Fortune – BT
Fortune Reit Q1 DPU up 5.5%
Income available for distribution was HK$112.8m
SINGAPORE-LISTED Fortune Real Estate Investment Trust (Fortune Reit) yesterday reported distribution per unit (DPU) of 6.73 HK cents for the first quarter ended March 31, up 5.5 per cent from 6.38 HK cents for the corresponding period last year.
The DPU represents an annualised distribution yield of 7 per cent.
Income available for distribution was HK$112.8 million (S$17.8 million), up 6.2 per cent from HK$106.2 million a year earlier.
Total revenue saw a 4.6 per cent increase to HK$218.8 million, attributed mainly to the improved performance of the property portfolio.
Net property income rose 3.3 per cent to HK$161 million.
The occupancy rate across Fortune Reit’s portfolio of 14 retail malls stood at 97.8 per cent as at March 31, 2011.
Passing rent increased by 7.6 per cent year on year to HK$29.40 per square foot, while rental reversions for renewals stood at 17.4 per cent.
Fortune Reit refinanced its entire loan facilities of HK$3.1 billion. The new facilities, at an aggregate principal amount of HK$3.8 billion, comprise a HK$2.83 billion term loan facility and a HK$790 million revolving credit facility.
Planned asset enhancement initiatives at City One Plaza is expected to commence in the third quarter of this year. The project deadline is targeted for end 2012. The cost of the project is estimated to be HK$100 million.
With Hong Kong’s GDP increasing 6.8 per cent in 2010 and forecast to expand by another 4 to 5 per cent in 2011, this augurs well for consumer confidence, said Fortune Reit in a statement yesterday.
Moving forward, ARA Asset Management (Fortune) will focus on retaining quality tenants particularly in Ma On Shan Plaza and The Metropolis Mall, where some 50 per cent of the tenants are up for renewal this year.
Fortune Reit closed down HK$0.01 yesterday at HK$3.86.
TCT – BT
Treasury China beats Q1 forecast
Net property income of $12.45m also 3.5% better than that for Q4, 2010
TREASURY China Trust (TCT) said that it achieved a net property income of $12.45 million for the first quarter ended March 31, exceeding its forecast by 8.6 per cent.
This is a 3.5 per cent improvement over the fourth quarter of 2010. But earnings per share came to 2.7 cents, compared with 8.7 cents for the fourth quarter of last year.
First-quarter gross revenue for the business trust hit $19.45 million, 1.9 per cent above forecast but 4.9 per cent below the fourth-quarter mark.
TCT yesterday reaffirmed its earlier intention to declare a distribution per unit of 10 cents for 2011 with a payment of five cents per unit each to be made on June 30 and on Dec 31.
There are no comparative figures from a year ago as TCT was listed only last June by way of introduction, after taking over China Real Estate Opportunities that was formerly listed on London’s Alternative Investment Market.
TCT said that its portfolio committed occupancy came to 93.3 per cent at the end of the first quarter, outperforming the target of 87.9 per cent for 2011, and beating the 2010 year-end occupancy level of 90.9 per cent.
It has also entered into formal negotiations to dispose of a majority stake in its Central Plaza asset and is in separate discussions to acquire a Shanghai-based retail asset.
TCT’s current portfolio comprises Central Plaza, City Center and Treasury Building in Shanghai and 74,000-square-metre development space in Beijing International Logistics Park.
It just completed an acquisition that provided a 55 per cent interest in Central Avenue Mall in Qingdao. TCT has also obtained regulatory approval to acquire 100 per cent of Shanghai Huai Hai Mall and a US$50 million loan from Citic International Bank to assist with the acquisition.
Richard Barrett, chairman of TCT, said that he expects the completion of the Central Avenue Mall purchase in Qingdao to provide a strong revenue stream from the second quarter onwards.
The group noted that leasing activities in the Shanghai office market remained active in the first quarter, with strong demand from multinational corporations, while demand for retail space is mainly driven by mid-market fast fashion retailers.
Some 33 leases were negotiated in the first quarter ended March 31, comprising new lettings and renewals. They produce an aggregate per square metre rental representing a 12.8 per cent increase over the expiring leases.
Among the new leases were a three-year lease to Eastern Life Insurance in Treasury Building and a 10-year lease pre-commitment from Marks & Spencer at TCT’s City Center Extension development.
TCT said that it is confident that ‘the retail and office sector will continue to perform well for the remainder of 2011’.
TCT units closed trading 1.6 per cent lower at $1.87 yesterday.
Cambridge – DMG
Sharp drop in DPU following rights issue
1Q11 DP U dropped sharply mainly due to share base expansion. Cambridge Industrial Trust (CIT) reported a lower DPU of 1.0S¢ in 1Q11 (- 21.4% YoY; -16.1% QoQ), representing 19.9% of our FY11 DPU estimate. The sharp drop in DPU is mainly attributable to the rights issue which was listed in Apr 2011. We expect CIT’s DPU to pick up in subsequent quarters as two acquisitions are expected to be completed and commence contributions in 2Q11. Given the 132m rights units have been officially listed on 15 Apr 2011, we lowered our FY11-12F DPU estimates by 13.9-9.2% respectively to account for the enlarged share base. Consequently, our TP is lowered to S$0.59, based on DDM (COE: 10.1%, TGR: 1.0%). Maintain BUY as CIT is still trading at undemanding spread of 6.5% vs pre-crisis spread of 4.9%.
