Suntec – DBSV
Divestment of CHIJMES is a small but nice surprise
• Divestment of Chijmes at S$177m reaped S$39.5m gains
• Positive: proceeds to fund planned AEI works at Suntec Mall
• Gearing down to 38.5%, minimal impact on earnings
Divestment of Chijmes. Suntec REIT announced that it has divested Chijmes for S$177m or S$2,218 psf on a NLA basis, which implies a 3.9% annualized yield on Chijmes NPI for YTD Sep 2011. The selling price represents 23% premium over the latest valuation done (15th Oct 2011, S$143.7m) and 38.2% higher than its purchase price of S$128m paid in late 2005. Suntec is expected to reap a divestment gain of S$39.5m over its Dec 2010 value carried in its books. The acquirer of Chijmes is understood to be a consortium of investors, including Perennial Real Estate.
Positive move that unlocks value. Chijmes, located in the entertainment heart of downtown Singapore, is an award winning gazetted national monument, which houses mainly entertainment and F&B tenants. While the property performance has been consistent, in our view it may not be a good fit to Suntec Reit’s current portfolio that comprises prime and Grade A office and retail space in the Marina and Marina Bay areas. As such, we view this sale positively, as it will help to unlock portfolio value. The net proceeds could potentially fund the planned asset enhancement activities at Suntec City Mall to yield higher returns.
Gearing down to 38.5%, minimal impact on earnings. Chijmes contributes 2.3% and 2.4% to Suntec reit’s NLA and NPI respectively, hence impact on earnings (>2%) is minimal. Meanwhile, gearing level is expected to head down from 39.8% to 38.5%, assuming that the net proceeds are fully utilized to repay debts. Maintain BUY at a target price of S$1.54.
StarHill Global – DBSV
Let’s focus on the fundamentals!
At a Glance
• Portfolio performance remained healthy, 9M11 DPU makes up 73% of our FY11 estimates
• Improve Supply/Demand outlook for prime retail space to drive prime retail rents
• Slight dilution (c.2%) in DPU in FY11, if Toshin lease renewal takes place in FY12
• Maintain BUY, TP raised to S$0.76
Comment on Results
3Q11 result is in line with expectations. Revenue and NPI fell by a marginal 3% and 4% to S$44.0m and S$34.5 m respectively, due to lower contributions from its Singapore, Japan and Malaysia portfolios. However, lower interest expense and dividend to CPPU holders helped to mitigate the decline resulting in a flattish distributable income of S$19.4m or DPU of 1.0 Scts. 9M11 DPU makes up 73% of our FY11 estimates.
Slide in occupancies expected to be transitional. The occupancy for Wisma Atria office rose 2.6 ppt to 94.6%, while Ngee Ann City office occupancy slipped by 4.8 ppt to 91.8% upon the lease expiry of a mid-sized tenant. However, the group has found a replacement tenant and occupancy should head back to the same level next quarter. Monthly rents signed remained healthy at S$9 -10 psf. Meanwhile, demand for retail space at Wisma Atria remains strong on the back of expansion from existing tenants with reversions as high as 20% from preceding rents.
Better outlook for prime retail space, Toshin renewals could only take place next year. Going forward, the improved supply and demand dynamics along Orchard Rd as well as the upcoming year-end festive season should continue to help lift average retail rents at Wisma Atria and Ngee Ann City. The main concern has centred on Toshin’s lease renewal at Ngee Ann City, which was due in June this year. We estimate that DPU in FY11 will be diluted by a marginal c1.8% if resolution takes place in FY12. In Australia, David Jones’ lease has been revised up by c. 6% upon the review in August and full contribution will be seen in 4Q. After refinancing of its loan upon the expiry of the cross currency swaps, interest rate fell marginally from 3.49% to 3.44% while gearing rose 2ppt to 32%due to the higher exchange rate.
Recommendation
Maintain BUY. SGreit continues to offer attractive FY11/12F yields of 7.1 – 7.4%. Valuation remains attractive at 0.7x P/BV. Maintain BUY, we raised our DCF backed TP to S$0.76 as we rolled forward our numbers to FY12F.
CLT – BT
Cache Logistics’ Q3 DPU up 8% at 2.095 cents
CACHE Logistics Trust has achieved a third-quarter distribution per unit (DPU) of 2.095 cents, up 8 per cent from 1.94 cents a year ago.
This translates to an annualised DPU of 8.312 cents, which implies a yield of 8.3 per cent based on yesterday’s closing price of $1.00.
Distributable income for the three months ended Sept 30 came in 8.6 per cent higher at $13.4 million, compared with $12.3 million a year back and exceeded forecasts by 8 per cent.
Boosted by additional rental income from the acquisition of investment properties during the period, the logistics real estate investment trust’s (Reit’s) net property income (NPI) registered a gain of 11.4 per cent at $16 million compared with $14.4 million in 3Q10.
For the first nine months of the year, the NPI and distributable income have risen 69.8 per cent and 68.8 per cent year-on-year, with numbers coming in at $45.9 million and $39.1 million respectively.
As at end-September, all of the warehouses in Cache’s portfolio continue to be fully occupied with a weighted average lease to expiry of 4.9 years – one of the highest in the local Reit universe.
