CDL H-Trust – Phillip
•Tourism industry registered spectacular performance in Jan-Nov 2010
•CDL HT ahead of industry average
•Maintained buy, target price $2.38
Tourist arrivals hit another record in Nov’10, registering 960k which is the best record for a November month. Tourist arrivals from Jan-Nov have already crossed the ten million mark at 10,508,000. Cumulative 3-months total showed an improving trend with each successive quarter surpassing the previous quarter. Average RevPar also registered the highest value for the year during the Oct-Nov period. Traditionally, December is another strong tourist month and we are expecting the Oct-Dec period to be the best quarter of 2010. 2010 is a good year for the tourism industry. CDL HT benefitted greatly from being in an industry that directly services the tourism industry. CDL HT has managed to outperform the industry averages in terms of hotel occupancy and RevPar.
CDL HT has performed strongly in the first 9 months of 2010. Revenue improved 35.5% compared to the same period a year ago. Revenue of $88.9 million is approximately the same as FY09 revenue of $91.8 million. Hotel occupancy rate has improved 7 percentage points over FY09 and RevPar is 26.8% higher. Besides the general improvement in the Singapore hotel portfolio, there was also additional contribution from the Australia hotels portfolio which CDL HT acquired in Feb 2010. There might be some concern over the flood in Australia affecting CDL HT Australia hotels portfolio. Revenue contribution is approximately 13% out of which approximately 1% is the variable component. We had also checked with management and understand that operations were not affected.
PLife – CIMB
Stepping up organic growth
• Maintain Outperform. We met investors during a week-long non-deal roadshow with PLife REIT’s CEO, Mr Yong Yean Chau and CFO, Mr Loo Hock Leong in the UK and Europe in December. Management elaborated on plans to expand organically and through acquisitions. We retain our assumptions of S$200m of acquisitions with half-year contributions for 2011, fully funded by debt. Our DPU estimates and DDM-target price of S$1.96 (discount rate 7.2%) are intact. Despite being pricier than the REIT sector’s average of 1.2x P/BV, we believe PLife’s ability to hedge against inflation justifies its premium pricing. We anticipate near-term price catalysts from announcements of accretive acquisitions and firm assetenhancement plans for its Singapore portfolio.
• Asset enhancement to start in Singapore. Management had been exploring asset-enhancement possibilities for Singapore hospitals and due diligence is in progress. Although the scale of the work cannot be ascertained for now, we believe with the Singapore portfolio contributing 64% of net property income, there would a material impact on distribution by 2H11.
• Market rent reviews at Japanese nursing homes. The first round of market rent reviews since acquisition is due this year and we estimate that up to 10% of PLife’s revenue would be subject to rental revisions on an annual basis.
CCT – UOB Kay Hian
BACKGROUND
CapitaCommercial Trust (CCT) has the largest portfolio of prime office properties in Singapore, deriving about 72% of its value from this segment. Its portfolio also includes office and business park properties in Malaysia through a 30% stake in Quill Capital Trust (QCT) and a 7.4% stake in Malaysian Commercial Development Fund.
OUTLOOK/RECOMMENDATION
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Watch out for acquisitions.
- Portfolio reconstitution saw the sale of two office buildings, Robinson Point and StarHub Centre, in quick successions this year for a total of S$572.5m. Current gearing of 31.5% gives debt headroom of S$1b, assuming target gearing of 45%, for acquisitions. Management indicated it is on an active lookout for prime/Grade A office property in the CBD.
- Portfolio reconstitution saw the sale of two office buildings, Robinson Point and StarHub Centre, in quick successions this year for a total of S$572.5m. Current gearing of 31.5% gives debt headroom of S$1b, assuming target gearing of 45%, for acquisitions. Management indicated it is on an active lookout for prime/Grade A office property in the CBD.
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Strong pick-up in office rentals mitigates risk of negative reversion.
- The market rents for office space continued to improve in 3Q10 with prime office rents increasing 7.2% qoq to S$7.40psf pm and Grade A office rent increasing 6.5% qoq to S$9.00psf pm. The risk of negative rental reversions is mitigated with Grade A office rents exceeding the average portfolio rent of S$8.73psf pm and the prime office rentals bridging the gap to average portfolio rents. Average portfolio rent for CCT is S$8.79psf pm.
