT saw a 6.3% increase in positive rental reversion in FY13, renewing 629 leases. About 696 leases, constituting 21% of gross rental, will expire in FY14. Portfolio occupancy rate remained strong at 98.5% (FY12: 98.2%). Aggregate leverage was 35.3%, up slightly from 34.8% in the previous quarter due to new borrowings.
Capital distribution unlikely for Westgate Tower sale
At the results briefing today, CMT said that should Sun Venture and Low Keng Huat exercise the option to buy its 30% stake in Westgate Tower for SGD579.4m (option deadline: 24 January), it intends to retain the divestment proceeds for future capex and working capital use and not distribute the gains to unitholders. Based on the purchase consideration of SGD1,900 psf, we value CMT’s stake at ~SGD1,400 psf, which works out to a marginal 1 SGD cts/share accretion. Maintain HOLD on valuation grounds and uninspiring DPU growth prospects as most of the eligible malls in its portfolio have already undergone asset enhancements. We forecast 2.5% DPU CAGR over FY13-16E. Yield-accretive acquisitions, if any, would be a positive catalyst for the stock. Until then, we keep our DDM-derived TP unchanged at SGD2.05 (7% discount rate).
KepREIT – OSK DMG
KREIT Portfolio Going Strong
Keppel REIT (KREIT) FY13 results were in-line with our forecasts (distributable income SGD214m vs SGD212m DMG estimate). 4Q13 saw KREIT achieved full occupancy in Singapore and official opening for 8 Chifley Sq in Sydney, Australia. Maintain FY14 forecasts and BUY on K-REIT (top pick in REIT sector) with TP of SGD1.66 or potential 43% upside.
KREIT’s assets under management (AuM) increased 10.4%, NAV raised to SGD1.38 due to largely to addition of Australian assets (Old Treasury Building in 1Q13, 8 Exhibition Street in 3Q13) as well as higher capital values (cap rates decreased from 7% in 2012 to 6.7% for Australia whilst Singapore portfolio remained at 4%). This is reinforced by the improved occupancy and positive rental reversion (recent leases signed between SGD12-13psf) across KREIT’s portfolio.
KREIT faces no debt refinancing risks until 2015, has current debt duration of 3.6years, 70% on fixed rates and Interest Coverage Ratio of 5.5x. This should offset concerns regarding its relatively higher than sector aggregate leverage of 42.1%. Portfolio weighted average lease to expirty (WALE) at 6.5years and 41.4% of portfolio on long term leases (more than 5 years) should further assuage concerns on higher interest rate impact /debt servicing capabilities of KREIT.
We like KREIT’s exposure to Grade-A office in Singapore (88% of portfolio). With an expected FY14E distribution yield of 7.5% and currently trading at 0.84x NAV, we maintain our BUY rating on KREIT (our top pick in the REIT sector) with TP of SGD1.66 or potential 43% upside.
FCOT – AmFraser
Results in line. FCOT’s Q114 performance is in line with our expectations, with revenue only 0.8% higher than our estimate and DPU of 2.05c forming 23% of our full‐year forecast. Revenue for the quarter was marginally lower on a YoY basis. This was a result of the weaker Australian dollar and slightly lower occupancies for Central Park, which was partly cushioned by positive rent reversions and improved occupancies at 55 Market St and China Square Central (CSC).
Poised to achieve positive rent reversions. Underpinning our optimistic rent outlook, FCOT achieved another strong quarter of performance in occupancy and rent reversions. FCOT recorded an occupancy rate of 97.1% and rent reversions of up to 20.2%. Noting the recent opening of the Telok Ayer MRT station, we believe this enhances accessibility to CSC and could potentially improve CSC’s ability to fetch higher rents.
