K-REIT – BT
K-Reit ups Prudential Tower stake
It buys four office floors comprising 48,158 sq ft for a total of $125.1m
OFFICE landlord K-Reit Asia will buy four strata office floors in Prudential Tower for $125.1 million, boosting its stake in the building to 92.8 per cent, it said yesterday.
The four floors total 48,158 sq ft and represent 19.4 per cent of the strata value of the building. K-Reit Asia, a unit of Keppel Land, currently owns 73.4 per cent of the strata value of the building.
The trust will buy level 26 from Innisvale Investments; level 27 from Maraha; level 28 from Lima Bintang Holdings; and level 29 from Mirabeau Gardens.
Post-acquisition, it will own a total of 223,830 sq ft of Grade A net lettable area office space at Prudential Tower, which is located at the junction of Church Street and Cecil Street. The committed leases in the property have a weighted average lease expiry of 3.6 years, the trust said.
Under the sale and purchase agreement, the vendors have agreed to provide rental support, subject to a maximum sum of $8.09 million for the period commencing from the date of completion of the acquisition until March 31, 2015.
The acquisition is expected to be immediately accretive to K-Reit Asia’s distribution per unit. Post-acquisition, more than 90 per cent of the trust’s Singapore portfolio will be located in the prime areas of Raffles Place and Marina Bay, said Ng Hsueh Ling, chief executive of the trust’s manager.
‘It (the acquisition) reinforces K-Reit Asia’s strategy to be a leading landlord in Singapore’s key business and financial districts,’ Ms Ng said.
The acquisition will be funded entirely by debt and when completed, will increase K-Reit’s aggregate leverage ratio marginally from 37 per cent to about 39 per cent.
K-Reit Asia units gained 4 cents or 3.2 per cent to close at $1.29 yesterday.
HPH Trust – DJ
Newly-listed port operator Hutchison Port Holdings Trust (NS8U.SG) said Friday that it expects "minimal" impact from Japan''s destructive earthquake and tsunami.
"It''s minimal," Chairman Canning Fok said when how Hutchison Port''s operations might be affected by last week''s magnitude-9 earthquake and ensuing tsunami, which has forced the closure of many production lines and ports in Japan.
"Our trade is more intercontinental, 70% of our trade is intercontinental. I think we are well protected by the nature of our business," he added.
The unit of Hong Kong conglomerate Hutchison Whampoa Ltd. (0013.HK) made its debut on the Singapore Exchange Friday at US$0.975 a unit, 3.5% below its initial public offer price of US$1.01, in the largest ever listing on the Singapore bourse.
Fok said he was happy with the opening price given the current market conditions.
The debut comes at a difficult time for new listings in Asia, with equity markets being sold off heavily after the destructive earthquake and tsunami in Japan and worsening geopolitical tensions in the Middle East.
HPH Trust – BT
HPH Trust sets sail in choppy seas, struggles
Mega IPO falls below offer price; may trade in S$ by year-end
HUTCHISON Port Holdings (HPH) Trust, the world’s largest initial public offering so far this year, went underwater yesterday in its stockmarket debut in Singapore.
But there was an interesting morsel thrown at investors. The container port business trust, which is trading in US dollars, could also be trading in Singapore dollars by year-end, potentially becoming the first counter on the Singapore Exchange (apart from exchange traded funds) to be quoted in two currencies.
That is for the future. For now, it had to put up with a rough day. Market watchers had predicted a lacklustre first-day showing from the US$5.45 billion IPO as investors remain jittery about Japan’s nuclear crisis, and those expectations materialised.
HPH Trust opened at 97.5 US cents per unit in the afternoon – 3.5 per cent below the offer price of US$1.01. It peaked at 98 cents, before sinking to as low as 94 US cents in intraday trading. It eventually closed at 95 US cents. A total of 616.79 million units changed hands, pushing the counter to the top of the trading volume table.
The trust was said to be trading below the offer price in the grey market even before its official debut. Institutional broker BTIG Hong Kong told Bloomberg that units were sold for 98 US cents on Thursday in deals it handled.
