a-iTrust – DBSV
Development projects complete
• Stable 3Q11 results
• Completion of Zenith and Park Square mall to underpin earnings growth
• Upgrade to BUY with S$1.08 TP based on DDM, offering total return of 20%
DPU of 1.72 Scts in line. Gross revenues held steady at S$29.9m, dampened slightly by a stronger S$/INR rate (underlying performance in INR was up 4% yoy). Net property income declined by 12% yoy due to higher utilities expenses resulting from an increase in electricity tariffs at ITPB. The manager expects to be able to pass on the increase to tenants in subsequent quarters, which should lead to operating margins returning to normalised levels. Portfolio occupancy remained high at 98%, even in the face of rising supply, highlighting a-itrust’s superior standing among tenants. Distributable income declined by a lower 7% to S$13.2m, largely due to savings from lower interest payments due to lower rates.
Completion of Zenith (located in ITPC) and Park Square Retail Mall (ITPB) to underpin future earnings growth. Both assets increased a-itrust’s SBA (“Super built-up area) by 1.1 m sqft or 25% to 5.9m sqft. Pre-commitments for Zenith and Park Square Retail Mall are progressing well at 28% and 49% respectively. Tenants should be undergoing fit-outs over the next couple of months and occupancy should ramp up in the coming quarters. We expect contribution from these 2 assets to start from FY12. In addition, its 3rd development asset – Voyager (located in ITPB, currently 29% pre-leased) – should be completed by mid 2011 (or 1Q12) and is expected to contribute positively to earnings.
Upgrade to BUY, S$1.08 TP offers 20% total return. Stock has declined 8% since our downgrade and is worth a re-look at current levels. a-itrust offers attractive forward yields of 8.3-9.0%, which are 230-300 bps above the Sreit sector average. Gearing of 12% as of 3Q11 also implies ample headroom for opportunistic acquisitions, which are currently not factored in our forecasts.
CDL H-Trust – DBSV
Scaling new peaks
• A new record in 4Q10
• Refurbished rooms at Novotel Clarke Quay, Orchard Hotel to underpin earnings growth from FY12
• Maintain Buy with DDM-based TP of S$2.30
4Q10 – a record quarter. Both revenue and net property income grew by a robust 27% y-o-y to S$33.3m and S$31.5m respectively as CDL HT’s Singapore hotels continued to enjoy strong demand. RevPAR rose 20% to S$194/night on the back of high occupancy of 90%, supported by earnings contribution from its Australia acquisitions (back in 1Q10). Distributable income rose to 19% to S$26.6m after taking into account S$1.4m retained for working cap purposes. The trust also recorded a slight increase in NAV to S$1.52.
Refurbishment will underpin higher rates from FY12. Singapore operations to drive DPU growth going forward, backed by expectations of a further 15% hike in RevPAR to S$220/night, while overseas operations should remain stable. In addition, CDL HT plans to refurbish rooms in Novotel Clarke Quay (NCQ) and Orchard Hotel (OCH) in FY11, with minimal disruption to operations. Capex for NCQ will be borne by CDL HT while the lessee will bear the capex for the latter. After completion, we expect these refurbished rooms to fetch c10% higher rates. Our estimates have been revised slightly upwards to reflect this.
BUY, TP raised to S$$2.30. Management is guiding for a payout ratio of 90-95% going forward subject to working cap requirements. With the bulk of its capex requirements already accounted for, we maintain our 95% payout ratio for FY11 and onwards. The stock offers a prospective FY11-12F yield of 5.7- 6.4%. Re-rating catalyst likely to stem from acquisitions, which CDL HT has the financial capacity to deliver given its lowly geared balance sheet of 20.4%.
CRCT – DBSV
Portfolio remixing bearing fruit
• Results slightly ahead of expectations
• Delivering on organic and AEI growth
• Maintain Hold, TP $1.28
FY10 DPU of 8.36Scts slightly ahead of consensus. 4Q10 revenue grew 6% q-o-q to S$30.2m while NPI was flat at S$19m, impacted by a strong S$ vs RMB and higher but normalized expense ratio of 37%. Distribution income of S$13m translates to DPU of 2.07Scts, bringing full year DPU to 8.36Scts, ahead of street estimates. The group revalued its portfolio up by 5.8% to book NAV of S$1.17 on better performance and lower property yield of 6.2%.
