KGT – Lim and Tan
• While net profit of $8.726 mln for period from June 29th to Dec 31st ’10 was 22% above management’s guidance at the time of the IPO last June, distribution is only 10% above at 4.31 cents (8.44 cents annualized), suggesting management is conserving cash ($ mln at end Dec ’10)
• The main contributing factor for the 22% lower than-expected decline in Revenue is the “shift in schedule” of the upgrading works at the Senoko plant. Management said the upgrade is on schedule for completion by June 2012.
• The annualized yield of 7.7% continues to merit a BUY, although pressure is on management to make acquisitions soon, to arrest the slide in the unit price from debut high of $1.16 to recent low of $1.04. Fact remains KGT has zero debt.
KGT – BT
K-Green profit after listing beats forecast
DPU from listing date to year-end 4.31cents, 10.2% higher than 3.91cents forecast
K-GREEN Trust has posted a net profit of $8.73 million for the period from its listing on June 29 to Dec 31, 2010, 22 per cent higher than forecast.
Including the net profit of $847,000 for the period Jan 1 to June 28, 2010, when it was a private trust, full-year net profit for the green infrastructure assets trust came to $9.57 million.
Full-year revenue was $65.8 million, while revenue garnered since listing was $49.3 million.
The latter is 22.1 per cent lower than the forecast of $63.3 million, mainly due to lower contributions from a delay in flue gas upgrading works for K-Green’s Senoko Waste-to-Energy Plant.
K-Green holds two other plants: the Keppel Seghers Tuas WTE Plant and the Ulu Pandan NEWater Plant.
The majority of K-Green’s full-year revenue – $35.3 million – came from the operation and management of its three plants. The Senoko Plant flue gas upgrade brought in another $16.5 million.
Distribution per unit (DPU) for K-Green from the listing date to the year-end was 4.31 cents, 10.2 per cent higher than K-Green’s forecast of 3.91 cents. K-Green said its annualised distribution yield stands at 7.9 per cent, based on a unit closing price of $1.07 on Dec 31, 2010.
K-Green disclosed its earnings per unit from the date of listing to Dec 31 is 1.39 cents. As at Dec 31, 2010, net asset value per unit for the group – which includes the performance of the holding company, K-Green and the three plants – stands at $1.16.
K-Green has said it will add more assets to its holdings, understandably from regions where it has a focus in ‘Asia, Europe and the Middle East’.
Said Thomas Pang, CEO of Keppel Infrastructure Fund Management, trustee-manager of K-Green Trust: ‘The growing sustainable development sector now and in the foreseeable future will drive demand for waste management, water and wastewater treatment, renewable energy, energy efficiency and other green initiatives.
‘K-Green Trust will be well positioned to evaluate these opportunities to grow our asset base.’
K-Green Trust ended trading up 2 cents to $1.10 yesterday.
A-REIT – DMG
Delivers another steady quarter
3QFY11 results inline with expectations. A-REIT reported 3QFY11 DPU of 3.29¢ (+0.6% YoY; -0.3% QoQ). Annualized 9MFY11 DPU came in at 13.3¢, marginally below our FY11 DPU forecast of 13.7¢. A-REIT had retained S$4.5m derived from a finance lease granted to a tenant, pending discussion with IRAS on tax treatment of this income. Had this income been distributed, DPU would have been 0.24¢ higher. Net property income rose 2.0% YoY contributed mainly from a larger portfolio base. We raise our FY12-13 DPU by 2-6.5% to account for higher rental assumptions and a new BTS project. We correspondingly raise our TP marginally to $2.20. At our TP of S$2.20, AREIT offers a yield of 6.2%, a reasonable peg in our view. Maintain NEUTRAL.
Occupancy improved. Reflecting the stabilisation in global demand, A-REIT’s portfolio occupancy has improved to 95.6% in 3QFY11 (95.3% in 2QFY11). For its multi-tenanted properties, occupancy has also improved to 91.1% (90.5% in 2QFY11). In 3QFY11, A-REIT saw negative rental reversion for the renewal leases for properties in the Business & Science Parks, Hi-Tech Industrial and Logistics & Distribution Centres of between -2.5% to -9.2%, mostly due to large floor plate discount. We expect positive rental reversion in the following quarters as expiring leases are mostly under-rented.
Focus on built-to-suit and other acquisition opportunities. A-REIT also announced that it has embarked on a built-to-suit logistics facility development at estimated cost of S$35.9m. We estimate accretion to FY13 DPU to be just 0.3%.