HPH Trust’s fall yesterday was in line with the Singapore broad market’s – the Straits Times Index dipped 7.1 points to close at 2,935.78. But markets elsewhere in the region rose after enduring selldowns in the wake of the earthquake and tsunami in Japan. The Nikkei 225 Stock Average climbed 2.7 per cent, while the Shanghai Composite Index gained 0.33 per cent.
Canning Fok, chairman of HPH Trust’s trustee-manager, was unperturbed by the trust’s stockmarket showing. ‘Considering the situation, this is excellent,’ he told reporters after the listing ceremony. ‘This is a testing time.’
CIMB research head Kenneth Ng pointed out the final stages of the IPO pricing process had played out before the Japanese catastrophe. With sentiment down since, the drop in HPH Trust’s unit price ‘is just reflecting market’s perception of fair value’, he said.
But even before last Friday’s natural disasters in Japan, signs of unease had emerged on HPH Trust’s IPO. For instance, some analysts were concerned about distributions being denominated in the Hong Kong dollar – which could depreciate as it is pegged to the weakening greenback.
What investors will be watching out for next is whether trade volumes – and HPH Trust’s business – will be affected in the wake of the Japanese calamity. The impact on the trust has been ‘minimal’, Mr Fok said.
For SGX, HPH Trust’s listing has boosted the size of its business trust sector significantly. There are now nine business trusts listed on the exchange with a combined market capitalisation of about US$11.9 billion. HPH Trust itself has a market capitalisation of US$8.8 billion based on the US$1.01 unit offer price.
‘SGX will promote the listing,’ said SGX chairman Chew Choon Seng. ‘We intend, within the year, to facilitate quotation and trading of HPH Trust in Singapore dollars in addition to the pricing in US dollars.’
SGX head of listings Lawrence Wong told reporters that there could be an arrangement allowing investors to buy HPH Trust units in Sing dollars. This is the first time the exchange is working on such an arrangement, ‘and we hope to roll it out to more companies and also even to our derivative products’, he said.
HPH Trust – BT
Hutchison Port dismal debut reflects turn in IPO sentiment
HONG Kong billionaire Li Ka-shing’s Hutchison Port Holdings Trust’s price fall of as much as 6.9 per cent in its Singapore debut yesterday underscored how the tide has turned for new listings, with several deals already being delayed or scrapped.
The slump in Hutchison Port’s shares comes as investors, reeling from the effects of Japan’s earthquake and nuclear crisis, fled stock markets in Asia and Europe, prompting companies from Hong Kong to Singapore and Denmark to delay IPOs or price them lower than initially expected.
Denmark’s ISS, which provides cleaning and cooking services, pulled its planned US$2.8 billion initial public offering on Thursday, joining a host of recent high-profile withdrawals, including Perennial China Retail Trust’s S$1.1 billion Singapore IPO.
The market turmoil also casts a shadow on the listing of commodities giant Glencore International Ltd’s float, which some had expected would happen by mid-May.
‘With markets where they are, it’s a matter of picking the windows. It is going to be very volatile, until the nuclear situation is resolved,’ said a Hong Kong- based investment banker, who earlier this week priced a separate Asian IPO.
The Straits Times Index has fallen about 4.5 per cent since a massive earthquake struck Japan a week ago, while Asian shares outside Japan lost 3 per cent.
Hutchison Port closed at 95 US cents, below its IPO price of US$1.01, in total volume of 616.8 million units. The units had fallen as low as US$0.94.
Traders and analysts had expected the fall, given the IPO was priced before Japan was struck by a massive earthquake last week, unleashing a destructive tsunami and damaging a large nuclear power generating complex.
‘I wouldn’t blow this out of proportion, bearing in mind that the IPO comes on stream at a time of extraordinary and exceptional market volatility,’ said Stephen Davies, CEO of Javelin Wealth Management, a financial advisory firm.
‘Once markets begin to calm down and become a bit more reflective you’ll see people pricing existing shares and also new issues more sensibly and with good reason,’ he added.
