A-REIT – DBSV
Acquisitions to sustain earnings growth
• 4Q11 results in line with expectations
• Acquisitions to drive FY12-13F earnings growth of 11%
• HOLD call, DCF-based TP S$2.14 maintained
4Q11 results in line with expectations. 4Q11 distributable income of S$61.2m (DPU of 3.27Scts), +19.8% yoy, – 0.6%qoq was in line with our expectations. Topline of S$112.9m (+8.7% yoy, +2.6% qoq) was largely due to acquisitions completed in 1Q11 and the completion of its development project – 5 Changi Business Park Crescent which was 100% pre-committed to Citibank on a long term lease. This was aided by an uptick in average portfolio occupancy level to 96%, with 1pct sequential improvement in take-up of its multi-tenanted buildings to 92.1%. A-REIT continued to see positive rental reversions – 0.6% to 3.7% increase from 3Q11. NPI margins fell to 74.4% due to the expiry of proper tax rebates, an enlarged portfolio coupled with higher utility costs incurred in 4Q11.
Acquisitions driving FY12-13F earnings growth of 11% Earnings growth over the next 2 years will be driven by new acquisitions of S$376.1m (including committed investments development projects, asset enhancement plans). In addition A-REIT is pursuing some S$200m worth of opportunistic acquisitions in the coming months, which we have assumed in our numbers.
HOLD call on valuation grounds, DCF-based TP S$2.14 is maintained. While we like A-REIT for its defensive and well diversified portfolio and execution track record for its development projects, upside to our target price is limited from current level. Forward yields of 6.7-7.0% should limit downside to share price.
Rickmers – DBSV
Accelerated loan repayments continue
At a Glance
• DPU payout for 1Q11 maintained at 0.60UScts; in line with our expectations
• Accelerated repayment of loans continue, with another US$12.6m repaid in 1Q11
• Unlikely to meet conditions for removal of DPU cap in near term, maintain HOLD with TP of S$0.37
Comment on Results
Stable cash flows in 4Q. RMT’s topline fell 3.5% y-o-y owing to the lower charter rate for the vessel Kathe C. Rickmers, which was fixed at only US$8,288 to CSAV for the first year up to March 2011. Currently, the rate has been revised up to US$23,888 as CSAV exercised the option to renew the lease by 1 more year amid an improving charter market. Distributable cash flows remained stable on a y-o-y basis at US$16.3m for 1Q11.
DPU stayed at 0.6UScts, loan repayments continued. As the Trust repaid about US$12.6m of borrowings in 1Q11 – ahead of scheduled repayment of about US$8m – distribution to unitholders 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 accelerate its deleveraging program in FY11, and borrowings could reduce from US$669m at end-FY10 to about US$624m at end-FY11. However, during the 3-year waiver period, the Trust’s DPU cap would be in place as long as the Value-to-Loan ratio on the IPO facility and subsequent top-up facility (about US$416m of which are outstanding currently) are below the covenant limit of 133%. According to our estimates, the value of the 10 vessels, which forms the security for the above facilities, is unlikely to cross that barrier in the near term, even after accounting for the gradual decline in borrowing level. Thus, we maintain our HOLD call on the stock, and our TP remains unchanged at S$0.37, pegged to 8% FY11 target yield. As highlighted earlier, balance sheet remains the key focus for management and acquisition driven growth will have to wait.
PST – DBSV
Steady as she goes!
At a Glance
• 1Q11 distribution remained steady at 0.81 UScts per unit or ~71% of distributable cash flow
• Financing for all newbuild vessels arranged
• Expect DPU growth from 4Q11 onwards
• Maintain BUY at unchanged TP of US$0.40
Comment on Results
Good start to the year. Revenue and operating profit came in virtually unchanged on a y-o-y basis, but net profit improved 4% to US$6.9m owing to the lower interest costs as PST continued to pay down its debt steadily. Subsequently, net distributable cash (after loan amortisation) for 1Q11 came in slightly higher at US$6.7m vs. US$6.5m in 1Q10. The 70% payout ratio was maintained, and the Trust paid out US$4.8m or 0.81UScts per unit in 1Q11, a 2% increase y-o-y.
Outlook & Recommendation
Debt financing for all new vessels has been secured. To recap, PST has announced 3 separate acquisition deals in FY10 to drive growth and diversification of the fleet – two new Capesize bulk carriers for delivery in Sep 2011, 2 Multi Purpose vessels for delivery in Sep/Dec 2012 and 5 Supramax bulk carriers for delivery in Nov 2012 – Apr 2013. While the total capital commitments for the 3 deals amount to about US$333m over the next 2 years, the Trust has already secured a total of US$282m in bilateral financing commitments from six banks to finance the deals, which implies a high debt-to-value ratio of close to 85% and signals the faith of lenders in PST’s capital management and business strategy.
Growth expected from 4Q11. We remain positive on these yield accretive acquisitions and expect DPU growth at near 12% CAGR over FY10-12, even after accounting for a potential equity issue of US$40-50m in FY12. Maintain BUY with an unchanged TP of US$0.40. PST remains our top pick in the shipping trust sector.
