MLT – DBSV
Acquisition-led growth story
• 1Q11 DPU of 1.55 Scts in line
• Acquisitions to power earnings growth in 2011, gearing of 39% is optimal as a cross-border REIT
• BUY and DCF-TP of S$1.07 maintained
DPU of 1.55 Scts in line. Mapletree Logistics Trust (“MLT”) reported a 21% and 19% growth in rental income and net property income to S$62.2m and S$54.7m respectively, largely attributable to contributions from new asset acquisitions completed during 2H10. Portfolio occupancy improved to 98.3% (from 98% in 4Q10) with increased take-up rates in Singapore & HongKong. NPI margins compressed slightly to 87.8% (vs 89% in 1Q10) owing to an enlarged portfolio and expenses incurred from the conversion of certain properties from single to multi-tenanted leases. Distributable income came in at S$37.5m (+22% yoy), translating to a smaller 3% yoy increase in DPU to 1.55 Scts due to enlarged share base.
Gearing of 39.4%, though higher than peers, is optimal in our view for its cross border exposure. MLT’s higher gearing of 39.4% compared wit S-REIT peers’ average c34% is justifiable, in our view, given its multi-jurisdiction exposure. The manager has taken higher debt levels overseas, acting as natural hedges against currency fluctuations and for tax efficiency purposes.
Manager expects to acquire from sponsor’s pipeline in FY11. More acquisitions are likely to feature in the coming months and will be the main earnings growth driver in FY11-12. Management is looking at a myriad of acquisition opportunites, deriving from possible sponsor’s injection on top of 3rd party assets. At current implied FY11 yield of 6.6%, any future acquisitions are likely to be value accretive. We have assumed S$300m worth of acquisitions in 2011, to be funded on a 35-65% debt-equity ratio.
BUY, DCF-based TP S$1.07 maintained MLT continues to offer an attractive growth story with strong tenant links and sponsor support from Mapletree Investments. Given its large cap status with visible growth pipeline, we find MLT’s premium FY11-12 yield of 7.3-7.5% attractive.
Suntec – DMG
Improving office segment offset by weak retail
1Q11 res ults in-line with expectations. Suntec REIT (Suntec) reported 1Q11 DPU of 2.388S¢ (+3.1% QoQ; -5.0% YoY), which represents 25% of our FY11 estimate. Net property income fell 2.4% YoY (-1.2% QoQ) mainly due to lower rental income from retail space (Suntec City Mall and Chijmes). Meanwhile, dividend income from JV rose 123% YoY to S$6.5m (+94.3% QoQ) due to maiden full three-month income contributions from MBFC during 1Q11 following the completion of the acquisition of a 33% stake in MBFC in 9 Dec 2010. At its current price, Suntec is trading at 6.2% yield and 3.7% spread, which is higher than pre-crisis mean spread of 2.4%. Maintain BUY with unchanged TP of S$1.76, derived based on DDM (COE: 8.4%; TGR: 3.0%).
Retail rental growth remains sluggish due to new supply in city centre. In spite of strong retail sales and tourist arrivals, retail rental growth has been sluggish in the prime city centre due to 1) new supply of retail space injected during the last two years, and 2) negative retailer sentiments towards rising inflation and hence, higher operating costs. However, we expect the retail rental to remain stable in the quarters ahead, underpinned by visitors’ arrivals which are expected to stay strong. For 1Q11, retail revenue accounted for 53% of total gross revenue excluding the 33% interest in ORQ and MBFC.
Office leases buoyed by higher occupancy and average rent. During 1Q11, Suntec City office space saw an increase in occupancy rate to 99.5% (+0.4ppt QoQ, +4.0% YoY), significantly higher than core CBD occupancy rate of 94.1%. In addition, Suntec City office space saw a higher average rent for leases secured during 1Q11 at S$9.22 psf (+13% QoQ; +30% YoY). This is in line with the strong growth of Grade A office rents which averaged S$9.90 psf in 1Q11 (+10% QoQ; +22% YoY).
MLT – OCBC
1Q11 DPU of 1.55 S-cents. Not stellar but stable results
1Q11 DPU of 1.55 S-cents. Mapletree Logistics Trust (MLT) reported a set of stable results on Thursday. 1Q11 gross revenue of S$62.2m was up 21.1% YoY and 2% QoQ. The yearly increase was mainly due to contributions from the 14 properties acquired in Singapore, Japan, Korea and Vietnam last year. The two acquisitions announced in Mar 2011 were only completed towards the end of 1Q11 and as such, the full effect of the income contributions will only be reflected from 2Q11. 1Q11 revenue was slightly below our expectation but within Bloomberg consensus. 1Q11 revenue met 22.3% of our full-year forecast and 23.8% of consensus FY11 revenue. Distributable income of S$37.5m was up 21.7% YoY and 1.9% QoQ. 1Q11 DPU is 1.55 S-cents, which is up 3.33% YoY but flat QoQ; this represents an annualized yield of 6.9%.