Canning Fok, chairman of trustee-manager Hutchison Port Holdings Management, remained optimistic about the company’s prospects despite the weak debut.
‘I think considering the situation, this is excellent . . . We got excellent support during the roadshow, so I am very positive about the whole thing,’ he said.
Hutchison Port, a unit of Hutchison Whampoa, raised US$5.5 billion, making it the largest initial public offering in South-east Asia and the biggest in Asia so far this year.
The trust, which owns and operates ports in Shenzhen and Hong Kong, is hoping to tap into a recovery in global trade and provide investors with exposure to China’s booming infrastructure business.
‘Anything below its offer price is a buying opportunity. It’s a good defensive stock to own, which gives exposure to growing Asian trade, and the yield is quite attractive,’ said Kevin Scully, managing director at NRA Capital.
The IPO, which takes the form of a business trust, had attracted cornerstone investors including Singapore state investment firm Temasek , US hedge fund manager Paulson & Co and fund company Capital Research and Management.
Based on the latest price, Hutchison Port now offers investors a yield of around 6.2 per cent, compared with 5.8 per cent based on the offer price of US$1.01.
The size of the Hutchison Port offering exceeds Petronas Chemicals’ US$4.1 billion fundraising last year, which was the biggest ever IPO in South-east Asia at that time.
DBS, Deutsche Bank and Goldman Sachs are joint bookrunners and issue managers for the offering. JPMorgan, UBS, Barclays, Morgan Stanley are among the co-lead managers. — Reuters
CLT – OCBC
Maiden acquisitions; first step to diversify from sponsor
Maiden acquisitions. Cache Logistics Trust (CLT) recently announced its maiden acquisitions of two Singapore properties for S$39.8m [6 Changi North Way (S$30.9m) and 4 Penjuru Lane (S$8.9m)]. The combined NPI yield is 8%, compared to the existing portfolio yield of 7.7% as at 31 Dec 2010. With the new additions, CLT’s total assets under management will increase to S$783.9m. Nonetheless, CLT remains the smallest among the eight Industrial S-REITs, pacing behind AAREIT and Sabana REIT, whose investment properties exceed S$800m. The acquisitions will be fully funded by debt, increasing CLT’s aggregate leverage from 23.7% (as at 31 Dec 2010) to 27.6%. The transactions are expected to complete within 1H11.
Diversification from sponsor. We applaud CLT’s efforts to diversify away from its sponsor with these third-party acquisitions. In our previous report, we noted that all CLT’s properties are on long-term master-leases (at least 5-years) to its sponsor (CWT) and CWT’s parent (C&P), which manifests as a counterparty risk. The multi-tenanted base of 6 Changi North Way and the sale and leaseback arrangement (S&L) with Kim Heng for 4 Penjuru Lane certainly help to spread out the lessees. We also like the shorter lease expiry period (~3 years) for both properties, which will better position CLT in a rising rental market. Nonetheless, the two properties constitute only about 5.3% of total portfolio value and 3.7% of gross rental income, according to our estimates. There is still much to be done, not only to diversify CLT’s tenant base, but also to reduce its concentration risk on a single asset (CWT Hub which still account for 47% of FY11 gross revenue following the acquisition).
Inflation risk remains a concern. The lease agreement for 4 Penjuru Lane provides for built-in rental escalation of 2% per annum for the next three years, with an option to extend for a further three years. While this provides a 50bp step-up vis-àvis the existing lease structures, we reiterate that it still pales in comparison with Singapore’s FY10 annual inflation rate of 2.8% and MAS FY11 forecast of 4%. If inflation continues above 2% without moderation, CLT’s rental income looks set to be eroded by inflation in real terms for at least the next three years.
Maintain BUY. With a gearing of 27.6%, CLT has debt headroom of S$89m for additional acquisitions before reaching the stipulated 35% limit (without a credit rating). Concentration (CWT Hub), counterparty and inflation risks remain our top concerns for the trust and we expect management to consciously address these as the REIT grows in asset size. Maintain BUY with an increased fair value estimate of S$1.04.