CRCT – BT
CRCT distribution inches up in Q4
INCOME to be distributed by CapitaRetail China Trust (CRCT), a CapitaLand unit, for the fourth quarter of 2010 inched up 2 per cent to $12.97 million – from $12.72 million in Q4 2009 – as it recorded higher rental revenue from its malls.
Distribution per unit (DPU) for the October-December quarter rose 1.5 per cent to 2.07 cents from 2.04 cents a year earlier.
CRCT, which owns eight retail mall properties in China, reported better distribution even as net property income fell year-on-year. This is because for 2009, there was a net retention of income. But for 2010, it is paying out all of its distributable income.
The trust also said its performance was affected by the stronger Singapore dollar, which appreciated against the yuan in 2010.
In renminbi terms, gross revenue for Q4 2010 grew 6.3 per cent year-on- year to 153.5 million yuan (S$29.8 million) due to occupancy and rental growth in some of its malls following asset enhancement works. Net property income fell 1.4 per cent in renminbi terms to about 97 million yuan mainly due to increases in marketing and utility expenses, and higher provision for staff-related costs.
But in Sing dollar terms, CRCT’s performance was worse. Gross revenue rose 1.6 per cent y-o-y to reach $30.2 million in Q4 2010. Net property income fell 6.1 per cent to $19 million.
For the whole of 2010, CRCT’s total income to be distributed rose 3.1 per cent to $52.2 million. Total DPU for 2010 is 8.36 cents, an increase of about 2.7 per cent over 2009.
As at end-December 2010, CRCT’s total borrowing was $402 million, while its gearing stood at 31.1 per cent.
Looking ahead, CRCT said it remains optimistic about its growth prospects in China. ‘With the rapid emergence of China’s middle class, increasing income levels and continuing urbanisation, consumer spending is expected to remain robust,’ the trust said in a statement. ‘China’s strong economic growth momentum, especially when contrasted with the lacklustre growth prospects in the developed markets, will continue to entice retailers to further expand into China. CRCT, with its geographically diversified portfolio of eight malls, is well positioned to tap into China’s growing consumer market.’
CRCT shares gained three cents to close at $1.27 yesterday.
CDL H-Trust – BT
CDLHT set to acquire Studio M
Its income available for distribution to stapled security holders rose 29.3% to $28m in Q4 2010
CDL Hospitality Trusts (CDLHT), which yesterday posted substantial year-on-year increases in top and bottom lines for the fourth quarter as well as full year 2010 – is widely seen by analysts as poised to acquire Studio M Hotel in the Mohamed Sultan area, possibly this year.
The hotel, which opened in April last year and is owned by CDLHT’s sponsor, London-listed Millennium & Copthorne Hotels, is seen by the market as a logical acquisition target for CDLHT.
The trust manager’s CEO Vincent Yeo said yesterday that typically it takes about two to three years for a newly opened hotel in Singapore to stabilise its income and render it a suitable candidate for injection into a real estate investment trust (Reit).
‘But in this strong market, that has shortened considerably; a hotel like Studio M has already reached gestation within a nine-month period,’ he said.
When asked about target acquisition markets, Mr Yeo said: ‘Singapore still offers the best prospects in terms of visibility and growth potential.’
The trust’s strong Q4 and FY2010 financial performance was on the back of improved showing by its Singapore hotels amid the stellar recovery in the local tourism market, as well as contribution from the five Australian hotels CDLHT bought in February 2010.
CDLHT’s income available for distribution to stapled security holders rose 29.3 per cent year on year to about $28 million in Q4 last year. However, CDLHT will retain $1.4 million of this sum as working capital and distribute $26.6 million to security holders.
For full-year 2010, CDLHT posted a 32.7 per cent rise in total distributable income to $100.65 million – of which nearly $8.7 million will be retained as working capital, leaving nearly $92 million to be paid to security holders. This reflects a payout ratio of 91.4 per cent for FY2010, against 94.6 per cent for FY2009.
The FY2010 payout works out to 10.2 cents per stapled security – reflecting a distribution yield of 4.88 per cent based on CDLHT’s $2.09 closing price yesterday.
CDLHT, which makes distributions semi-annually, will pay security holders a total 5.31 cents per unit for the July 1-Dec 31 period last year – comprising 4.71 cents taxable income and 0.6 cent tax-exempt income.
