PLife – CIMB
Assurance in tough times
• Maintain Outperform. Amid global uncertainties and persistent inflationary pressures, PLife is likely to enjoy both DPU stability and upside, owing to its CPIpegged rents and portfolio of long-dated leases. We also expect management to exercise prudence in new partnerships and acquisitions, mitigating risks from nonaccretive M&As. Although current valuations (1.3x P/BV) reflect those positives, we believe its premium pricing can be justified by the assurance of defensive, resilient yields. We maintain our assumptions and DDM-based target price of S$2.05 (discount rate 7.4%), anticipating catalysts from accretive substantially debt-funded acquisitions. We advocate PLife as an ideal inflation hedge.
• Guaranteed rent increases set the backdrop for strong, stable DPU growth. PLife has announced minimum guaranteed rent increases of 5.3% for its Singapore assets for the year commencing 23 Aug 11. We expect another 4% minimum rental increase in Aug 12-13, underpinning 3.4% and 2.7% minimum DPU growth in Aug 11-12 and Aug 12-13 respectively, stronger than for most SREITs.
• Acquisitions in core markets. Management is on the lookout for overseas acquisitions, while exercising prudence in the current environment. We expect more reasonably priced assets amid global uncertainties and 3-5% DPU accretion from acquisitions. With S$261m debt headroom to a 45% gearing ratio and its strong share price thus far, PLife should be well-positioned to finance its acquisitions.
AIMSAMPReit – SGX
RECEIPT OF APPROVAL IN-PRINCIPLE
FOR PRIVATE PLACEMENT OF 12,195,122 NEW UNITS IN AIMS AMP CAPITAL INDUSTRIAL REIT TO CWT LIMITED
AIMS AMP Capital Industrial REIT Management Limited, as manager of AIMS AMP Capital Industrial REIT (“AIMSAMPIREIT”, and the manager of AIMSAMPIREIT, the “Manager”), is pleased to announce that further to its announcements dated 26 July 2011 and 15 August 2011 in relation to, among others, the private placement of 12,195,122 new units in AIMSAMPIREIT (the “Placement Units”) to CWT Limited (“CWT”) or its subsidiary (the “CWT Private Placement”), the Manager has today obtained the approval in-principle from Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing of, dealing in, and quotation on the Main Board of the SGX-ST of, the 12,195,122 Placement Units to be issued pursuant to the CWT Private Placement at an issue price of S$0.205 per Placement Unit.
The Placement Units are expected to be issued to CWT on 5 September 2011. Subject to applicable laws and regulations, the Manager intends to use the entire gross proceeds of S$2,500,000.01 from the CWT Private Placement for working capital and general corporate purposes of AIMSAMPIREIT. The SGX-ST’s approval in-principle is subject to, inter alia, compliance with the SGX-ST’s listing requirements.
The SGX-ST’s approval in-principle is not to be taken as an indication of the merits of the CWT Private Placement, the Placement Units, AIMSAMPIREIT and/or its subsidiaries.
StarHill – BT
Starhill rises after positive reports by analysts
STARHILL Global Reit units rose yesterday after Standard Chartered initiated coverage of the trust with an ‘outperform’ rating and a target price of 81 cents.
Investment Research report which identified Starhill as the bank’s preferred pick in the retail segment.
Starhill, which owns stakes in the Ngee Ann City and Wisma Atria shopping malls along Orchard Road, ended the day one cent, or 1.7 per cent, up at 60 cents.
Stanchart said in a report dated Aug 22 that Starhill is a cheap proxy to luxury retail in Singapore.
Analysts Meenal Kumar and Regina Lim noted that the trust is the cheapest Reit in Singapore with exposure to Singapore retail assets. The stock was trading at around 0.7 times adjusted net asset value.
The analysts expect a compound annual growth rate of 5.7 per cent for Starhill’s distribution per unit over the 2011-2013 financial years, as they expect the company’s Singapore assets to deliver a strong performance.
‘We believe central area retail rents will outperform suburban retail rents because of the large amount of suburban retail supply in the next three to five years,’ they said in their report. ‘We now prefer central retail landlords to suburban retail landlords and believe Starhill Global Reit is one of the best ways to play this theme.’
