StarHill Global – CIMB
Strong Singapore portfolio
Singapore was the star in 4Q12, with positive rental reversions for office and a full quarter of contributions from Wisma Atria retail AEI, bringing 4Q12 DPU growth to 12% yoy. Performance for overseas assets was muted, with Chengdu still impacted by soft luxury demand.
4Q/FY12 DPU was largely in line at 26%/99% of our full-year estimates and 26%/102% of consensus. We adjust FY13-14 DPUs upwards to factor in the recent acquisition of Plaza Arcade in Perth, and introduce FY15 estimates. Our DDM-based target price inches up (discount rate: 7.9%). Maintain Neutral. Stronger Toshin rental valuation and sizeable acquisitions are rerating catalysts.
Singapore strength
4Q12/FY12 NPI was up 2.9%/3.4% yoy, while DPU grew 11.9% and 6.6% respectively. DPU growth was led by Wisma Atria retail which saw stronger centre sales post-AEI. NPI was up 23.5% yoy, albeit in part due to small disruptions in rental in 4Q11. Wisma Atria and Ngee Ann City office also saw positive rental reversion on 46%/55% of leases expiring in 2013 renewed. Portfolio occupancy inched up from 98.7% in 3Q12 to 99.4% in 4Q12. Chengdu asset saw FY12 NPI fall 8.7% yoy as demand for luxury retail remained soft.
More to look forward to
We continue to expect more positive reversions on the remaining office leases expiring this year. Independent valuers have been appointed for the Toshin master lease, and a stronger-than-expected rental valuation (to be finalised 1Q13) could be a rerating catalyst. S$24.7m of revaluation gains were booked, largely from Malaysia and Ngee Ann City assets, with the latter revalued up by 1.9%. We expect weakness at Chengdu to persist.
Australia acquisition
Acquisition of Plaza Arcade in Perth at 7.8% yield is a positive, but it is relatively small at 2% of portfolio value. Management estimates DPU accretion of 1.9%. Proforma gearing on completion of acquisition this quarter is c.31%. Synergistic benefits through 13k sf of unutilised space potentially converted to retail, connecting to David Jones, could kick in by 2014/15.
CDL H-Trust – OCBC
FLAT 4Q12 RESULTS AS EXPECTED
- Revaluation gain of S$15m
- 4Q12 RevPAR flat
- Maintain FV
4Q12 in line
CDL Hospitality Trusts (CDLHT) reported 4Q12 results that were generally in line with ours and consensus estimates. Revenue grew by 1.4% YoY to S$38.3m, and net property income rose by 0.2% YoY to S$35.6m. For 4Q12, NPI contribution from the Australia hotels declined 3.0% YoY to S$4.3m due to translation loss arising from the weaker AUD. CDLHT recorded a revaluation gain of S$15.0m on its properties, which was largely due to its Singapore properties. 4Q12 DPU of 2.90 S cents was down 1.4% YoY. FY12 DPU totaled 11.32 S cents, up 2.4% YoY and giving an annualised distribution yield of 5.7% based on the closing price on 29 Jan 2013.
Full year RevPAR record
RevPAR for the Singapore hotels was flat YoY in 4Q12 at S$205; occupancy was up 0.8ppt at 89.4% while average daily rate fell 1.3% YoY to S$229 (excludes Studio M Hotel, which was acquired on 3 May 2011). Management indicated that travellers remained cautious about their expenditure due to the weak global economic climate, and MICE business was affected too. For FY12, RevPAR excluding Studio M Hotel grew by 3.3% to S$211, a record high. Our assumptions turned out to be fairly accurate; we had assumed 3.2% YoY RevPAR growth for the Singapore hotels.
Quiet outlook for SG hotels
In the first 27 days of Jan 2013, the RevPAR for the Singapore hotels (excluding Studio M Hotel) increased by 0.9% YoY. For 1Q13, management noted that apart from stiffer competition, there will be the absence of the bi-annual Singapore Airshow and additionally, CNY will fall later this year (Feb instead of Jan), possibly delaying the seasonal pick-up in corporate travel. Weak accommodation demand by corporate and leisure travellers is likely over the next 12 months. The proposed acquisition of Angsana Velavaru Maldives is expected to be completed around the end of Jan 2013. Gearing post-acquisition will be healthy at ~27.9%.
Maintain HOLD
We maintain our fair value of S$1.93 and HOLD rating on CDLHT.
StarHill Global – Kim Eng
Results In-Line; Investment Thesis Intact
4Q/FY12 earnings inline. SGREIT’s FY12 DPU beats street estimates of 4.30 SG-cts with an upbeat payout of 4.39 SG-cts. FY12 revenue at SGD186m (+3%) was 100% of ours and consensus estimate. 4QFY12 revenue at SGD47.4m (+2% QoQ, +3% YoY) was 26% of ours and consensus estimate. FY12 DPU at 4.39 SG-cts (+7%) was 101% of ours and 102% of consensus estimates. 4QFY12 DPU at 1.13 SG-cts (+2% QoQ, +12% YoY) was 26% of ours and consensus estimates. Gearing inched down to 30.3% from 31.2% last quarter, following revaluation gains and depreciation of JPY. Net financing costs for 4QFY12 averaged 3.16% (3Q: 3.13%) with an average term of debt of 1.7 years (3Q: 1.5 years).
Wisma Atria retail harvesting upside. Wisma’s AEI is completed in 2Q12 with all Orchard road fronting stores commencing business. It was officially relaunched on 6 Sep and enjoyed a +1.7% QoQ and +21.4% YoY increase in 4Q12 retail revenue on strong rental reversion, and almost full occupancy (99.5%). According to our estimates, average passing rent continues to scale from SGD35.04 psf/mth last quarter to SGD35.82 psf/mth.