- The market rents for office space continued to improve in 3Q10 with prime office rents increasing 7.2% qoq to S$7.40psf pm and Grade A office rent increasing 6.5% qoq to S$9.00psf pm. The risk of negative rental reversions is mitigated with Grade A office rents exceeding the average portfolio rent of S$8.73psf pm and the prime office rentals bridging the gap to average portfolio rents. Average portfolio rent for CCT is S$8.79psf pm.
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Market Street carpark redevelopment.
- With prime office capital values increasing 29% ytd to S$2,000psf in 3Q10, outpacing a corresponding 9.6% rise in prime office rents to S$7.40, yield compression is starting to set in. With yield-accretive acquisition opportunities becoming increasingly difficult in the near term, management may relook the option to redevelop the Market Street carpark into an office building.
- With prime office capital values increasing 29% ytd to S$2,000psf in 3Q10, outpacing a corresponding 9.6% rise in prime office rents to S$7.40, yield compression is starting to set in. With yield-accretive acquisition opportunities becoming increasingly difficult in the near term, management may relook the option to redevelop the Market Street carpark into an office building.
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Maintain BUY and target price of S$1.70.
- We use the dividend discount model (required rate of return: 7.7%, terminal growth: 2.5%) to value CCT.
Ascendas REIT – UOB Kay Hian
BACKGROUND
Ascendas REIT (A-REIT) is a business and industrial REIT which invests in a diversified property portfolio in Singapore, comprising business and science parks, hi-tech industrial properties, light industrial properties, logistics and distribution centres as well as warehouse retail facilities.
OUTLOOK/RECOMMENDATION
Positive rental reversions in FY11. A-REIT will benefit from positive rental reversions for lease renewals across all sub-segments in FY11, as current market rentals are at 4-21% premium to expiring rents, with existing business park rentals commanding a 19% premium to space due for renewal. A-REIT will also benefit from the bottoming out in industrial rentals and the improvement in the manufacturing sector outlook.
- Industrial rentals picking up. The Urban Redevelopment Authority (URA) industrial rental index bottomed out in Sep 09 and is up 8.0% ytd. Average market rents for business parks, factory and warehouse space are up 6.9%, 8.0% and 8.1% ytd respectively. Hi-tech industrial space is expected to recover in 2011 after bottoming out this year due to supply overhang in the segment.
- Downside protection in earnings. A-REIT has a well-diversified and stable portfolio with average lease to expiry of five years. About 45% of the leases are long-term, typically with annual rental escalation, of which 32% have adjustments pegged to the Consumer Price Index.
- Continued acquisitions and developments to drive growth. A-REIT acquired DBS Asia Hub at Changi Business Park and another industrial property in Joo Koon in 1Q10. Development projects, such as the recently completed Plaza 8 @ Changi Business Park (CBP) and Phase II of CBP due to be completed in 1Q11, will contribute to FY11 and FY12 earnings.
- Debt headroom of S$953m. A-REIT has a debt headroom of S$953m from its current gearing level of 34.3% before reaching the 45% aggregate
- leverage. This presents ample opportunity to fund build-to-suit (BTS) development projects and acquisitions.
- Maintain BUY and target price of S$2.50. We value A-REIT based on the dividend discount model (required rate of return: 7.7%, terminal growth: 2.0%).
MIT – SGX
COMPLETION OF ACQUISITION OF 44 & 46 CHANGI SOUTH STREET 1, SINGAPORE
Further to its press release dated 2 December 2010 regarding the acquisition of the property at 44 & 46 Changi South Street 1, Singapore for a purchase price of S$16.8 million, Mapletree Logistics Trust Management Ltd., as manager of Mapletree Logistics Trust is pleased to announce that the acquisition was completed today.
The acquisition was fully funded by proceeds raised in the recent equity fund raising exercise announced on 21 September 2010 (“EFR announcement”). This was one of the Potential Acquisitions as identified in the EFR announcement.