HPH Trust – DMG
Margins squeezed; downgrade to Neutral
Results s lightly below expectations. HPH Trust (HPHT) reported 1Q12 EPU of 5.31HK¢, 20% of our forecast and 22% of consensus estimates, as margins were squeezed on higher costs. Following the results, we lower FY12/13F EPU by 3% (on higher costs) but maintain DPU estimates on lower capex. We cut HPHT to Neutral with a lower DCF-derived TP of US$0.78, which reflects our revised estimates and 23.4HK¢ distribution in Mar 2012. With growth concerns emerging in Europe and inflationary pressures, we see downside risk to management’s forecasts. We expect FY12 distribution to come in 8% below HPHT’s IPO target of 51.24HK¢. Based on our DPU estimate, the stock is yielding 8% for FY12.
HIT showed strong throughput growth; Yantian slightly down. 1Q12 revenue was 6% below IPO projection due to weaker-than-expected volume growth from Yantian (-0.4% YoY) and lower ASP from HIT. HIT managed to record strong throughput growth (+9.4% YoY) driven by higher transshipment cargoes. HPHT’s market share is growing: throughput at HIT, Yantian and COSCO-HIT accounted for 53.1% of Kwai Tsing and Shenzhen volume vs. 51.8% in FY11. We maintain our 6% and 3% volume growth for HIT and Yantian respectively.
But margins lower due to higher costs. EBITDA margin came in lower at 56% compared to 59-61% in the past three quarters, as costs per TEU are rising due to the RMB appreciation and inflationary pressures. Staff cost rose +17% QoQ while we estimate that cost of services rendered per TEU is up 4-5%.
Positive demand outlook for April 2012 and May 2012. Management painted a more robust demand outlook for April and May, with volume growth likely to hit the 5-7% range. In our view, the stronger volume has been priced in given the weaker 1Q12 demand in Yantian. Europe demand remains uncertain but the shortfall will be compensated with higher international transshipment. Management may defer some of the capex planned for 2014/15 berths.
CLT – CIMB
Much-awaited acquisition
Cache has announced itsmuch-awaited acquisition from sponsorCWT after its private placement in Mar. Pandan Logistics Hub marks Cache’s largest acquisition afterits IPO,andwill expand its AUM and YTD acquisitions to S$944m and S$101m,respectively.
We adjustDPUs factoring in Cache’s placement, partially offset by higher YTD acquisitions (S$101m) vs. our S$80m expectation and new acquisition assumption of S$80m next year. Our DDM-based target price (discount rate: 8.5%) drops marginally. Maintain Outperform.
What Happened
Cache has announced its acquisition of Pandan Logistics Hub, a newly developed five-storey ramp-up logistics warehouse (329,109sf GFA) from sponsorCWT Ltd. Purchase consideration of S$66m (S$201psf GFA) was at a marginal 0.4% discount to average valuation by independent valuers and will be funded fully by debt.
Asset will be master-leased to CWT Ltd for the first three years at NPI yield of 7.6%, andnet rents of S$1.32psf with annual rental escalation of 2.5-2.6%. Cache had also entered into lease with CWT for a further 2-4 years for the first and fifth storeys. Acquisition is subject to approval through EGM and we expect completion within two months.
What We Think
The acquisition was very muchanticipatedafter a somewhat unexpected S$59m placementby Cache in Mar.YTD acquisitions of S$101m surpassed our FY12 assumed acquisition of S$80m and would take Cache’s AUM to S$944m. Overall NPI yield of 7.6-7.7% for the two acquisitions areaccretive over funding cost (42:58debt-equity funding) and FY11 NPI yield of about 7.3%. Asset leverage is expected to rise to 32% post-acquisition and should still leave ample debt headroom for acquisitions if Cache obtains a credit rating.
What You Should Do
We factor in the higher-than-expected YTD acquisitions and new acquisition assumption of S$80m for FY2013. We continue to like Cache for its stable and resilient yieldsand pipeline from sponsor.Maintain Outperform.
CLT – BT
Cache Reit to buy warehouse for $66m
Pandan Logistics Hub will give net property income yield of 7.6%
CACHE Logistics Trust is making its biggest buy to date in the form of a ramp-up logistics warehouse facility, for which it will shell out $66 million.
The real estate investment trust's manager, ARA-CWT Trust Management, said yesterday that Cache will purchase the Pandan Road located Pandan Logistics Hub from CWT Ltd under a sale and leaseback arrangement. CWT is a controlling shareholder of ARA-CWT – a joint-venture Reit management company between ARA Asset Management and CWT.
ARA-CWT said that the purchase was made at an arm's length, willing-buyer and willing-seller basis. The property is the second acquisition that Cache has made to date under the Rights of First Refusal (ROFR) arrangement with CWT as its sponsor.
Among the reasons that led to the purchase is the net property income yield of 7.6 per cent for Pandan Logistics Hub, said ARA-CWT. The acquisition also allows Cache to increase its market share of ramp-up warehouses in Singapore to 22.9 per cent from 21.2 per cent.
HPH Trust – BT
HPH Trust Q1 profit in line with target
HUTCHISON Port Holdings (HPH) Trust posted a net profit attributable to unitholders of HK$462.8 million (S$74.3 million) for the quarter ended March 31, 2012, sliding in one per cent ahead of its projected figure in its initial public offering prospectus last year.
Revenue and other income, however, fell 6 per cent short of projections, at HK$2.84 billion for the quarter.
While throughput at its Hong Kong terminals rose 9.4 per cent year-on-year and also beat the projection as transhipment volumes grew, throughput from its Yantian International Container Terminals (YICT) side dipped 0.4 per cent year-on-year and also fell 12.3 per cent short of the projection.
The trust declares a distribution per unit (DPU) on a semi-annual basis, with the amount calculated as at June 30 and Dec 31 each year.
Retail REITs – BT
Retail Reits doing well in inflationary environment
INFLATIONARY pressures and escalating retail rents seem to have benefited retail focused real estate investment trusts (Reits) and business trusts over recent months.
Six Singapore-listed Reits which have been categorised to have a retail focus by Bloomberg – namely Lippo Mapletree Indonesia Retail, CapitaRetail China Trust, Starhill Global Reit, Frasers Centrepoint, Fortune Reit and CapitaMall Trust – yielded an average price return of around 13 per cent since the onset of 2012, which is almost on par with the year-to-date return of the Straits Times Index (STI), even before factoring in their compelling distribution returns.
Notably, Reits tend to offer dividend yields superior to that of other equity peers due to the sector's distribution of at least 90 per cent of their cash flow income to unit-holders in return for tax concessions from the government.
For instance, distribution yields for the six Reits averaged an attractive 6.1 per cent, and ranged from 5.2 per cent for CapitaMall Trust and Fraser Centrepoint to 6.6 per cent for CapitaRetail China Trust, Starhill Global Reit and Lippo MapleTree Indonesia Retail, according to data from Bloomberg.