MCT – BT
Mapletree Commercial Trust launches $983m IPO
It’ll sell up to 1.12b units at 88 cents apiece; trading likely to begin on April27
Mapletree Commercial Trust (MCT) will raise up to $983 million from its initial public offering (IPO) in Singapore after pricing the shares at 88 cents each – above the mid-point of the marketed range of 84 cents to 91 cents.
MCT, a unit of Temasek Holdings’ property arm Mapletree Investments, also said yesterday that the 548.1 million units set aside for placement to institutional investors were nine times subscribed.
At the offer price, MCT’s projected yield for the year ending March 31, 2012 is 5.7 per cent; while that for the year after is 6.2 per cent.
MCT expects to raise total gross proceeds of around $893 million. But the amount will climb to up to $983 million if an over-allotment option is exercised in full.
The trust had planned to lodge its prospectus in March, but had to delay the IPO process due to volatile markets caused by the March 11 earthquake and tsunami in Japan. MCT’s IPO is the second biggest in Singapore so far this year.
The trust will sell up to 1.12 billion units (including the over-allotment option) at 88 cents per unit. In addition to the shares that will be placed out to investors, cornerstone investors – including insurance company AIA Group – have committed to take up another 302.2 million units.
Another 164.8 million units will be sold to the public in Singapore. The public offer opens today at 9am and will close on April 25 at 9am. Units are expected to start trading on the Singapore Exchange on April 27.
MCT will initially hold three assets worth $2.8 billion in all – Singapore’s largest mall VivoCity, and the Bank of America Merrill Lynch HarbourFront and PSA Building office buildings.
‘MCT is the first commercial Singapore Reit to be listed on the Singapore Exchange since 2007,’ said Amy Ng, chief executive of the trust’s manager. ‘Investors now have an opportunity to own a piece of VivoCity, Singapore’s largest mall, and other quality Mapletree office buildings.’
JP Morgan analyst Christopher Gee noted that the assets were all ‘high profile’. VivoCity, in particular, should be familiar to the public in Singapore, he added.
But in a recent report, Credit Suisse analysts pointed out that while MCT is mainly a retail Reit now, it is likely to become an office Reit in future as the pipeline from sponsor Mapletree Investments comprises mostly office assets.
Mapletree Investments has granted MCT the right of first refusal to acquire 10 properties including HarbourFront Centre and Mapletree Business City.
But the trust, which will have a gearing of 39 per cent after the IPO, is not likely to make any acquisitions in the first 12 months after listing, said Shane Hagan, chief financial officer of MCT’s manager.
Sponsor Mapletree Investments will hold a 40 per cent stake in MCT after its listing, assuming the over-allotment option is exercised. Including the sponsor’s stake, there will be a total of 1.86 billion units.
The property group’s third Reit, Mapletree Industrial Trust, also raised close to $1 billion when it was listed in October 2010.
As at end-December 2010, Mapletree Investments and its subsidiaries own and manage more than $14.4 billion of office, logistics, industrial, residential and retail properties with an extensive network of offices in Singapore, China, Hong Kong, India, Japan, Malaysia, South Korea and Vietnam.
A-REIT – BT
A-Reit’s Q4 DPU jumps 19.8%
Net property income up 9.5% on completion of new projects
IMPROVED results for the fourth quarter capped a strong financial year for Ascendas Real Estate Investment Trust (A-Reit).
The industrial Reit, which has been actively snapping up properties or enhancing existing ones in the past financial year, expects to invest more this year if all goes well.
Gross revenue for the quarter ended March 31 grew 8.7 per cent year-on-year to $112.9 million as new projects were completed. This pulled net property income up 9.5 per cent to $84 million.
Total amount available for distribution jumped 20 per cent to $61.3 million. As a result, distribution per unit (DPU) was 3.27 cents, up 19.8 per cent.
For the full year, gross revenue climbed 8.2 per cent from the previous year to $447.6 million, and net property income increased 6.1 per cent to $339.4 million.
This contributed to a 5.6 per cent increase in total amount available for distribution to $248 million. DPU rose one per cent to 13.23 cents.
The DPU, seen against A-Reit’s closing price of $2.04 on March 30, translates to a distribution yield of about 6.5 per cent. The counter ended trading yesterday at $1.97, one cent down.
A-Reit had been busy with investments in FY10/11, committing $376.1 million to acquisitions, asset enhancement works and development projects. For instance, it recently bought Neuros and Immunos in Biopolis for $125.6 million.
The pipeline of deals this year is ‘generally more encouraging’ than last year’s, said Tan Ser Ping, CEO and executive director of A-Reit’s manager, at a briefing yesterday.
‘If everything pans out well, then I think we should do better than the last financial year,’ he said.
To support its purchases, A-Reit had raised net proceeds of around $393.3 million through a private placement last month.
Mr Tan told BT that the Reit is unlikely to need more equity fundraisings for ‘a good while’ as it will have a debt headroom of over $800 million after the placement, taking committed projects into account.
Another of A-Reit’s purchases was a business park building in Shanghai.
A-Reit will focus on both Singapore and China but in the next three years or so, its portfolio is expected to remain predominantly Singapore-based, with up to 20 per cent of assets potentially in China, Mr Tan said.