Charities Support – 2012
Attention to Reader of Singapore REITs
Gobi March, a 250km self-supported desert footrace over 7-days will be held in Taklamakan Desert, China.
Kwan is participating the Gobi March in aid of the Student Advisory Centre(SAC). Please visit the fund raising website by clicking this link.
Thank you.
LMIR – OCBC
POISED FOR FURTHER GROWTH
•Consistent set of results
•Demand for retail space to stay strong
•Well-positioned for growth
4Q11 results within expectations
Lippo Malls Indonesia Retail Trust (LMIRT) reported NPI of S$24.6m (+16.8% YoY) and distributable income of S$11.4m (-5.1% YoY) for 4Q11. This is in line with our quarterly forecasts of S$23.7m and S$12.7m respectively. DPU for the quarter (post rights issue) came in at 0.53 S cent, lower than 4Q10 DPU of 1.11 S cents but still consistent with our projection of 0.58 S cent. For FY11, NPI grew by 7.9% to S$92.0m and distributable income fell 0.9% to S$47.4m. DPU, on the other hand, was down 13.0% to 3.85 S cents. However, this translates to a still attractive FY11 yield of 9.9%.
Optimistic outlook from management
Moving forward, LMIRT reiterated that its retail malls are likely to continue to benefit from Indonesia’s robust economic growth and strong domestic consumption. Management also highlighted that there is a demand-supply imbalance for quality retail space, which is likely to keep the demand for its malls strong. We note that its portfolio occupancy rate as at 31 Dec 2011 remained healthy at 94.1% (97.8% in prior quarter), well above Indonesia’s retail industry average of 87.6%. The Dec 2011 Retail Sales Survey by Bank Indonesia also showed that retail sales is expected to remain strong throughout 1H12. Hence, we concur with LMIRT that its financial performance in the coming quarters is likely to remain favorable, especially with full-quarter contributions from recently-acquired Pluit Village and Plaza Medan Fair going forward.
Financial position remains strong
As at 31 Dec 2011, LMIRT’s aggregate leverage was at low 8.7% (10.1% in 3Q), boosted by a positive 5.7% YoY revaluation of assets (excluding acquisition assets) and rights issue. In addition, approximately S$931m (60.4%) of its assets are unencumbered. This gives LMIRT the financial flexibility and capacity to realize its growth plans. Maintain BUY with unchanged fair value of S$0.45 on LMIRT.
CDL H-Trust – OCBC
RIDING MULTIYEAR HOTEL INDUSTRY GROWTH
•Hotel demand will outstrip supply
•REIT structure, leases & AEI
•Debt headroom for acquisitions
Strong demand growth for 2012-2015
Given that ~80% of CDLHT’s revenues come from Singapore, its key driver will be the performance of the local hotel industry. The hospitality sector is actively supported by the government and the STB has a target of 17m annual visitor arrivals by 2015, up from 13.2m in 2011. We believe that hotel room demand will grow at a CAGR of 6.4%, outstripping overall supply increases (CAGR: 3.8%) for 2012-2015. Specifically, the high-end hotel subsector, which CDLHT is in, will fare better with a room supply CAGR of 3.0% versus 5.6% for budget hotels. As a liquid high-end local hotel play, CDLHT offers a fairly unique way to capitalise on the multiyear growth of the local hotel industry.
REIT structure and dividend policy
CDLHT consists of a REIT and a dormant business trust. The REIT has master leases on its four- and five-star hotels, with minimum rents for all contracts. The Singapore hotel leases grant CDLHT 20-30% of revenue and gross operating profit as rent. The trust has guided that dividend payout ratio will be in the low 90 percentile range this year to help fund upgrades to the chiller/heater systems and ballroom in Novotel Clarke Quay, with a view to enhancing operating margin and asset value. Asset enhancement initiatives for last year consisted of the refurbishment of rooms in Orchard Hotel and Novotel Clarke Quay.
Debt headroom to pursue acquisitions
We are comforted by the high interest coverage of 8.9x for FY11 and the fact that no debt is due this year. With a gross gearing of 25.2%, there is ~S$520m in debt headroom to finance yield-accretive acquisitions. Going by its track record, the management will likely make prudent acquisitions that will serve as price catalysts.
Initiate with a BUY
We initiate with a BUY rating and a S$2.00 fair value estimate based on a Revalued Net Asset Value (RNAV) analysis. CDLHT represents a solid way to capitalise on the continued robust growth in tourism, while its REIT structure provides the comfort of consistent dividends.