Stock almost fully valued; maintain NEUTRAL. We maintain our FY11 DPU forecast of 13.7¢ as dividends are well supported by the long-term leases. At its current price, A-REIT offers investors a stable dividend of 6.4% for FY11, but minimal upside compared to pre-crisis yields of 5.3%.
A-REIT – OCBC
3QFY10/11 Results Lacklustre; Maintain HOLD
Distribution Income on the downtrend. Ascendas REIT (A-REIT) reported 3QFY10/11 gross revenue of S$109m, up 3.74% YoY but down 1.89% QoQ. Net property income (NPI) of S$83m also rose 2.05% YoY but declined 1.06% QoQ. Its income available for distribution was up 2.6% YoY but down 0.5% QoQ. A-REIT will disburse 3.29 S cents to unitholders, payable on 28 Feb. This is the second consecutive quarter that A-REIT saw a decline in gross revenue, NPI, income-available-for-distribution and income distributed.
Portfolio Management. Portfolio occupancy improved marginally to 95.6% at end Dec versus 95.3% at end Sep. Occupancy of its multi-tenanted buildings also clocked in 91.1% versus 90.5% three months ago. The manager secured 30,165 sqm of lease renewals and 48,796 sqm of new leases during the quarter, achieving positive rental reversion only in one out of the four industrial sub-sectors1 . 2.9% of property income remains due for renewal this financial year. A-REIT also announced that it has embarked on its 11th development project, a built-to-suit logistics facility in the eastern part of Singapore at an estimated cost of S$35.9m2 . This facility is fully pre-committed for a period of 10 years upon expected completion in 4QFY11/12. In addition, A-REIT has completed Phase 2 of Plot 8 Changi Business Park in Dec. This property is fully pre-committed to Citibank N.A. and the lease will commence progressively from Feb 2011. For FY10/11, management also aims to at least maintain the previous financial year’s level of net income on the back of a high-degree of predictability and sustainability of portfolio earnings.
Maintain HOLD on valuation grounds. As of 31-Dec, A-REIT has an aggregate leverage of 34.7% and an interest-cover-ratio of 4.6x, which is fairly comfortable in our view. It also has ample debt headroom to fund further investment opportunities, with an additional S$931m leeway to reach 45% aggregate leverage. We were disappointed that there was no announcement of international acquisitions, despite previous reports that A-REIT has set up a representative office in Shanghai and is actively exploring investment opportunities in Asia3 . A-REIT is currently trading at a 37.5% premium to book, with a 1-year forward yield of 6.4%, while the broader industrial-REITs are trading at an average 7.8% premium to book with a forward yield of 7.5%. While we believe A-REIT may deserve a premium because of its size and quality of its portfolio, valuations and prospects do not seem compelling at the moment. Maintain HOLD with a reduced RNAVderived fair value of S$2.20.
A-REIT – CIMB
Time to take profit
• Broadly in line; downgrade to Underperform from Neutral. 9MFY11 results met Street and our expectations. DPU of 10cts (-4%) forms 69% of our FY11 forecast of 14.4cts. After accounting for a new development project just announced, lengthening the timing of new contributions, and lowering non-taxable deductible items, our DPU estimates fall by 2-5% for FY11-13. Our DDM target price (discount rate 8.4%) dips correspondingly to S$2.09 from S$2.13. While the industrial outlook appears to be stabilising, intensifying competition from existing and upcoming industrial REITs and funds could make it increasingly challenging for AREIT to grow much more in Singapore. As such we downgrade to Underperform. AREIT’s recent share price surge is an opportune time for investors to take profit and switch to Cache Logistics for more value.
• Default cases slowing down. Despite stable gross rental income and declining property expenses, net property income of S$83m in 3QFY11 was still down 1% qoq. However, this was to some extent a positive thing as AREIT’s lower other income was largely due to reduced liquidation damages received in the form of forfeited security deposits from defaulting tenants (including LabOne, TT International and Autron), pointing to dwindling default cases. Portfolio occupancy also improved: 95.6% from 95.3% in 2Q11 for the entire portfolio and 91.1% from 90.5% for multi-tenanted properties. New take-up rates increased 1-12% from the last quarter across the portfolio except for Hi-tech space (-14%). However, renewal rates were down 3-9% across the sectors, except Hi-tech (+6%). Management is committed to distributing YTD retained income of S$4.5m which would add 0.22cts to 4Q11 DPU.
• New S$35.9m development project. AREIT has commenced a new S$35.9m build-to-suit logistics facility in Changi. Completion is expected by Mar 12. We have assumed 9% yields and income contribution only in FY13.