MIT – CIMB
Good but not great
Positive rental reversion and asset enhancements have mitigated the drop in occupancy at The Signature. Although headline yields continue to be attractive, we maintain our Neutral stance, pending future backfilling at the Signature and meaningful growth catalysts.
2QFY14 results were largely in line with consensus and our estimates. DPU for the quarter accounted for 27% of our FY14 forecast, with 1H14 DPU meeting 54%. We bump up FY14-16 DPUs in anticipation of better rental reversion, but maintain our Neutral rating with a higher DDM-based (discount rate: 8.1%) target price of S$1.48.
Positive rental reversion continues
2QFY14 DPU was up 9.7% yoy, mainly attributed to higher rental rates secured across all property segments and higher occupancies in flatted factories and stack-up/ ramp-up buildings. Compared to a quarter ago, revenue dipped by 2.3%, mainly due to the exit of Credit Suisse from The Signature. However, this was mitigated by better margins, which in turn led to DPU being higher by 1.6%. Rental reversions remained fairly strong – flatted factories at +27%, business parks at +12%, stack-up/ramp-up at +27% and high-tech buildings at +25%, but portfolio occupancy dipped slightly to 93.9% (1QFY14: 95.5%).
Factors limiting foreign acquisitions
With its pure-local mandate expiring this month, MINT can look at expanding overseas. Among the various markets, Iskandar is a natural choice for the REIT. However, various factors such as the lack of skilled labour, relatively low yields and the absence of an established local rental market may lead to difficulties in acquiring yield-accretive projects in the near term.
Maintain Neutral
Additional contribution from the recently completed BTS development for Kulicke & Soffa, and AEI projects will mitigate the temporary dip at The Signature. We keep our Neutral rating on MINT (currently trading at 1.2x P/BV), pending clarity on backfilling at The Signature and meaningful new growth catalysts.
FCT – OCBC
Repeating its success
- 4QFY13 DPU up 10.0% YoY
- Positive reversion of 10.8% achieved
- Bigger malls likely to underpin growth
Consistent set of 4QFY13 results
Frasers Centrepoint Trust’s (FCT) 4QFY13 NPI fell 5.0% YoY to S$27.3m on higher property expenses. However, distributable income was up 2.7% to S$21.7m as FCT benefited from lower borrowing costs and higher distribution from Hektar REIT. In addition, S$2.9m of cash (0.35 S cents/unit) retained in 1HFY13 was distributed during the quarter. Consequently, DPU jumped 10.0% to 2.98 S cents. For FY13, NPI grew 6.9% to S$111.6m, whereas distributable income rose 9.5% to S$90.1m. Full-year DPU came in at 10.93 S cents (+9.2%), spot on with our DPU projection (consensus: 11.0 S cents). This, we note, marked FCT’s seventh year of consecutive DPU growth since its listing.
Leasing demand remained robust
Expectedly, Causeway Point (CWP) remained the main revenue generator, raking up 7.4% growth amid improved occupancy and rental rates. During the quarter, however, the mall was subject to higher property taxes (significant portion backdated from 2010 to 2012) and maintenance costs (higher amount budgeted ahead for the year). This brought CWP’s NPI down by 6.7%. Nevertheless, we note that overall performance remained robust, with portfolio occupancy maintained at a high 98.4%, while positive rental reversion of 10.8% was achieved. We also understand ~2% of retail space at YewTee Point is expected to start operating in Oct, which is likely to improve the mall’s occupancy. For Bedok Point, management also updated that it has successfully secured an electronics retailer as its anchor tenant for basement one. This may translate to a more stable performance at the mall.
Upgrade to BUY
Looking forward, FCT reiterated CWP and Northpoint will continue to perform, as leases at the malls amounting to 75.5% of FCT’s gross rent are due for renewal and positive reversions are still expected. FCT also revealed that the strata title division of One@Changi City is progressing well, and that the asset injection may take place in 2014. We are rolling our valuation to FY14, while keeping our forecasts largely intact. Our fair value is in turn raised to S$2.02 from S$1.96 previously. As upside now looks compelling, we upgrade FCT from Hold to BUY.
KepREIT – AmFraser
TEMASEK SELLS KREIT STAKE FOR $125M
Placement works out to 3.74% of KReit that Temasek received as dividend.
Temasek Holdings has sold its entire direct stake in office landlord Keppel Reit (KReit) in a share placement that started on Monday evening, sources close to the deal said yesterday.
The deal involved 103,994,321 shares offered at a price range of between $1.195 and $1.21 per share, the sources said. This represents a 1.6‐1.8 per cent discount to the trust’s last closing price of $1.23 on Oct 21. The placement offer amounted to an estimated $125 million.