Portfolio Performance. As at 31 Mar 2011, MLT recorded portfolio occupancy of 98.3%, compared with 98.0% in 4Q10, boosted largely by Singapore, Hong Kong and China. However,1Q11 saw the occupancy rate of Malaysia fall from 99.2% to 96.3%. Meanwhile, a total of 81,500 sqm of space had been renewed or replaced, and this accounts for approximately 94% of the total NLA that was due for renewal in 1Q11. The weighted average lease term to expiry for the portfolio is about 6 years with approximately 70% of the leases expiring in 2014 and beyond. MLT also undertook a S$4m enhancement on Multi-Q Centre in South Korea, with the addition of a 3-storey warehouse next to the existing building, thereby increasing total gross floor area by 4,100 sqm. MLT has also identified another Singapore property with underutilized plot ratios and outdated specifications for redevelopment. It is currently firming up the preparations, which will increase the GFA by more than 70,000 sqm. MLT will make the announcement, likely by next month.
Further Acquisitions. MLT adds that it is actively looking at acquiring a warehouse (60,000 sqm and 98% leased) in Malaysia from its sponsor. MLT should be able to complete the acquisition by this year. Going forward, its main acquisition focus will be in Singapore, Malaysia and South Korea, but MLT remains cautiously optimistic on the outlook in Asia. MLT also believes that a significant portion of the future growth will come from its repeat customers. Currently, repeat customers account for 28% MLT’s gross revenue. Reiterate BUY with a reduced RNAV-derived fair value of S$1.00 (prev: S$1.03) on grounds of dampening prospects in Japan (constituted 23.3% of 1Q11 gross revenue.
FCT – BT
Frasers Centrepoint Trust results improve for Q2, H1
FRASERS Centrepoint Trust (FCT) yesterday reported better results for both the second quarter and half year ended Mar 31.
Gross revenue in Q2 rose 2 per cent from the previous year to $28.8 million, with the increase coming mainly from Northpoint 2 and YewTee Point which were bought last year.
Contributions from these malls helped offset the drop in takings from Causeway Point, which is undergoing asset enhancement works.
Net property income slipped 1.3 per cent to $20.1 million. Distribution to unitholders rose 7.8 per cent to $16 million.
Distribution per unit (DPU) in Q2 was 2.07 cents, up slightly from 2.06 cents in the previous year.
For the first half of the year, gross revenue increased 9.5 per cent year-on-year to $56.4 million, and net property income was up 6.7 per cent to $38.7 million.
Distribution to unitholders grew 15.5 per cent to $31 million. As a result, DPU in H1 was 4.02 cents, higher than 3.97 cents a year ago.
FCT’s portfolio occupancy rate in Q2 dropped to 82.9 per cent from 92.1 per cent a quarter ago as refurbishment works at Causeway Point continued. At the mall itself, just about 69 per cent of space was taken up at Mar 31.
Chew Tuan Chiong, CEO of FCT’s manager, said at a briefing yesterday that Causeway Point is now 68 per cent occupied but that should climb gradually to over 80 per cent towards end-June.
Upgrading works were 33 per cent completed in March, and tenants had pre-committed to 99 per cent of space undergoing refurbishment. FCT projects that the average rent at Causeway Point post-refurbishment would be $12.20 per square foot – 20 per cent higher.
FCT is still aiming to acquire Bedok Point this calendar year. The mall opened in December last year and ‘we wanted to see at least some months of stabilisation,’ Mr Chew said.
FCT gained one cent on the stock market yesterday to close at $1.50.
MLT – BT
MapletreeLog distributable income up 21.7%
Properties acquired in Singapore, Japan, Korea and Vietnam last year boost revenue by 21.1%
MAPLETREE Logistics Trust (MapletreeLog) posted a 21.7 per cent year-on-year rise in total amount distributable to $37.54 million for the first quarter ended March 31, 2011, up from $30.84 million.
Gross revenue rose 21.1 per cent to $62.2 million on the back of contributions from 14 properties acquired in Singapore, Japan, Korea and Vietnam in FY10. Net property income (NPI) was 19.4 per cent higher at $54.67 million, as were property expenses, which climbed 34.4 per cent to $7.57 million.
For the first quarter, it will pay out a distribution per unit (DPU) of 1.55 cents, versus 1.5 cents a year ago. The DPU will be paid on May 30.
MapletreeLog, which invests in income-producing logistics real estate and real estate-related assets in Asia, has a portfolio of 98 properties as at March 31, with a book value of about $3.57 billion. Its properties in Singapore, Hong Kong and Japan were the key contributors, accounting for close to 89 per cent of MapletreeLog’s NPI.
Occupancy rate in Q1 improved marginally to 98.3 per cent compared with 98 per cent in Q4. About 81,500 square metres of space – or 94 per cent of the total net lettable area that was due for renewal in Q1 – was renewed or replaced. The weighted average lease term to expiry for the portfolio is about six years with some 70 per cent of the leases expiring in 2014 and beyond.
‘We are currently firming up the redevelopment plan for one property in Singapore. Upon completion of its redevelopment, total gross floor area will increase by more than 70,000 sq m. While the property will not generate any income during the redevelopment period, the resultant yield will provide better returns to MapletreeLog in the long run,’ said Richard Lai, CEO of Mapletree Logistics Trust Management.
He went on to add that they are upbeat on the Asian economy, and that growth this year will continue to come mainly from acquisitions of yield accretive assets.
MapletreeLog closed at 91.5 cents in trading yesterday, up 1.5 cents.