Majority of CPPUs redeemed. At present, 99.9% of the Series A CPPUs had either been converted or redeemed, leaving only approx. 0.2mil CPPUs outstanding. As the CPPUs are held at an interest cost of 5.5%, interest savings associated with the redemption of the CPPUs would provide another upli
CLT – CIMB
The wait continues
Cache’s 4Q13 revenue and DPU translate to 25% and 24% of our respective quarterly estimates. Taken together with its 9M earnings, full-year revenue and DPU largely met our expectations, at 98% and 99% of our respective FY13 estimates. With its solid portfolio and no debts due to be refinanced in FY14, we believe Cache will continue to provide stable dividends while we await news of potential acquisitions. We maintain our Add rating with an unchanged DDM-based target price (discount rate: 7.8%) of S$1.33.
Another quarter with strong earnings
Cache Logistic just announced its FY13 results, posting revenue of S$81m (+11.4% yoy) and DPU of 8.64Scts (+3.3% yoy). The higher revenue was mainly due to Two Precise, acquired in February 2013, as well as the built-in rental escalation within the portfolio. 4Q13 revenue grew by 8.2% qoq but DPU fell by 0.8%, mainly as a result of the dilution from the placement of 70m units in April and additional cash in the balance sheet. Occupancy for the quarter continued to remain at a respectable 100% level. Property valuation was also up slightly by S$6.7m, with the cap rate unchanged at 6.5-7%.
Tap on AEI for growth
Looking ahead, with asset prices on the high end, we believe the possibility of acquiring assets within Singapore would continue to remain challenged. As a result, management has highlighted that it will focus on seeking acquisitions in Penang, the Klang Valley and China, and to a lesser preference, Iskandar. With gearing currently at 29.1%, Cache will have debt headroom of S$117m for future acquisitions before gearing reaches 40%.
Maintain Add
We expect Cache’s management to take advantage of the low interest rate environment for early refinancing of the S$187.5m loan due in 2HFY15. In addition, we remain confident that Cache will be able to renew the majority of the 34% of leases that will fall due in FY15, whether through a master lease or underlying tenants before they expire. We maintain our Add rating with an unchanged DDM-based target price of S$1.33.
MIT – CIMB
An impressive quarter
MIT’s 3QFY3/14 revenue rose by 9.3% yoy and DPU rose by 8.2% yoy. 9MFY14 DPU was slightly better than expected at 77% of our FY14 forecast due to strong rental reversion and rising occupancy. With further room to grow through rental reversions, BTS projects and AEI, we raise FY14-16 DPU by 2% and we upgrade our rating on MIT to Add from Hold, with a slightly higher DDM-based (discount rate: 8.1%) target price of S$1.52.
Impressive growth
Mapletree Industrial Trust (MIT) has recently reported 3QFY14 revenue of S$75.6m (+9.3% yoy) and DPU of 2.51 Scts (+8.2% yoy), mainly driven by higher rental revenue (ranging between 9.7% and 27.2%) across all property segments and rising occupancy at the flatted factories. The average portfolio occupancy for the quarter was reported at 92.5%, slightly lower than the 93.9% in 2QFY14 due to the increase in leasable area with help from the completion of the K&S Corporate Headquarters in 2QFY14.
More room to grow
Looking ahead, with 26.5% of leases up for renewal in FY15, mainly concentrated in the flatted factories, we expect MIT to achieve positive rental reversion despite the upcoming large supply of industrial space, as these leases are estimated to be c.23% below the average spot rent. In addition, with the built-to-suit (BTS) Equinix project expected to be completed in 2HCY14, coupled with the near-to-completion AEI at Toa Payoh North 1, we expect MIT to continue to grow c.4% in FY15.
Upgrade to Add on bright prospects
Although the amount of debt due to be renewed is relatively high in FY15 (c.30% of total debt), given management’s prudent approach, we remain confident that MIT will most likely take advantage of the current cheap lending environment and refinance these debts prior to their expiry. On the back of slightly better-than-forecast results, coupled with further room to grow both organically and inorganically, we tweak up our earnings estimates by 2% for FY14-16. Currently MIT is trading at 12.6% FY15 NPI yield (vs sector average of 10.7%). On this basis, we upgrade to Add with a higher DDM-based target price of S$1.52.