Gearing came in slightly higher at 30.4 per cent for the period, up from 2Q11’s 29.1 per cent, but remains at healthy levels leaving adequate debt headroom.
Recent acquisitions by the Reit include the Air Market Logistics Centre at 22 Loyang Lane, which brings the Cache’s total portfolio to a total of 10 properties located in both Singapore and China.
The CEO of the Reit’s manager, Daniel Cerf, remains optimistic on Cache’s outlook, saying: ‘We will continue to track the positive fundamentals of the market in our pursuit of enhancing the portfolio organically and with value- add acquisitions.’
Yesterday, Cache closed two cents higher at $1.00.
Suntec – BT
Suntec Reit sells Chijmes for $177m to Pua-linked entity
OSIM’s Sim holds stake in the entity; Pua, Sim also linked to a nearby project
SUNTEC Real Estate Investment Trust (Suntec Reit) is selling Chijmes for $177 million to an entity whose shareholders include Pua Seck Guan’s Perennial Real Estate group and OSIM boss Ron Sim.
Mr Pua and Mr Sim are also joint majority shareholders (40 per cent stake) in the nearby Capitol project, which will have retail/theatre, hotel and residential components.
According to a Perennial spokesperson, this acquisition provides good synergistic opportunities between the Chijmes and Capitol sites.
‘We like this site because it’s a good opportunity to own an iconic heritage landmark commercial site, and it’s very rare to get an opportunity to invest in such a large commercial site right in the downtown core of Singapore CBD (central business district), with a low plot ratio of 0.8,’ said the Perennial spokesperson.
HSBC Institutional Trust Services (Singapore), as trustee of Suntec Reit, entered into a property sale agreement with PRE 8 Investments Pte Ltd for the 154,062 sq ft plot located along Victoria Street.
With a gross floor area of 127,793 sq ft, the $177 million price tag translates into about $1,385 psf ppr (per sq ft per plot ratio). The area was valued at $143.7 million by DTZ Debenham Tie Leung (SEA) as at Oct 15, placing the divestment at 23.2 per cent above the valuation.
Suntec Reit is expected to recognise an estimated gain of about $39.5 million following the divestment.
The sale of Chijmes follows an expressions of interest exercise conducted by Colliers International.
According to Suntec Reit’s results for the third quarter ended Sept 30, the property posted revenue of $2.7 million and net property income of $1.8 million during the quarter.
Going forward, PRE 8 Investments intends to spend some $40 million to rejuvenate the asset.
‘In terms of efficiency of the asset, it will be enhanced; the tenancy mix will be reviewed and optimised; and in terms of ambience, a lot can be done to improve and blend it with the precinct. Over time, we hope to enhance the rental revenue from this asset.’
Chijmes has 79,794 sq ft of net lettable area and includes several conservation buildings and two gazetted national monuments – Chijmes Hall (the former CHIJ Chapel) and Caldwell House.
Chijmes is on a site with a remaining lease of about 79 years. It has 97 car park lots and is located opposite Raffles City and the City Hall MRT Station. Tenants include Lei Garden Restaurant and Harry’s Bar.
The completion of the divestment is expected to be sometime in January 2012.
MCT – BT
MCT posts DPU of 1.333cents for Q2
Net property income was $31.7m and income available for distribution, $24.8m
MAPLETREE Commercial Trust (MCT) yesterday announced a distribution per unit of 1.333 cents for the second quarter ended September, beating its forecast DPU of 1.218 cents by 9.4 per cent.
This translates to an annualised distribution yield of 6 per cent, based on the IPO price of 88 cents per unit.
For the period April 27 (its listing date) to Sept 30, its aggregate DPU is 2.289 cents, exceeding the IPO forecast of 2.097 cents by 9.1 per cent.
MCT achieved net property income of $31.7 million, 2.5 per cent above its forecast for the quarter.
Income available for distribution for the quarter was $24.8 million, beating its forecast by 9.4 per cent mainly due to the higher net income and lower interest costs on borrowings.
In particular, the company enjoyed a favourable average all-in interest rate of 1.95 per cent, compared with the forecast 2.43 per cent, said the manager, Mapletree Commercial Trust Management (MCTM).
VivoCity mall – which has close to 100 per cent occupancy – saw both tenant sales and shopper traffic increase 9.4 per cent and 13.9 per cent respectively year-on-year, for the period from April 1 to Sept 30.
With the new leases and renewals committed to date, a significant portion of the leases expiring this financial year have been renewed or re-let, providing rental uplift of approximately 20 per cent.
For its office portfolio, MCT achieved an occupancy level of 95.2 per cent, from last quarter’s 92.8 per cent, higher than the fringe office occupancy rate of 91.7 per cent for Q2.
Alexandra Retail Centre (ARC), the section of PSA Building now being upgraded, is also on track for completion by December.
‘We are also planning to progressively open some F&B and retail tenants soon after completion to serve our office tenants and both the working and residential population in the vicinity,’ said Amy Ng, chief executive of MCTM.
MCT ended trading yesterday half a cent higher at 86 cents.