FCOT – OCBC
ACQUIRES 50% INTEREST IN CAROLINE CHISHOLM CENTRE
•12.6% discount to valuation
•Accretive to DPU
•Enhance lease expiry profile and stability
Details of acquisition
Frasers Commercial Trust (FCOT) yesterday announced the proposed acquisition of the remaining 50% interest in Caroline Chisholm Centre (CTL) for AUD83.0m (S$112.6m). The purchase consideration was at a 12.6% discount to the last valuation of AUD95.0m (S$121.3m) of its existing 50% stake in the property, carried out on 30 Sep 2011. Management intends to finance the acquisition via bank borrowings and internal funds.
Benefits likely from investment
We are positive on the acquisition as CTL is fully leased to the Commonwealth Government of Australia, represented by Centrelink, with a balance lease of ~13.5 years and 3.0% annual rent increment. This will likely enhance FCOT’s portfolio lease expiry profile and provide stability in income growth. According to management, the portfolio weighted average lease to expiry is expected to improve from 3.4 years (31 Dec 2011) to 4.4 years, while the percentage income from master leases and blue-chip tenants is likely to increase from 43.1% to 48.3%. We also believe the move will give FCOT greater control and flexibility as the group will own the entire property upon completion of the transaction.
Maintain BUY
Based on FY11 NPI of AUD8.5m (S$10.9m) and valuation of FCOT’s present interest in CTL, we note that NPI yield of the property was at 8.9%. This compares favorably to the FY11 implied portfolio NPI yield of 4.9%. Assuming the acquisition was financed by bank borrowings and internal funds, management guided that it is expected to add 0.32 S cents or 5.6% to its DPU. In our view, FCOT appears poised to produce a good set of performance in the current financial year, given the better expected rental terms on China Square Central, potential interest savings from refinancing and current investment. Our DDM based fair value is now lifted to S$0.94 from S$0.87 previously, after factoring in the acquisition. Maintain BUY on FCOT.
Rickmers – BT
Rickmers keeps Q4 DPU at 0.6 US cts
RICKMERS Maritime reported distribution per unit for the fourth quarter ended Dec 31, 2011 of 0.60 US cents, unchanged from the year-ago period.
The shipping trust’s full-year DPU comes up to 2.4 US cents, which marks a 4 per cent increase from 2010’s 2.31 US cents.
Q4 cash flow available for distribution – before payment to debtors – for the final quarter was down 13 per cent from the previous year to US$25.8 million from US$29.7 million
For the full-year, cash flow for distribution before debt repayment was US$107.3 million, a 6 per cent decline from FY2010’s US$114.3 million.
Rickmers recorded US$11.3 million of net profit for the last quarter of fiscal 2011, 43 per cent down from the preceding year-ago quarter’s $20 million, which included a US$7.3 million vessel impairment writeback.
It also managed to reverse its 2010 losses to end the year firmly in the black, with $40.3 million net profits compared to 2010’s $28.6 million loss, which took into consideration a US$64 million compensation fee to discharge the group from its obligation to purchase seven vessels.
Rickmers managed to bump up its fourth-quarter and full-year revenue by 3 per cent and 2 per cent, respectively, to $37.8 million and $149.5 million. This was thanks to a higher daily charter rate of US$23,888 for its box ship Kaethe C Rickmers, in effect since March 25, 2011, from the previous rate of US$8,288.
However, Rickmers management warned that as the vessel finishes its one-year charter contract and is redelivered in a few weeks’ time, it may not find immediate re-employment.
And even if it does, said CEO of Rickmers Maritime’s trustee-manager, Thomas Preben Hansen, Kaethe C Rickmers’ secured charter rate would be far lower than in its previous outing.
That said, Rickmers’ 15 other container vessels are on long-term leases stretching until 2019, with average daily charter rates of US$26,120 in 2012. These agreements will fetch the trust US$615 million of secured revenue between Jan 1, 2012 till 2019.
Given the collapse of charter rates which have resulted in some charterer defaults in the dry bulk vessel segment, Mr Hansen said that the same has not yet been seen in the container vessel segment.
‘I don’t foresee the same degree of default and reneging that has been happening in dry bulk sector (in the container shipping market),’ he said, explaining that the bulk carrier market has far more smaller operators than container shipping.
Mr Hansen said that Rickmers has no plans to buy new vessels.
Rickmers Maritime was last traded at 31 cents.