Fortune – BT
Fortune Reit Q4 DPU up 10.7%
Income gets boost from higher occupancy and rental rates
FORTUNE Real Estate Investment Trust (Fortune Reit) saw its fourth-quarter payout rise 10.7 per cent year-on-year, helped by higher occupancy and rental rates.
The Reit, which is listed both in Hong Kong and Singapore, reported yesterday, after the market closed, that distribution per unit (DPU) rose to 6.32 HK cents, from 5.71 HK cents. Distributable income for the October-December period climbed 11.3 per cent to HK$105.7 million (S$17.4 million) from HK$94.9 million a year earlier.
Total revenue for Q4 rose 9.1 per cent year-on-year to HK$217.7 million, while net property income climbed 10.7 per cent to HK$152.4 million.
Reit manager ARA Asset Management (Fortune) Ltd said yesterday that it will continue to drive revenue growth by embarking on asset enhancement initiatives.
And with leases that account for more than 30 per cent of its leased gross rentable area and gross rental income expiring this year, it will ‘continue to implement effective leasing and tenant repositioning strategies’.
In particular, it will focus on Ma On Shan Plaza and The Metropolis Mall, where around 50 per cent of tenancies will be up for renewal this year.
‘Leveraging on a strong balance sheet and capital structure, the manager will continue to look for acquisition opportunities in line with addressing the long-term interests of Fortune Reit’s unit-holders,’ it added.
Fortune Reit holds 14 retail properties in Hong Kong under its portfolio such as City One Shatin Property, Ma On Shan Plaza, Metro Town, The Metropolis Mall and Waldorf Garden Property. Together, the 14 properties provide two million sq ft of retail space and 1,660 car parking lots.
The occupancy rate of its properties climbed to a record high of 98.7 per cent at the end of last year, while passing rent also hit a record HK$28.7 per sq ft as at Dec 31.
For the year, distributable income jumped 20.3 per cent to HK$406.5 million. But DPU dropped to 24.35 HK cents from 30.20 HK cents in FY2009 because of an enlarged unit base as a result of a rights issue. Fortune makes distributions on a half-yearly basis. The full-year DPU, which comprises an interim DPU of 12.27 HK cents and a final DPU of 12.08 HK cents, works out to a yield of 6.1 per cent based on the unit’s average closing price of HK$4.01 as at Dec 31, 2010.
Full-year total revenue increased 19.4 per cent to HK$837.3 million. Net asset value per unit at Dec 31, 2010, was HK$6.18, up from HK$5.32 a year earlier.
Fortune Reit units closed unchanged at HK$4.05 yesterday.
MIT – BT
Mapletree Industrial Trust’s DPU beats forecast
$22.3m distributable income for reporting period 13.6% higher than expected
MAPLETREE Industrial Trust’s first set of financial results since its listing on the Singapore Exchange have surpassed forecasts, its manager said yesterday.
The Singapore real estate investment trust (Reit) achieved a distribution per unit (DPU) of 1.52 cents for the period from Oct 21 (listing date) to Dec 31 last year, 13.4 per cent above the forecast of 1.34 cents disclosed in its initial public offering prospectus.
Distributable income for the period came in at $22.3 million, 13.6 per cent above its forecast, thanks to higher gross revenue and lower property expenses.
After its widely anticipated IPO was 38 times subscribed last year, MIT surged on its first day of trading to close at $1.16, up from its offer price of $0.93. Yesterday, MIT slipped one cent to close at $1.09, before its results were announced.
Higher rentals and a one-off rent collection back-dated to the start of a tenant’s lease lifted gross revenue to $41.5 million, 4.8 per cent above the forecast.
Lower utility costs thanks to energy saving initiatives, lower maintenance expenses and a one-off recovery of bad debts previously written-off, all lowered MIT’s property expenses to $11.9 million, 3.8 per cent below what was initially forecast.
Excluding the one-off effects on revenue and property expenses though, Mapletree Industrial Trust Management (MITM) said yesterday that the DPU would have been 1.46 cents, still 9 per cent above the forecast.
With the manufacturing sector expected to grow in tandem with Singapore’s economy, the manager expects demand for industrial properties to remain stable this year and sustain MIT’s performance.