OCBC Investment Research likewise said in a new report yesterday that it prefers Orchard Road retail exposure over suburban malls.
The supply of retail space in the Orchard Road vicinity is expected to ease in the 2012 financial year, the firm added.
OCBC has a ‘buy’ call on Starhill with a target price of 70 cents.
Starhill Global Reit, which owns commercial assets in Singapore, Malaysia, Australia, China and Japan, is sponsored by Malaysia-listed YTL Corporation.
SREITs – OCBC
1H11 performance round-up
Industrial REITs – stability from positive reversion and longer lease structures. The three industrial REITs under our coverage reported 1HCY11 results which were largely within our expectations. Some of the common themes we noted were 1) contribution from new acquisitions, 2) continued high occupancy rates, and 3) positive rental reversions. Ascendas REIT (A-REIT), Cache Logistics (Cache) and Mapletree Logistics Trust (MLT) had annualised implied yield of 6.2%, 9.0% and 7.7%, respectively, based on their latest reported quarterly DPU and last closing prices. As at 30 Jun 2011, both A-REIT’s and Cache’s leverage was below 30% (28.7% and 28.5% respectively), while MLT’s gearing of 40.6% was within management’s medium-term target range of 40%-50%. In light of possible headwinds from the current macroeconomic uncertainty, the relatively longer lease structures of industrial REITs could provide some level of stability to unitholders. Our preferred pick in this space is Cache [BUY, fair value: S$1.06] at a relatively attractive FY11E yield of 8.5%.
Office REITs – prefer Grade A exposure. The 1H11 performance of office REITS under coverage (CCT, FCOT and Suntec) were largely in line with expectations. Overall, occupancy rates stayed healthy (CCT: 97.7%, FCOT: 97.6%, Suntec: 99.1%), while we expect negative rental reversions to continue in 2H11 with inflection points ahead in FY12. As of end Jun11, leverage levels remained below long-term targets (CCT: 26.9%, FCOT: 37.1%, Suntec: 38.5%), though we expect CCT and Suntec to gear up further with the Market Street office project and an increased stake in Suntec Singapore, respectively. We continue to prefer CCT for its exposure to domestic Grade A space which is likely to enjoy continued tailwinds underpinned by a flight to quality office space and an increasing rental spread between Singapore and Hong Kong. Maintain BUY on CCT with fair value estimate of S$1.67.
Retail REITs – Orchard supply to ease ahead. CapitaMall Trust (CMT), Frasers Centrepoint Trust (FCT), Starhill Global REIT (Starhill) reported 2Q11 results that were within expectations. In this space, we prefer Orchard retail exposure over suburban malls with the supply of Orchard retail space expected to ease into FY12. We continue to see managers carry out asset enhancement works – CMT (The Atrium, Junction 8), FCT (Causeway Point) and Starhill (Wisma Atria) – which would be the main driver for performance uplifts ahead, in our view. We prefer Starhill for its Orchard retail exposure (Wisma Atria and Ngee Ann City). Maintain BUY with fair value estimate of S$0.70.
AIMSAMPReit – BT
Aims AMP Capital proposes 5-into-1 share consolidation
AIMS AMP Capital Industrial Reit Management Limited yesterday proposed a five-into-one share consolidation, which will see shareholders receive one new share for every five existing shares held as at a book closure date to be announced.
The company currently has 2.207 billion issued units.
The company believes that the proposed share consolidation ‘may serve to reduce the magnitude of volatility of (the Reit’s) unit price and market capitalisation’ as well as ‘improve the profile of (the Reit) among institutional investors’ and ‘improve the coverage of (the Reit) among research houses’.
Said Tang Buck Kiau, head of finance at Aims AMP Capital: ‘Based on the current units, a volatility of 0.5 cents in unit price impacts market capitalisation at 2.38 per cent. After consolidation, volatility will go down to 0.5 per cent.’
The company said that it is seeking unit-holders’ approval for the implementation of the unit consolidation by way of an ordinary resolution at an extraordinary general meeting to be convened.
Following this, it will make an application to SGX for approval for the listing and quotation of the new shares arising from the consolidation and will despatch a circular to shareholders setting out the details of the move.
The counter closed down 0.1 cent at $0.199 yesterday.