Temasek continues to hold 21 per cent in Keppel Corp which in turn holds 54.6 per cent in Keppel Land. Keppel itself has less than a 1 per cent stake in KReit following its two rounds of dividend in specie, while Keppel Land remains KReit’s largest shareholder at 44.86 per cent.
Besides Keppel group, the other significant shareholders are Capital Group, Franklin Resources, Goldman Sachs and Aberdeen.
With the Temasek share placement, KReit’s free float will rise to more than 55 per cent from 24.4 per cent in January.
KReit recently posted a 9.9 per cent increase in net property income to $100.9 million for the nine months to Sept 30, 2013. Distributable income rose 6 per cent to $159 million, while distribution per unit rose 1.9 per cent to 5.91 cents.
Management had said that its total portfolio value was more than $6.8 billion. Average por
FCT – CIMB
Ready for next stage of growth
With footfalls returning to the pre-asset enhancement initiative level and the increase in sales per sq ft, we expect Causeway Point to continue to grow albeit at a slower rate. The next stage of growth is expected to come from the accretive acquisition of Changi City Point.
4QFY13 results are in line, with DPU accounting for 28% of our full-year forecast and FY13 results at 103%. We tweaked our model to account for the slightly better-than-expected results. Maintain Outperform with higher DDM-based (discount rate: 7.4%) target price of S$2.05, given re-rating catalysts from accretive acquisitions and strong rental reversion.
Big malls continue to be the focus
4QFY13 results were respectable, mainly due to the contribution of 0.35 Scts from cash retained in 1H13. Distributable profit before retained earnings made up 25% of our full-year forecast. During this quarter, NPI was down by 5% yoy as a result of higher property tax and maintenance expenses. For the full year, FY13 NPI growth of 6.9% was mainly led by Causeway Point and Northpoint. During this quarter, the performances of Anchorpoint and Bedok Point were weak, mainly due to lower revenue and higher property expenses. However, we believe the performances of these malls will stabilise henceforth, with Anchorpoint's occupancy expected to climb from its current level of 96.9% and rental rates at Bedok Point to steady.
Awaits acquisition
With 31% and 37% of leases (as % of total NLA) due to be renewed in FY14 and FY15 respectively, the majority of which are concentrated in Causeway Point and Northpoint, we expect rental reversions to continue for some years. Also, Changi City Point's acquisition is expected to be FCT's next growth catalyst.
Grow through acquisitions
With a gearing of 27.6% and several ongoing projects from its sponsor, we believe FCT is well-positioned to benefit from a steady pipeline of potential future acquisition targets.
HPH-Trust – DBSV
3Q13 missed expectations
- 3Q13 revenue up 1%; PATMI down 8%
- Cut topline forecasts
- Reduce FV to US$0.74
HK volume flat YoY
Hutchison Port Holdings Trust (HPHT) reported 3Q13 results that were lower than ours and the street’s expectations. Revenue climbed 1% YoY to HK$3.36b. Total operating expenses increased by 1.3% to HK$2.17b. Profit before tax fell 1.6% to HK$1.07b and profit after tax fell 2.2% to HK$966m. Profit attributable to HPHT unitholders fell 8.4% to HK$539m. According to management, for 3Q13, volume through the HPHT’s HK ports was roughly flat YoY (the prior effect of striking workers has worn off) and the 9M13 volume is down 4%.
Volume through Yantain (Shenzhen) was down 3-3.5% QoQ, making 9M13 volume for Yantian flat. All-in-all, the US trade is flat YoY and European volumes remains disappointing, down roughly 5%. Fully-laden export cargo for both US and Europe had registered single-digit growth in 3Q13, but empty boxes were down quite a lot YoY, affecting overall volume.
Trimming 2013 topline forecast
We lower our forecasts to -1% and 0% YoY change in 2013 throughput for HPHT’s ports in Kwai Tsing, HK (including the increase in TEU from the acquisition of Asia Container Terminals in Mar) and Yantian, Shenzhen respectively. Our previous forecasts were 0% and 2% growth. Our revenue forecast for FY13 thus falls to HK$12.4b from HK$12.6b. Shipping lines’ formation of alliances, e.g. P3, G6 and CKYH, should continue to put pressure on transshipment volumes, especially in HK.
FY13F dividend yield of 6.8%
Management is guiding FY13 DPU of approximately 40 HK cents, versus a previous range of 40-44 HK cents. With the adjustment of our topline and cost assumptions, we trim our FY13 dividend from 44.2 HK cents to 40.6 HK cents. HPHT is trading at a FY13F dividend yield of 6.8%.
For FY14, tax rate should increase significantly because of the expiry of tax holidays for some phases of Yantian, and there will be the full year impact of the 9.8% wage increase for port workers agreed on in early May.
Downgrade to HOLD
We trim our FV for HPHT to US$0.74 from US$0.84 and downgrade HPHT from Buy to HOLD on valuation grounds.