MCT – CIMB
Upside from VivoCity yet to kick in
• In line; maintain Outperform. 1Q12 DPU meets expectations at 19% of our full year estimate and consensus. The quarter only consisted of 65 days, after listing. Annualised, DPU would have formed 26% of our FY12 forecast. There was strong rental growth at VivoCity even though the bulk of potential lease-renewal upside (43% of leases) has yet to kick in. This remains a key catalyst for MCT in FY12, we believe, with the completion of AEI in PSAB and the possible acquisition of MBC forming the next triggers. We refine our model to assume slightly stronger growth for VivoCity (raising FY12-13 earnings by 3-4%) but lower our DDM-based target price from S$1.08 to S$1.01 on applying a lower terminal growth rate of 2% (2.5% previously), in line with our assumptions for its listed peers. MCT trades at a 5.9% CY12 yield.
• Potential upside from VivoCity yet to kick in. 1Q12 revenue inched up 3% yoy to S$33m as VivoCity’s base and turnover rents grew 4.5% and 6.7% yoy respectively. Although 43% of its total leases are due for renewal this year, we understand that the new base rates are likely to kick in only at end 2011/early 2012. The asset remains substantially under-rented, in our view, at S$9.79psf as at Nov 10 vs. an average of S$11-14psf for comparable malls in Singapore. We understand that GTO growth at VivoCity could have been 10-15% yoy, lending support to revenue growth for MCT (GTO rents form 20% of VivoCity’s gross revenue). We anticipate substantial rental reversions in FY12 as the mall enters its first renewal cycle.
• PSAB enhancement and MLHF step-up to add to NPI; acquisition trigger from MBC. Strong rental growth in the quarter was partially offset by the decanting of retail units for the development of the new Alexandra Retail Centre (ARC), due to be completed by end-2011. Retail space is estimated at 89.6k sf of NLA while office space consists of 15.1k sf of NLA. By Dec 11, the rental step-up provision for MLHF’s master lease (10-12%) will also be triggered to fuel further organic growth. In the mid-term, acquisition upside could continue to come from its sponsor’s assets under ROFR, namely Mapletree Business City.
CLT – DBSV
Upside from Acquisitions
At a Glance
• In line with expectation and on track to meet our full year forecasts
• Acquisitions and asset enhancement activities to drive earnings growth.
• Maintain Buy, S$1.11
DPU of 2.1ct is inline with expectation. Cache Logistics Trust (“Cache”) reported S$15.5m net property income (“NPI”), 6.1% above IPO forecasts. 2Q sequential performance was relatively robust with gross revenue and NPI rising 9.2% and 7.2% to S$16.2m and S$15.5m respectively, lifting distributable income to about S$13.2m (+7.1% qoq). The robust performance was largely due to an enlarged portfolio and the group’s continuous asset enhancement efforts. As a result, DPU rose by about 6.8% qoq to 2.09cts. The first 2 quarters’ DPU forms 50% of FY11 forecast.
New acquisitions yet to kick in, more to come. Recent acquisition of Jinshan Chemical warehouse in Shanghai and Air market Logistic Centre in Singapore, as well as the 70,000 sf asset enhancement works at Cold Hub should underpin earnings growth in the coming quarters. Gearing remained healthy at 29.1% and the group is looking to grow portfolio further via acquisitions in Singapore and China. All-in Interest rate has also lowered from 4.37% to 3.92% due to the more attractive rates secured for its recent acquisitions.
Recommendation
BUY Call, TP maintained at S$1.11. Cache remains attractive for its FY11-12F yield 8.2-8.7%, which is 230-270 bps above the peers’ average 5.9% – 6.2%. Re-rating catalysts will be the execution of more acquisitions that the manager is currently reviewing.
MCT – BT
MCT’s maiden distribution beats forecast
DPU of 0.9564 cent 8.7% higher than forecast 0.8795 cent
MAPLETREE Commercial Trust (MCT) yesterday announced a distribution per unit of 0.9564 cent for the period April 27 (its listing date) to June 30, beating its own IPO forecast of 0.8795 cent by 8.7 per cent.
This translates into an annualised distribution yield of 6.1 per cent, at yesterday’s closing price of 88.5 cents per unit.
MCT achieved net property income of $22.7 million, 2 per cent above its forecast, while gross revenue came up to $32.7 million, 0.9 per cent above forecast.
MCT attributed this to higher turnover rent, carpark income and advertising and promotion revenue from VivoCity, which was offset slightly by lower rental income from PSA Building, as carpark income fell slightly due to ongoing construction at Alexander Retail Centre.
Income available for distribution for April 27 to June 30 was $17.8 million, 8.7 per cent higher than forecast, mainly due to higher net income and lower interest costs on borrowings. Since its IPO, the manager has hedged 85 per cent of its total debt of $1.1 billion, achieving actual all-up interest costs of 1.96 per cent, better than the forecast 2.43 per cent.
