HPH Trust – BT
Port spin-off may give Hutchison US$5.8b booster
But distributions in HK$ may be a downside for local investors
Hutchison Whampoa’s port unit is set to raise anywhere from US$4.91 billion to US$5.83 billion from the initial public offering (IPO) of Hutchison Port Holdings Trust (HPH Trust), the trust’s preliminary prospectus showed yesterday.
The offering – South-east Asia’s largest – will be backed by Temasek Holdings, one of its cornerstone investors. The trust will sell about 3.9 billion units to the public and institutional investors, priced within a range of US$0.91 and US$1.08 apiece.
On top of that, about 1.5 billion units will be parcelled out to eight cornerstone investors that will subscribe for US$1.62 billion worth of trust units, in total.
Aranda Investments Pte Ltd, of which Temasek Holdings is the ultimate controlling shareholder, has committed a subscription amount of US$100 million. Capital Research and Management Company will lead the group, investing US$634 million. Paulson & Co, which is managed by John Paulson, will take a US$350 million stake and Lone Pine Capital LCC has pledged US$186 million.
Based on the maximum offer price of US$1.08, the cornerstone investors will hold 17.2 per cent of the trust. The trust’s sponsor – Hutchison Port Holdings Limited – will own a 38 per cent stake. PSA International holds an effective 20 per cent stake in the sponsor. At that price, the trust will have a market capitalisation of about US$9.41 billion.
The sponsors have estimated annualised distribution yields of 5.5 per cent and 6.1 per cent for 2011 and 2012, respectively, based on the maximum offer price. The 2011 period is a nine-and-a-half month period running from Mar 16 to the end of the year. Kenneth Ng, head of CIMB-GK Research, deemed the yield ‘fairly decent’.
With the distributions being declared in Hong Kong dollars, however, local investors might face an accompanying downside, said Phillip Securities analyst, Alfred Low. ‘If it’s in Hong Kong dollars – which is tied to the US dollar – then if the Sing dollar appreciates next year, it’s bad,’ said Mr Low.
The timing of the IPO might work against it as well, as investors have displayed skittishness in response to the turbulence in the Middle East.
‘The equity markets are doing so badly, with all the IPOs underperforming. Based on the mid-point of the price range, I would not subscribe,’ said Mr Low.
Other market watchers, however, believe that the turmoil in the Middle East will make this region look like a safe haven for investments, in comparison. The merits of the trust could also make it an outlier, according to CIMB’s Mr Ng. ‘It’s a business trust or a Reit-like structure marketed as a yield-providing instrument, so even in jittery markets, there should be demand for such issues,’ he said.
HPH Trust’s portfolio will include Hongkong International Terminals (HIT) and Cosco-HIT Terminals, along with the Yantian terminal in the Shenzhen Port. Last year, total throughput for all the container terminals in the trust’s portfolio stood at 21.17 million twenty foot-equivalent units (TEUs), up from 18.08 million TEUs in 2009.
In 2009, Hong Kong and Shenzhen topped global container throughput lists with a combined throughput of about 39.2 million twenty foot-equivalent units.
Revenue from the trust’s deep-water port business accounted for more than 90 per cent of HK$11.56 billion in total revenue last year.
The trust will also have a claim on the economic benefits derived from the three river ports of Jiangmen, Nanhai and Jiuzhou. These three ports brought in HK$70.9 million in economic benefits last year.
As Intra-Asian trade explodes and an increasingly large proportion of it begins to revolve around the mainland, the trust will focus on developing and investing in deepwater container ports lining the Pearl River Delta.
The proceeds from the offering will partially pay off the HK$102.9 billion price tag on the assets when the trust acquires them from the sponsor. The rest of the acquisition will be funded by a three-year US$3 billion debt facility and an issue of consideration units.
DBS, Deutsche Bank, and Goldman Sachs are joint bookrunners and issue managers.
TCT – BT
TCT sees at least 25% rise in net property income
TREASURY China Trust (TCT) is expecting at least a 25 per cent jump in net property income this year, thanks to its recent acquisition of two shopping malls in Shanghai and Qingdao. It is now looking to acquire retail malls in Xi'an through its tie-up with Hong Kong retail group Ginwa Investment this year.
'We are seeing about 25 per cent increase in net property income as a result of those two acquisitions,' TCT chief executive Richard David told BT yesterday. 'On every front, we expect 2011 to be very strong,' he said, pointing to TCT's existing development pipeline which is fully funded, continued strong economic underpinnings in China and income accretion from the two latest acquisitions.
TCT's current portfolio comprises completed office/ retail properties Central Plaza, City Centre and Treasury Building in Shanghai. It is building 74,000 sq m space in Beijing International Logistics Park and adding 88,000 sq m in City Centre, where it expects strong pre-leasing commitments this year. Its recent stake acquisitions in two retail malls in Qingdao and Shanghai, to be completed by April, will add a further 225,000 sq m of retail space to TCT's portfolio and double TCT's development pipeline to more than 330,000 sq m.
The enlarged portfolio is estimated to yield net property income of 302.3 million yuan (S$58.5 million) for fiscal 2011, up from 238.6 million in fiscal 2010, a 26.7 per cent increase.