‘Improving demand for industrial space is reflected in the healthy occupancy rate of 92.3 per cent and average monthly rental rate of $1.45 per square foot per month, for the third quarter,’ said Tham Kuo Wei, CEO of MITM.
MIT retained 81 per cent of leases due for renewal in Q3, (the three months ended Dec 31, 2010), and the rentals were renewed at an average of 21.9 per cent above previous rates. For the rest of its financial year which ends on March 31, only 2.6 per cent of MIT’s portfolio is still due for renewal.
Meanwhile, renovation has begun at its Redhill 2 cluster to convert the 7th floor of a flatted factory into e-business space, which commands higher rentals than conventional flatted factory space. It is expected to meet strong demand from enterprises and start-ups in e-business, and is slated for completion by the end of March.
MIT has committed to distributing 100 per cent of its adjusted taxable income from the listing date till March 31, 2012. Unitholders can expect to receive their first distribution on Feb 28.
PLife – Phillip
FY10 Results
•4Q10 revenue $21.5m, NPI $19.7m, distributable income $14.4m
•FY10 full year revenue $80.0m, NPI $73.6m, distributable income $53.2m
•4Q09 DPU of 2.38 cents, bringing full year DPU to 8.79 cents.
•Property portfolio asset size increased 13%, backed by acquisition and revaluation gain
•Buys another nursing home in Japan
•Maintain hold recommendation, target price $1.82
Results slightly ahead of expectations
Plife REIT reported 4Q revenue of $21.5 million (+1.5% q-q, +21.1% y-y), net property income of $19.7 million (+1.2% q-q, 19.5% y-y), distributable income of $14.4 million (+6.0% q-q, +16.6% y-y). For the full year, revenue was $80.0 million (+20.0% y-y), net property Income was $73.6 million (+18.8% y-y), distributable income was $53.2 million (+13.8% y-y). DPU for 4Q10 was 2.38, bringing full year DPU to 8.79 cents. Results came in close to our forecast. Revenue and DPU were both 2.3% higher than our numbers. The strong y-y performance stems from both organic growth and inorganic expansion. Organically, rental from the Singapore hospitals portfolio had an upward revision of 1.73%. Inorganically, Plife REIT purchased 11 nursing homes in Japan during the year. Bottom line was also boosted by lower refinancing rate. Percentage revenue contribution from Singapore and Japan are 66% and 34% respectively, compared to 77% and 23% in 2009.
Growing asset size
Portfolio asset value increased from 13% to $1.3 billion as Plife REIT expanded its portfolio. Revaluation surplus added $18.7 million to the portfolio asset value. The portfolio consists of 3 Singapore hospitals and 28 Japan properties (27 nursing homes, 1 pharmaceutical products distribution facility). Portfolio asset value breakdown is 67% Singapore and 33% Japan. Total debt as at 31 Dec 2010 was $467.5 million with a gearing of 34.6%. Debt maturity profile is well spread out with 10.7%, 41.1% and 48.2% maturing in 2013, 2014 and 2015 respectively.
Continues expansion in Japan
Plife REIT made its first acquisition in 2011. Building on its relationship in Japan, the REIT bought another nursing home on 21 January 2011 for a consideration of $8.9 million. The acquisition is debt-funded and we estimated post acquisition gearing will increased slightly to 34.9%. Plife REIT performed credibly in 2010 and results came in close to our forecast. We have all along been a proponent of the value of Plife REIT, citing its stable revenue as a strong merit. In our view, expansion is good, but up to a certain limit inherent risk increases as well. Our main bugbear is on the rising gearing. With the latest purchase, gearing rises to 34.9%. We are comfortable up to 40% which we think would warrant some form of equity fund raising. We are factoring in the contribution from the new purchase and raising our target price to $1.82. We have a forecasted FY11E DPU of 9.76cents which translate to a dividend yield of 5.4%. Maintain hold recommendation.
FirstREIT – OCBC
4QFY10 results within expectations
4QFY10 results within expectations. First REIT (FREIT) reported its 4QFY10 results which were within expectations. Gross revenue declined 0.2% YoY but increased 0.2% QoQ to S$7.65m; net property income decreased 0.3% YoY but increased 0.5% QoQ to S$7.56m; while distributable income increased 2.8% YoY and 1.6% QoQ to S$5.43m. FY10 gross revenue increased 0.4% to S$30.27m, which was 0.2% above our estimates; it would have increased 4.4% to S$31.49m if we include the deferred rental income from Pacific Cancer Centre’s asset enhancement initiative. Net property income grew 0.1% to S$29.88m, which formed 99.9% of our estimates. Distributable income for the same period rose 1.8% to S$21.35m and was 1.4% higher than our forecast.