S$46.4m worth of property acquisitions to be completed in 2Q11. Two new additions – a warehouse at 4 & 6 Clementi Loop, and an industrial building at 60 Tuas South Street 1 – will add ~233k sqft of GFA to CIT’s existing portfolio GFA of 6.98m sqft. Based on assumption of 40% debt funding, we expect incremental DPU of 0.09-0.23S¢ from the acquisitions in FY11-12. Meanwhile, the S$13.1m BTS project at Tuas View Circuit is expected to be completed only in 2Q12.
New term loan facility being mooted. CIT will need to refinance its loans beginning next year where its existing syndicated term loan of S$303m will mature in Feb 2012. It is currently in discussion with four financial institutions for new term loan of S$320m which comprises of a three-year tranche of S$220m and a five-year tranche of S$100m. Estimated all-in borrowing cost for the new term loan facility is ~4.4%/year. Coupled with the acquisition term loan facility which has debt cost of 3%, we expect CIT’s all in cost of debt to drop from current 5.7% to 4.0-4.1%. In addition, we believe CIT’s gearing will decline to ~30% by end FY11.
LMIR – OCBC
1Q11 results mostly in line; Riding on Indonesia’s economic growth
1Q DPU of 1.17 S-cents. LMIR Trust (LMIR) reported 1Q11 gross revenue of S$32.8m, up 40.8% YoY and 1.9% QoQ, which was also in line with our expectation and street estimates. The yearly increase was largely due to the (1) additional income derived from the service charges receipt and utilities cost recovery from tenants at seven of its malls and (2) positive rental reversion of renewed leases. NPI rose 9.9% YoY and 6.1% QoQ to S$22.4m. Distributable income, however, dropped 1.6% YoY but rose 5.3% QoQ to S$12.7m. The yearly decline was partially the result of an increase in realized loss on foreign exchange forward contracts of S$2.1m as the cross currency swap remained “out of the money”, compared to $1.7m in 1Q 2010. 1Q11 DPU is 1.17 S-cents (also in line with our forecast of 1.14 S-cents) compared to 1.11 S-cents in 4Q10 and 1.20 S-cents in 1Q10. On an annualized basis, this represents a yield of 8.5% based on yesterday’s close of S$0.555. As at 31 Mar 2011, LMIR’s gearing remained flat QoQ at 10%, with total borrowings stable at S$125m.
Portfolio Performance. Overall portfolio occupancy dipped from 98.3% the previous quarter to 98%. We note that the occupancy for Plaza Semanggi declined 3.4pp to 93.7%, possibly due to non-renewal of tenants. Nonetheless, this compares well against Jakarta’s average occupancy rate of 86.3%. LMIR also benefited from positive rental reversion with renewed leases contracted at 9% higher on average than the ones that have expired during the quarter. LMIR continues to have a well-diversified portfolio, with no particular trade sector accounting for more than 25% of total net leasable area (NLA), and no single property accounting for more than 16% of total net property income (NPI). We continue to like LMIR’s market positioning. The main shopper traffic at its retail malls and spaces comprises urban middle-income to upper middleincome consumers, whilst its malls are deemed as “everyday malls” for daily essentials, food outlets and family entertainment.
Supported by Indonesia’s Growth Story. Management guided that Indonesia’s retail sales are expected to rise by 20% to S$13.8b in 2011, due to the growing number of retail outlets and strong domestic demand. With Indonesia’s continued economic growth, rising middle class income and greater spending power, we believe LMIR is poised to benefit from the growth of the mall culture in Indonesia. Reiterate BUY with an unchanged fair value of S$0.59 (total returns of 14.7%). Further increase in fair value, in our view, would stem from the manager announcing further acquisitions or development projects.
MIT – DBSV
Key take-aways from meeting
• Strong operational performance
• Organic growth robust, further upside from acquisitions, asset enhancement works
• Maintain BUY, DCF-based TP raised to S$1.21
Strong operational performance. Mapletree Industrial Trust’s (“MINT”) strong set of 4Q11 results unveiled encouraging datapoints. Firstly, occupancy increased to 93.2% on the back of high retention rate of 86%, indicating a strong underlying demand for industrial space. Secondly, MINT continues to renew c99.1% of leases at the maximum cap (for the non-business parks space in its portfolio) while new leases secured at market rates are in excess of 20% above expiring rents. These highlight that the average portfolio rental rate of S$1.49 psf/pm is not excessive and there is room for further upside once the rental caps affecting c84% of its NLA fall off in Jun’11.
Organic growth remains robust over FY12-13F. We expect MINT to deliver strong organically-driven DPU CAGR of 9% over FY12-13F. As rental caps expire, the manager will re-price rents nearer to market when leases, amounting to c23%/c26% of revenues are renewed over FY12/13. Further earnings growth is likely to come from a myriad of opportunities – (i) with strong take-up for its first initiative at property development in Redhill – a conversion of flatted factory space into e-business use – the manager is looking for more asset enhancement opportunities within its portfolio. Possibilities include similar conversion of vacant space and redevelopment of un-utilized GFAs in certain properties, (ii) 3rd party acquisitions, which the manager is actively pursuing, including JTC’s trade sale of a portfolio of assets.
BUY call maintained, TP raised to S$1.21. MINT currently trades at implied yield of 6.6%, which means that target acquisitions should be accretive when executed. Prospective FY12-13F yields of 7.2-7.7% are attractive given its mid-large cap status and strong sponsor backing.