As MCT only completed its acquisition of PSA Building and Merrill Lynch Harbourfront Building on its listing date, April 27, there are no comparative figures for the year-ago period.
But VivoCity, with close to 100 per cent occupancy, has seen both tenant sales and shopper traffic grow 16 per cent and 12 per cent respectively year-on-year, for the three months ended June 30.
For its office portfolio of Bank of America Merrill Lynch HarbourFront and PSA Building, MCT achieved an occupancy level of 92.8 per cent as at June 30, higher than URA’s 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 likely to open by March 2012, three months ahead of schedule. Construction is on track for completion by December this year, and one-third of the space has been pre-leased, MCT said.
CLT – BT
Cache’s Q2 DPU surpasses forecast
Logistics Reit clocks 7% q-o-q rise in DPU to 2.086 cents
Distributable income for the second quarter came in 7.1 per cent higher at $13.3 million, compared with Q1’s $12.4 million, and also beat the Reit’s earlier Q2 projection of $12.4 million by 7.4 per cent.
On the back of upward rental adjustments across the portfolio and contributions from new acquisitions, Cache’s net property income (NPI) for Q2 surpassed forecasts by 6 per cent, coming to $15.5 million. Quarter-on-quarter, NPI also improved by more than 7 per cent, exceeding Q1’s NPI of $14.4 million.
Combining the first two quarters, Cache outperformed its first half (1H2011) distributable income and NPI forecasts by 3.8 per cent and 2.5 per cent, with numbers coming in at $25.7 million and $29.9 million respectively.
In response to Cache’s growth plans in the local logistics space, Daniel Cerf, chief executive officer of ARA-CWT Trust Management said in an interview with BT yesterday: ‘This is our backyard, we will continue to grow here (Singapore) as much as we can.’
However the industry has been getting rather ‘crowded’ of late, making it increasingly difficult to acquire ideal logistics properties.
The logistics Reit recently completed the acquisition of three new properties, bringing its logistics portfolio to a total of nine high quality logistics warehouses located in the Asia-Pacific region, amounting to a total portfolio value of $805.1 million.
‘We are pleased with our performance and the fact we have exceeded the $800 million mark in assets under management. We will continue to pursue growth from within the portfolio as well as through external growth by way of acquisitions that are conducive to the portfolio,’ commented Mr Cerf in relation to Cache’s portfolio.
As at end-June, all of the warehouses in Cache’s portfolio are 100 per cent occupied, with tenants on triple-net master leases and multi-tenancy leases.
Gearing also remains at a healthy level of 29.1 per cent with about $231.2 million in borrowings as at end-June.
When asked whether investors can expect Cache’s DPU to continue on an uptrend, Mr Cerf declined comment, though he did hint that the Reit was ‘on track’ in that aspect.
Mr Cerf shared with BT that to him, driving Cache’s stock price is not as much of an issue as ensuring healthy distributions. After all, he said, ‘I know if I’m doing the right thing, people will do the right thing and buy the stock.’
Cache’s stock closed half a cent lower at 97.5 cents yesterday.
Rickmers – DBSV
Exit from waiver period not in sight
At a Glance
• DPU payout for 2Q11 maintained at 0.60UScts as accelerated repayment of loans continues
• Covenant waiver period likely to continue as container shipping fundamentals weaken, further raised uncertainty in future asset values
• Maintain HOLD with TP of S$0.37 as DPU cap stays
Comment on Results
Cash flows up slightly in 2Q11. RMT recorded revenues of US$37.6m in 2Q11, 3% higher y-o-y, owing to the higher charter rate received from employment of vessel Kaethe C. Rickmers, which is now fixed at US$23,888 per day compared to US$8,288 per day in 2Q10. This also resulted in a write-back of vessel impairment of US$2.9m for Kaethe C. Rickmers, but was more than offset by an impairment of goodwill charge of US$4.1m on another vessel as internal WACC for impairment check was raised from 7.28% to 7.52%. These items are, however, non-cash in nature and distributable cash flows increased 8% q-o-q to US$17.5m.
DPU stays at 0.6SUScts, loan repayments continue. The Trust repaid about US$11.2m of borrowings in 2Q11 – ahead of scheduled repayment of about US$8m – and distribution to unit holders remained steady at US$2.5m for 1Q11, translating to a DPU of 0.6UScts, at the upper end of the DPU cap imposed by lenders.
Outlook & Recommendation
DPU cap could stay for a while. The Trust will continue to use its cash reserves of about US$50m to pay down debts in excess of scheduled repayments in 2H11. However, the Trust’s DPU cap is likely to be in place as long as the Value-to-Loan ratio on the IPO facility and subsequent top-up facility (about US$411m of which is outstanding currently) is below the covenant limit of 133%. According to our estimates, the market value of the 10 vessels which are encumbered could be around US$480m currently, which implies a coverage ratio of only 117%. And with container shipping likely heading towards a potential down cycle, asset values could come under further stress. Thus, we maintain our HOLD call on the stock, and our TP remains unchanged at S$0.37.