New acquisitions to start contributing in FY11. FREIT’s growth was largely driven by higher rental income from its Indonesian properties, thanks in part to the variable rental component in its master leases. FREIT’s Indonesian properties formed 86.7% of its gross revenues (including the deferred income from Pacific Cancer Centre) for FY10 and we expect Indonesia to play an even more pivotal role in FREIT’s development. We opine that FREIT’s two new Indonesian hospital acquisitions in Dec 2010 will drive its earnings momentum moving forward, underpinned by the expanding healthcare market in Indonesia. We predict that FREIT’s gross revenue and distributable income will jump by 80.6% and 88.0% to S$54.66m and S$40.12m respectively in FY11 as contributions from the two hospitals kicks in.
Outlook. Management believes that the healthcare market in Asia, particularly Indonesia, is underserved and has good growth potential. As such, FREIT will continue to be on the lookout for new yield-accretive healthcare properties. This is likely to come from its sponsor Lippo Karawaci (Lippo), in our opinion, as FREIT has a first right of refusal to Lippo’s healthcare assets. We also expect any new acquisitions to be funded by debt, given FREIT’s healthy gearing ratio of 16.6% (our FY11F estimate), which implies ample debt headroom of S$183.8m before hitting the regulatory limit of 35%.
Maintain BUY. We believe that FREIT’s current valuations are still compelling, boosted by its attractive yield (estimated yield of 8.3% in FY11F). Future growth will be supported by its stable master lease terms, which has downside revenue protection and built-in step-up rental features. We continue to like FREIT’s strong sponsor support as well as management’s execution capabilities. Maintain BUY with a revised RNAVderived fair value estimate of S$0.82 (total returns of 15.5%) as we incorporate the latest figures into our assumptions.
ART – CIMB
Boosted by European portfolio
• In line; upgrade to Neutral from Underperform. FY10 results met Street and our expectations, at 102% of the respective full-year forecasts. Stronger REVPAU assumptions for Singapore, stronger assumptions for gross operating profit margins and moderate growth expectations for its European portfolio raise our FY11-12 DPU estimates by 2-4%. We also introduce FY13 estimates. Following our upgrade, our DDM-based target price climbs to S$1.32 from S$1.22 (discount rate 8.3%). Upgrade to Neutral as we see re-rating catalysts from stronger-than-anticipated REVPAU growth in Singapore due to MICE and tourism growth, and in the UK in the lead-up to the 2012 London Olympics.
• FY10 DPU of 7.54cts (our forecast 7.43cts) grew 2.7% yoy. Gross profit of S$39.3m in 4Q10 grew 80% yoy on full contributions from 28 properties acquired in 3Q10, offset by the divestment of Ascott Bejing and Country Woods, and strong performances in Singapore, the UK and Australia. However, 4Q10 DPU growth of 15.6% yoy to 2.16cts paled in comparison due to dilution from equity fund-raising. Europe now contributes 43% of ART’s gross profit, with the top-3 contributing countries being France, Vietnam and Singapore.
• Singapore and UK could grow stronger. Singapore is one of ART’s biggest growth markets, where gross profit grew 14% qoq and REVPAU, 15% yoy to S$219. Although qoq REVPAU was down 10%, we believe this was due to seasonality. YTD REVPAU of S$208 has grown 25% from a year ago. That said, this is still 15% below peak levels of S$249. We believe ART can achieve or even surpass peak levels in 2011, backed by strong visitor arrivals and MICE growth. Surprising us this quarter was gross profit in the four UK properties which grew 31%, above management’s forecast. REVPAU was also 9% above forecast at S$174. This was attributed to the successful refurbishment and rebranding of “Citadines Prestige” in two properties, which enabled higher pricing. Management will start to rebrand Citadines Trafalgar Square this year, and we anticipate improved pricing thereafter. The lead-up to the 2012 London Olympics is also likely to boost performance.