Portfolio performance boosted by AEI. In RMB terms, revenue grew 4.2% q-o-q to RMB153.5m, lifting full year topline to a record RMB589m, backed by a 25% jump in tenant sales and 15% higher shopper footfalls. Portfolio occupancy increased to 98.1%. The best performing malls were Wangjing and Xinwu, which enjoyed rental reversions of 12% and 11% y-o-y. AEI works including reconfiguring shops at Xinwu helped lift average rents on a RMB/sm basis. In all, the group renewed 451 leases in FY10, with new tenants making up c50% of the remix, including those from F&B and fashion trade sectors. Looking ahead, we expect performance at Saihan and Qibao malls to continue improving following the successful roll out of AEI works. Meanwhile, the recovery in retail rents from better supply/demand dynamics and rising consumption trends should benefit given that 19% of gross income will be renewed in 2011. The group would continue to execute its other growth drivers including potential asset enhancements, particularly at master-leased assets as well as looking for new acquisitions. Its current gearing stands at 31.1%. Debt expiry profile remains healthy with a maturity of 2.2 years with only 16% of total debt to be renewed this year.
Maintain Hold. We project a modest topline growth of 5% in FY11 as the group continues to fine-tune its portfolio tenant mix and occupancy. Maintain Hold with TP adjusted slightly to $1.28 as we fine-tune currency assumptions. CRCT currently offers FY11 and FY12 DPU yield of 6.6-6.7%.
StarHill Global – DBSV
Well-positioned for growth
• 4Q10 results in line with expectations
• Positive master lease rental reversion and improving office sector fundamentals to underpin growth
• Maintain Buy with S$0.78 TP
In line with expectations. 4Q10 distribution income rose 7% y-o-y to S$20.2m on the back of a 33% jump in gross revenue to S$45.6m and a 37% increase in NPI to S$36.7m. The increase was mainly attributed to contributions from Starhill Gallery and Lot 10 in Malaysia, and David Jones Building in Australia, which were acquired in 2010. On a q-o-q basis, gross revenue and NPI rose by 0.9% and 2.7% respectively, thanks to the continued improvement in Wisma Atria and Ngee Ann City’s office occupancies and higher rental income for its Chengdu property. There was a revaluation surplus of S$76.4m in 4Q10 from its Singapore and newly acquired properties, lifting its fully diluted book NAV to S$0.84.
SG properties revenue continues to grow. Annual footfalls to Wisma Atria increased 22% yoy to 27m in 2010. Our forecast of about 13m tourist arrivals this year is expected to have a favorable impact on retail rents. Meanwhile, revenue from the office portion of Wisma Atria also saw a smaller contraction this quarter (-12.0% in 3Q10 vs -6.2% 4Q10). We expect this trend to continue as office occupancies improve further on the back of demand from new tenants such as new-to-market retailers and uptick in rental rates. Toshin and David Jones master leases are up for renewal in June and Aug 2011, respectively. Toshin’s lease reversions are capped at 25% above preceding levels and we have factored in a conservative 10% upside reversion vs the 20% adjustment in the last cycle. For David Jones, we expect rental hikes of 6%-8%.
Maintain Buy and S$0.78 TP. The stock offers FY11/12F yields of 6.7-6.9%, translating to a total return of 23%. Gearing remains healthy at 30.2%. Potential AEI works to increase NLA at Wisma Atria and possible new acquisitions could provide future catalysts. These have not been factored into our forecast.
FCOT – BT
FCOT Q1 net property income slips 2.4%
Lower contribution from Cosmo Plaza cited for fall
FRASERS Commercial Trust’s (FCOT) net property income slipped 2.4 per cent year-on-year to $22.95 million for the first quarter ended Dec 31, 2010.
Gross revenue fell 2.3 per cent to $28.98 million.
Trust manager Frasers Centrepoint Asset Management (Commercial) Ltd attributed this to ‘lower contribution from Cosmo Plaza as a result of the expiry of a significant tenancy in August 2010’.
It added: ‘If the financial results for Cosmo Plaza were to be excluded, the net property income for the financial quarter would be comparable to that of last year on the same basis.’
FCOT had successfully completed the divestment of Cosmo Plaza – located in Osaka, Japan – on Jan 18.
‘The divestment of Cosmo Plaza would improve the overall quality of the portfolio and create additional debt headroom for FCOT to enlarge its existing portfolio via future acquisitions,’ said Low Chee Wah, chief executive of the trust’s manager.
Despite the dent in net property income, total distributable income rose 4.1 per cent to $12.64 million.
This was due to ‘an absence of loss from realisation of forward contract incurred in the prior year’.
Distribution per unit (DPU) for the period rose 4.2 per cent to 0.25 cents.
There is no distribution payment this quarter as FCOT distributes semi-annually.
The counter gained 0.5 cents yesterday to close at 17.5 cents.