CDLHT’s gross revenue rose 27.5 per cent year on year to $33.3 million in Q4 2010, while net property income improved 27.3 per cent over the same period to $31.5 million.
Singapore hotels posted a 14 per cent year-on-year rise in hotel revenue to $76 million with gross operating profit (GOP) climbing 15.4 per cent to $39.3 million. Revenue per available room (RevPAR) for the Singapore hotels rose 20.6 per cent year on year to $194 in Q4 2010 but was still shy of the record $222 achieved in Q2 2008.
The trust’s FY2010 total gross revenue grew 33.3 per cent to $122.3 million while net property income expanded 33.9 per cent to $115.1 million. Its Singapore hotels achieved a 19.1 per cent increase in revenue to $281.4 million with GOP improving 23.8 per cent to $146.8 million last year. RevPAR for the Singapore hotels surged 28 per cent to $191 in FY2010.
The five Australian hotels contributed $15 million gross revenue last year.
Mr Yeo highlighted that CDLHT’s Singapore hotels achieved their highest ever quarterly occupancies of 89-92 per cent from Q2 to Q4 2010 since the trust’s IPO in June 2006 due to the strong growth in visitor arrivals in Singapore in 2010, notwithstanding the addition of 5,468 new hotel rooms in the Singapore market last year.
He points to a structural boost in accommodation demand brought about by the opening of the two IRs last year, which led to rising leisure demand for hotel rooms during the weekend and festive holiday periods which boosted overall occupancy rates, while robust corporate demand was sustained during the weekdays.
As a result, CDLHT has enjoyed a narrowing in the gap between its Singapore hotels’ business on weekends (including Fridays) and weekdays since the two IRs opened. RevPAR during weekends was about 12-13 percentage points lower than on weekdays in Q4 last year; the gap used to be about 22 percentage points around the beginning of 2010, before the IRs opened, Mr Yeo said.
Friday occupancies now match those on weekdays (in the past they were noticeably lower) and Mr Yeo reckons this is due to corporate travellers being more willing to extend their stay to the weekends to check out the IRs and its attractions.
‘I still remain very upbeat about tourism prospects for Singapore. I see continued good years ahead,’ he added, citing new attractions that will open in coming years, expansion of the low cost carrier market, strong economic growth in Singapore and the region, and growth in the MICE business.
Standard Chartered Bank, which lists CDLHT as one of its top Singapore Reit picks, said yesterday: ‘We continue to believe CDLHT will make accretive acquisitions in 2011, given its low cost of equity (5.6 per cent 2011 estimated distribution per unit yield) and debt (2-3 per cent).’
MIT – DBSV
Robust organic growth engine
• DPU of 1.52 Scts above street
• Growth to accelerate in FY12F with expiry of rental caps
• BUY, TP revised to S$1.18 based on DCF, offering total return of 15%
DPU of 1.52 Scts ahead of street estimates. Organic growth in MINT’s first report card was impressive with topline and net property income of S$41.5m and S$29.6m, which were 4.8% and 8.7%, respectively higher than IPO forecasts. Portfolio-wide occupancy levels inched 1.1%ppts higher to 92.3%, while reversions averaged 21.9% above previous levels. As such, average portfolio rent rose 10% to S$1.45/sqft pm. For space with rental caps, tenants continued to renew at the maximum cap levels. DPU of 1.52 Scts (+13.4%) included one-off items and when excluded, would have been 1.46 Scts (+9%).
97% of FY11 income locked in, expiry of rental caps in Jun 2011 will see further income hikes. MINT’s ability to sign new leases at >30% above preceding rentals is a testament of the current under rentedness of the portfolio. The expiry of the rental caps by end Jun 2011 should enable MINT to start marking their renewals closer to market. We tweaked our FY12F-13F upwards in view of more robust rental renewal and occupancy assumptions.
Active effort to drive portfolio yields while acquisitions remain a possibility. Driven by demand from end-users, MINT plans to spend S$2.6m to convert one story at Redhill 2 property into e-business space, targeting IRR of 10%. While impact is small, we are encouraged by management’s efforts to look out for opportunities to drive portfolio yields higher, creating value for unitholders in the process. In terms of acquisitions, management is keen on the upcoming JTC portfolio tender, and we see a strategic fit with its current portfolio.
