CMT – BT
CapitaLand, CMA and CMT unveil $1.5b Jurong project
CAPITAMALLS Asia (CMA), CapitaMall Trust (CMT), and CapitaLand will be developing a 25-storey retail- cum-office project on a site at Jurong Gateway which they won in a tender.
The total development cost is expected to come up to around $1.5 billion. The partners had put in the top bid of $969 million or $1,012 per square foot (psf) per plot ratio for the site.
The project will be among several new ones coming up in the area. Next door, a mixed-use development by Lend Lease is on the way.
CMA, CMT, and CapitaLand believe that their plot is the ‘most prime’ in Jurong Gateway. Behind their confidence is its connectivity – the new building will have links to Jurong East MRT station, bus interchange, and Ng Teng Fong hospital.
‘It’s a place that everybody must pass through if they’re in Jurong Gateway,’ said CMA CEO Lim Beng Chee.
Of the maximum permissible gross floor area of 957,780 sq ft, 60 per cent will be set aside as retail space. The mall is likely to take up five levels and may open its doors in time for the Christmas shopping season in 2013.
The project partners are expecting rents to be in the range of $16-18 psf. There are no plans to sign up anchor tenants because there will be large retailers in IMM and JCube – malls in CMT’s stable – and also in Lend Lease’s development, they said.
JCube, which is expected to open in the first quarter of next year, is more than 70 per cent pre- leased.
Offices – spanning 20 storeys – will take up 40 per cent of the project and may be ready in December 2014.
The partners are looking to incorporate regular- size column-free floor plates in the design and they believe rents can go up to $8 psf.
There is a lack of quality offices in Jurong and the development will fill a market void, said CEO of CMT’s manager Simon Ho.
Target tenants include government agencies, medical firms, and multinational corporations in the energy and marine sectors with operations in Jurong Island and Tuas.
The government is promoting Jurong Lake District as a new major regional centre and has released sites in the area for sale. Last year, Lend Lease won the tender for its plot with a bid of $650 psf ppr.
CMA, CMT, and CapitaLand note that Jurong Gateway is 2.5 times the size of Tampines Regional Centre and has a catchment of one million residents in the surrounding towns.
On the stock market yesterday, CMA gained three cents to close at $1.63, CMT lost a cent to $1.99, and CapitaLand rose two cents to $3.11.
MCT – CIMB
King of the South
• King of the South; initiate with Outperform. MCT is a Singapore-centric commercial REIT whose initial portfolio includes VivoCity, Bank of America Merrill Lynch Harbour Front (MLHF) and PSA Building, all located in Singapore’s Southern Corridor. We value MCT using DDM (discount rate 8.1%) and arrive at a target price of S$1.08. MCT offers one of the strongest organic and acquisition growth potentials among REITs within our coverage. Our target price of S$1.08 implies a total return of 29%. We see catalysts from higher-than-expected rental growth and accretive acquisitions.
• Strong opportunities for organic and acquisition growth. We expect organic growth to be fuelled by: 1) an under-rented portfolio (key asset VivoCity) coupled with significant leases expiring in FY12-13; 2) the development of Alexander Retail Centre (ARC) with increased footfalls expected after the completion of the nearby Labrador MRT Station; and 3) step-up rent increases for MLHF in 2011. Acquisition growth could come from rights of first refusal (ROFR) to its sponsor’s office, retail and business-space assets totalling 5m sf GFA.
• Strong sponsor to support growth. Sponsor, Mapletree Investments, a wholly owned subsidiary of Temasek Holdings, is a leading Asia-focused real-estate development and investment company. MCT should be able to depend on its sponsor for incubation or the joint development of greenfield projects. The sponsor is also likely to support MCT in future debt or equity fund-raising.
• Debt headroom to fuel acquisitions and asset enhancement. Starting off with asset leverage of 39.5%, MCT is in the process of obtaining a credit rating which would allow it to gear up to 60%. This provides debt headroom of S$282m to fuel acquisitions and asset enhancement, at 45% leverage.