TCT yesterday posted a net profit of $20.9 million for the fourth quarter ended Dec 31, 2010, 8.5 times its forecast, and a net profit of $39.6 million for the full year, 16 times its forecast, on the back of a $33 million fair-value gain in investment properties. Net property income for the fourth quarter was $12 million, 5.8 per cent lower than forecast, while that for the full year was $22.6 million, 4.1 per cent below forecast. TCT has declared a distribution per unit of 2.5 cents for the fourth quarter, representing annualised yield of 5.7 per cent.
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 (CREO) that was formerly listed on London's Alternative Investment Market. Mr David said TCT is looking at a number of retail properties in Xi'an with its partner Ginwa, where TCT will take up majority ownership of 55 per cent. TCT had in December agreed to acquire a 55 per cent stake in Sanyang Property Development Co Ltd, which owns Central Avenue Retail Mall in Qingdao, at 476.85 million yuan – its first investment made in partnership with property developer TRIO Group. It also agreed to acquire 100 per cent of a firm which owns the Huai Hai Mall (formerly referred to as Retail Mall) in Shanghai at 575 million yuan.
These two acquisitions will raise TCT's retail exposure from 28 per cent of its total portfolio's gross floor area to 56 per cent. Mr David said TCT will continue to expand its retail exposure, given the segment's growth potential supported by strong double-digit retail sales growth in China.
'We would also expect the strategic partnership agreement with the TRIO Group, having already identified one acquisition in Qingdao, to also identify more in the years to come,' Mr David said. TCT has zero debt maturing by end-2012 and a cash hoard of $104 million as at Dec 31.
StarHill – BT
Wisma Atria gets a facelift to draw crowds
COMPETITION has been hotting up at Orchard Road as new malls spring up and older ones get facelifts.
Amid this, Wisma Atria, whose blue facade has been a key feature on the shopping belt, will see a crystal-line frontage with double-storey store fronts as part of its redevelopment.
The first phase of the redevelopment will start this quarter and is slated for completion by the third quarter of next year, according to Starhill Global Real Estate Investment Trust, the Singapore-based Reit which has interests in a portfolio of 13 properties, including Wisma Atria. Its portfolio is valued at about $2.7 billion.
Phase one of the asset redevelopment is expected to incur capital expenditure of about $31 million and ‘generate an additional net property income of approximately $2.5 million per annum when stabilised, representing a return on investment of approximately 8 per cent’. The cost of the works will be funded from the proceeds of a rights issue completed in 2009 and working capital.
The double-storey frontage, to be designed by DP Architects, is primed to showcase the latest flagship stores of international retailers.
Ramps and walkways leading to the new shop fronts will also be built to draw in pedestrians from surrounding malls and the Orchard Road MRT station.
Another key feature is the full-width steps that span the entire 123-metre long facade of the mall. This is to improve accessibility and provide a permanent flood control measure, hence replacing the current mechanical flood barriers.
Ho Sing, CEO of YTL Starhill Global, the manager of the Reit, said: ‘The redevelopment of Wisma Atria is part of our continuous effort to enhance our retail assets, in line with the growing retail environment in Orchard Road.’ He added that the the redevelopment will be implemented with minimal disruption.
CMT – BT
Capitamall Trust buys Iluma for S$295 mln
SINGAPORE – Singapore's CapitaMall Trust Management said on Monday it has entered an agreement to buy a shopping mall in the city-state, Iluma, for S$295 million ($231 million).
'Iluma is a new shopping mall in Singapore located at Victoria Street opposite the popular Bugis Junction, one of CMT's existing properties. The mall has a net lettable area of 185,190 square feet,' CapitaMall Trust said in a statement.
CapitaMall is part of Singapore's CapitaLand, Southeast Asia's largest property firm.
CMT – BT
CMT’s first retail bonds 1.9 times subscribed
CAPITAMALL Trust (CMT) announced yesterday that its two-year retail bonds were 1.9 times subscribed. In particular, the bonds under the public offer were four times subscribed, receiving valid applications of $206.47 million when the offer closed at noon on Feb 23.
In response, CMT increased the bond offer from $200 million to $300 million. An amount of $175 million has been allocated to retail investors, while $125 million has been allocated to the placement tranche, it added.
CMT had initially allocated $50 million of the bond offer to retail investors and $150 to the placement tranche.
The issue price of the 2 per cent bonds, due 2013, will be $1 per $1 in principal amount, ie 100 per cent of the principal amount of the bonds.
‘We are very encouraged by the strong response to our first retail bond offer,’ said Simon Ho, chief executive of CapitaMall Trust Management, which manages CMT.
Expressing regret that they were unable to fully satisfy all the demand in its inaugural offer, he added: ‘Investors can look forward to opportunities to participate in our future offers under the $2.5 billion retail bond programme that we have set up.’
The bonds – which have received a final credit rating of A3 from Moody’s – will begin trading on the Singapore Exchange at 9am on Feb 28 in board lot sizes of $1,000.
The bond issue is not expected to have a material effect on the net asset value and earnings per unit of the CMT group for the current financial year, it said.
CMT units closed trading one cent higher at $1.78 yesterday.