Portfolio review. Singapore properties contributed 63% of 4Q12 and FY12 revenue. Wisma’s retail and office occupancy were at 99.5% and 98.7% from 100% and 97.7% last quarter respectively. Ngee Ann City retail maintained at full occupancy while Ngee Ann City office occupancy remains flat at 98%. Despite 100% occupancy, Renhe Spring Zongbei’s 4Q12 revenue was down 13% YoY, mainly due to lower revenue amidst increased competition and softening of retail market (esp. mid to high-end luxury segment).
Toshin rental review. With regards to the master lease in Ngee Ann City, three international licensed valuers have been appointed according to directions prescribed by the Court of Appeal. The valuers’ work on the rental valuation is expected to be finalised by 1Q13. Toshin constitutes 85.3% of NAC retail gross rent as at 31 Dec and is SGREIT’s largest tenant (18.8% of portfolio gross rent). 4Q12 average passing rent at NAC retail stays at depressed levels of SGD13.68 psf/mth from our estimates.
Investment thesis intact. SGREIT’s key assets are in the coveted Orchard Road area, where tight supply and the entry of new international retailers should give it greater bargaining power in terms of leasing its space. We continue to like SGREIT for the rental upside at Wisma Atria and income stability in Malaysia and Australia. We also incorporated the Plaza Arcade acquisition (Perth), which we expect to complete by 31 Mar 2013, with yield-on-cost of 7.8%-8.6% from FY13-FY18 into our forecast. At 5.5% FY13F yield and 413bps yield-spread, we reiterate BUY with a DDM-derived TP of SGD0.90.
PLife – DBSV
Stable earnings
• Declared 2.69 Scts DPU (+9% y-o-y) in 4Q12, taking FY12 DPU to 10.3 Scts
• Gearing remains healthy
• Raised 2013 CPI assumption to 4%
• Maintain HOLD, nudged up TP to S$2.19 after adjusting for higher CPI
Highlights
4Q12 DPU in line. Gross revenue grew 5% led by three properties in Japan acquired in Mar12, Gleneagles Medical Centre Kuala Lumpur (acquired in Aug12), as well as higher rents at its Singapore hospitals in Year 6 of its lease commencing 23 Aug12 (yield: CPI+1% = 6.31%). However, this was partly offset by a weaker Japanese Yen in in the quarter. Nevertheless, net property income margins inched up to 92.2% led by lower property repair costs and a weaker Yen.
Gearing remains healthy at 32.9%. This gives the REIT S$174m, S$323m and S$995m debt headroom before reaching 40%, 45% and 60% gearing, respectively. Weighted average term to maturity is now 2.4 years with only S$163m JPY loans (34% of total loans) due in 2014. Total cost of debt remains at 1.62%.
Our View
Acquisition yet to materialize. We believe management is continuing its efforts to source for acquisitions, and continue to expect this to be in markets such as Malaysia and Australia. Though this has taken slightly longer than expected, management could be taking a more cautious stance, in our view. We have not factored acquisitions into our assumptions given the uncertainty in timing.
Factoring in higher CPI. We expect PREIT’s hospital assets to continue to benefit from a higher inflation rate in Singapore. In line with DBS economists’ latest forecast, we raised our CPI assumption for 2013 to 4%, from 3.1% previously. Consequently, DPU is nudged up to 10.7Scts for FY13F and 11.1Scts for FY14F.
Recommendation
Maintain HOLD, TP: S$2.19. PREIT is trading at 1.5x P/BV and 4.7% FY13F yield, amongst the lowest in the SREIT universe. Our DCF-derived TP (WACC: 5.7%, t:2%) is raised.
ART – OCBC
Raises S$150m through private placement
- Acquisitions more likely
- Advanced distribution
- Maintain HOLD
Private placement
Ascott Residence Trust has raised gross proceeds of S$150m through a placement of 114.9m new units at an issue price of S$1.305 per new unit, representing a discount of ~4.6% on the adjusted VWAP of S$1.3685 per unit for trades done on the SGX-ST on 28 Jan. The placement will increase ART’s free float from 51% to 55%. ART received participation from existing and new institutional investors from Asia, the United States and Europe.
Use of proceeds
The proceeds will be used to fund potential future acquisitions, finance AEIs, repay existing debt and for general working capital. Assuming that the net proceeds of S$147.9m are used to repay existing debts, the private placement is expected to reduce ART’s aggregate leverage from 40.1% to 34.9%. As of 31 Dec 2012, S$167.8m of debt was due to mature in 2013 for ART. At the FY12 results briefing a few days ago, management stated that it is comfortable with gearing between 40-45%, hence even if the proceeds are used to pay off the debt that is maturing, we think the additional financial flexibility from the placement will likely be utilised over the longer run for yield-accretive acquisitions. That said, we will incorporate future acquisitions into our model if and when they are announced.
Advanced distribution
There will be an advanced distribution of between 0.59 cents and 0.63 cents per unit to existing unit-holders. The advanced distribution is taken from ART’s distributable income from 1 Jan 2013 to 5 Feb 2013, which is the day before the date on which new units will be issued. The next distribution will be for 6 Feb to 30 June 2013 and semi-annual distributions will resume thereafter.
Reduce FV to S$1.36
We maintain our HOLD rating but reduce our FV from S$1.37 to S$1.36 due to the dilutive effect of this placement.