CMT – DMG
Successful joint tender for Jurong Gateway site
Successful joint bid at S$969m. CapitaMall Trust (CMT), CapitaMall Asia (CMA) and CapitaLand have successfully beaten four other bidders for the 18,159.1 sqm site at Jurong Gateway (JG). Under the joint tender agreement, CMT/CMA/ CapitaLand will hold 30%/50%/20% stake in the two entities (JG Trustee and JG2 Trustee) which emerged as the winners of JG site bid. At least 40% of the GFA of JG site under development will have to be used for office purpose. Given that this is a Greenfield site, there will be no DPU accretion to CMT in the next two years. Maintain NEUTRAL with unchanged TP of S$2.00.
Strategic location comes at dearer price. The latest site to be awarded sits conveniently beside Jurong East MRT interchange station. Due to the popularity of this location, there were five bidders for the JG site, with the winning bid beating the second highest by 5.7%. Other key bidders were United Engineer, Singapore Press Holdings, Fast East Civil Engineering etc. According to CBRE, the retail/commercial assets at JG site can garner S$15/S$6 psf pm respectively. Based on JG site’s winning bid of S$1,012psf ppr, and recent JG site transaction, JG and JG2 Trustees paid 56% premium on psf ppr to the URA land sale at Jurong Gateway Road successfully won by Lend Lease Retail Investments 3, and Lend Lease Commercial Investments in Jun 2010.
We value CMT at S$2.00 based on DDM (COE: 8.0%; TGR: 2.0%). At its current trading level, CMT’s 12-month forward dividend yield is 5.4% while its spread is 3.1%. Considering that its pre-crisis mean spread was 3.0%, and there is a lack of growth catalysts in the next 12 months, we believe CMT is trading at fair valuation.
MCT – Lim and Tan
• Citigroup Global has, after buying 6.228 mln units on Friday (68% of total trades on the day) under the stabilizing action program, ceased such action with the expiry of the option period.
• Citigroup has bought a total of 37.669 mln units, representing 31% of the total granted.
• We do not expect MCT’s unit price to come under undue stress just because the stabilizing action has ceased. Fact is MCT’s unit price has been rather resilient without need for stepped-up buying by Citigroup, ever since it fell below the IPO price of 88 cents on May 4th.
• We maintain BUY, especially should the unit price drop this morning on the above news.
HPH Trust – DBSV
Smooth sailing so far
• Year-to-date throughput numbers in HK and Yantian Port are largely on track with our expectations
• 7%-8% throughput growth along with modest improvement in rates to drive EBITDA growth in FY11
• Maiden interim DPS of c. US 1.8cts projected when HPHT reports 1H11 earnings before mid August
• Maintain BUY and US$1.15 TP
Throughput volumes on track with our projections. Throughput volumes for the first four months of 2011 rose by 5.7% y-o-y at Yantian Port, 7.9% at COSCOHIT, and we believe by between 6%-8% at HIT, which means that operations at HPH Trust are on track to meet our expectations for FY11.
Firm prospects over the short and medium term. We like HPH Trust for its stable and growing earnings profile, which we believe will be driven by continued rising trade volumes into and out of the Pearl River Delta region, translating into an annual growth of 10% in distributions to unit-holders for the next few years. HPH Trust is due to report its interim results by mid-Aug, and we are expecting a DPS of c. 1.8UScts to be declared.
Maintain BUY and US$1.15 TP. Given that HPH Trust seems to be well on its way to meet our projections in FY11/12, current FY11/12 yields look very attractive at 6.6%/7.2%; expect DPU CAGR of 10% up to 2013. Maintain BUY on the stock with a TP of US$1.15. This implies a total return potential in excess of 30% at current prices. Amongst Singapore listed REITs, Business Trusts and high yield plays, HPH Trust offers one of the highest combinations of yield and DPU growth.