BUY maintained, DCF based TP raised to S$1.18, offering total return of 15%. MINT offers a prospective FY12-13F yield of 7.0-7.4%, which is 100-140 bps above the S-REIT sector. Trading at implied yields of 6.4% means that target acquisitions should be accretive when executed, which are currently not factored in our forecasts.
SREITs – BT
S-Reits likely to continue buying assets: Moody’s
But it calls for guard against risk of rising rates
MOODY’S Investors Service expects real estate investment trusts in Singapore (S-Reits) to continue purchasing assets this year as interest rates stay low and funding remains available.
But the credit rating agency also reminds Reits to guard against the risk of rising rates through hedging and other strategies.
‘S-Reits will use their well-capitalised balance sheets to continue acquisitive growth strategies this year amid an environment of low interest rates,’ said Moody’s associate analyst Alvin Tan in a report.
Some S-Reits, sponsored by developers, will also have access to a pipeline of assets, he added. Moody’s foresees interest rates staying low this year, and this makes it attractive for S-Reits to borrow more. Nevertheless, given the Reits’ experience with strained balance sheets during the global financial crisis, they are likely to remain conservative.
Also, any rise in interest rates will increase S-Reits’ acquisition and refinancing costs and hurt their credit profiles. ‘Trusts must manage the risk of any upward spike in rates by balancing their debt maturities, proper hedging and using an appropriate debt/equity mix to fund acquisitions,’ Mr Tan said.
He noted that most S-Reits had gearings of 30-40 per cent, which should rise with further acquisitions, but remain within their long-term targets of 40-45 per cent.
S-Reits went on a shopping spree last year as growth returned to the agenda with the sharp economic recovery. According to a DBS Vickers analysis in December, the sector bought around $7 billion worth of properties in Singapore and abroad in the year.
Several S-Reits have announced plans for further growth this year. For instance, Frasers Centrepoint Trust is looking to acquire Bedok Point while Parkway Life Reit recently announced the acquisition of a nursing home in Japan for around $8.9 million.
Moody’s is keeping its ‘stable’ rating on the S-Reit sector given ample liquidity in the market, high occupancies and rising rents this year.
AIMSAMPReit – BT
AIMS AMP Capital Reit Q3 DPU takes a dive
Rights issue dilutes payout from higher distributable income
AIMS AMP Capital Industrial Reit yesterday said that its distributable income for the third quarter surged 94.2 per cent year-on-year to $10.4 million, though its payout per unit fell largely on the back of its rights issues of new units.
Distribution per unit fell to 0.51 cent from 1.1368 cents a year ago – when it recorded a distributable income of $5.4 million. The number of units issued at the end of the quarter was 1.99 billion, compared with 1.5 billion over the same period a year earlier.
Gross revenue for the three months ended Dec 31 jumped 56 per cent to $19.6 million. Reit manager AIMS AMP Capital Industrial Reit Management Ltd attributed this to the additional rental income from the six properties it acquired since November 2009, and higher recovery of property tax and land rent from tenants.
With 0.1 per cent of the trust’s revenue due for renewal in the fourth quarter and ‘healthy occupancy’ of 98.5 per cent, the manager said it expects revenue for the final quarter of its fiscal year 2011 to be stable and sustainable.
Net property income rose 47.1 per cent to $14.5 million from $9.9 million a year earlier. Earnings per unit was 0.41 cent, compared with 0.8 cent a year earlier.
During the quarter, a major focus of the trust was the transaction for its acquisition of a ramp up warehouse at 27 Penjuru Lane for $161 million from AMP Capital, said Nicholas McGrath, the Reit manager’s chief executive.
This transaction, he said, ‘has resulted in a significant increase in the asset base ($818.8 million as at Dec 31, 2010) and market capitalisation ($427.2 million as at Jan 24, 2011) of the trust’.
The acquisition, which was completed in October last year, was partially funded by a fully underwritten renounceable rights issue of $79.6 million and partially funded by a new loan.
According to the Reit’s financial statement, its net asset value per unit as at end-December last year was 27 cents, compared with 31 cents on March 31, 2010.
Yesterday, the Reit’s shares closed unchanged at 21.5 cents.