CCT – DBSV
Waiting for acquisition catalyst
• 3Q10 distribution income up a marginal 1.0% qoq, within expectations
• Portfolio occupancy to remain high with limited rental reversion upside
• Maintain Hold with TP S$1.47
Within expectations. CCT reported a marginal 2.4% qoq decline in topline to S$97.8m in 3Q10 despite loss of income from Starhub Centre, sold in mid Sept 2010. Performance was underpinned by robust leasing activities in its remaining properties, which boosted portfolio occupancy by 2.6% pt qoq to 98.2% with an additional 138,000sf of new take up. NPI increased by 2.8% to S$76.3m due to lower property expenses (-17.2% q-o-q) and distributable income remained stable, rising by 1.0% to S$56.2m (DPU: 1.99Scts) on reduced borrowing costs (-6.3% q-o-q). For the 9M, the group achieved DPU of 5.89Scts.
18.3% leases expiring in 2011. While leasing activities had focused on newer properties in 1H10, we believe that rental attention could shift back to existing prime buildings, as the next wave of new developments would only be ready late next year. As such, going forward, we think that CCT's high portfolio occupancy would remain intact. Although rental rates have started to strengthen, CCT's rental revenue is likely to see limited reversion upside as leases expiring in 2011(18.3%) were transacted at about $11-16 psf pm vs current prime rents and Grade A at S$7.4 psf pm and S$9 psf pm respectively. Asset enhancement activities for 6 Battery Rd will commence in Nov 2010 and be carried out in phases till 2013. Upgrading works will coincide with StanChart's plan to downsize their space occupation by 70ksf and some potential replacement candidates have already been identified.
Maintain Hold. We are revising our DCF-backed TP to $1.47 as we roll our numbers forward into FY11. Meanwhile, asset divestments have lowered gearing to 31.5%, putting them in good position to undertake new acquisitions. However, we think rising capital values could post a hurdle to making immediately accretive purchases. With no near term catalysts, we maintain a Hold call with TP of $1.47
PST – DBSV
Growth, diversification plans on track
At a Glance
• 3Q10 DPU of 0.83UScts in line with our expectations
• Existing cash flows look stable, diversification and growth plans remain on track with recent acquisition of 2 Multi Purpose Carriers for delivery in late 2012
• Trading at about 11% FY11 yield, maintain our BUY call at higher TP of US$0.39 (9% target yield on FY11 DPU)
Comment on Results
DPU of 0.83UScts was declared for the quarter, which is 5% higher than 2Q10 DPU but similar to the payout in 3Q09, when PST first started conserving 30% of distributable cash. 3Q10 revenue of US$15.6m held steady, and net profit was up 9% q-o-q to US$7.2m. After regular loan amortisation payment of US$4.3m, net cash generated for 3Q10 amounted to US$7.0m, of which approximately US$4.9m will be distributed to unitholders and the remaining US$2.1m retained for future working capital purposes.
Outlook & Recommendation
Following its earlier plans to acquire two new capesized bulk carriers for delivery in Sep 2011, PST has announced further growth plans and diversification into MPP vessels, with an order for 2 vessels worth US$60m for delivery in Sep/Dec 2012. The vessels will be chartered out for 10 years to COSCO Xiamen, a subsidiary of the COSCO Group. Pre-delivery payments for these ships will be supported by advances from sponsor PIL, and hence financing requirements will be back-loaded. To recap, the payment schedule for the bulk carriers are back-loaded as well, with 85% to be paid on delivery. Thus, while there is no immediate DPU accretion, there are no immediate funding needs as well.
Management is content to wait for better financing deals as they believe the market for ship financing is improving (it is possible to obtain more than 60% Loan-to-Value currently). Given the current cash buffer, we thus push back our equity fund raising assumptions to 2012, as we believe at least the bulk carrier deal can potentially be financed without raising additional equity. Maintain BUY, TP revised up to US$0.39, as we roll over valuations to FY11.
MLT – OCBC
3Q10 in line; still a compelling play
3Q10 in line. Mapletree Logistics Trust (MLT) reported 3Q10 gross revenue of S$54.5m, up 7.4% YoY and 4.9% QoQ. Net property income of S$47.6m rose 8.1% YoY and 4.0% QoQ. Distributable income of S$31.5m was up 9.5% YoY and 2.2% QoQ. Results were boosted by positive contributions from recent acquisitions and lower vacancy rates. Distributable income was just 2% shy of our S$32.3m estimate.
Occupancy improves. As at 30 Sep, MLT recorded portfolio occupancy of 98%, up from 97% three months ago. This was due to lower vacancies in Hong Kong (+500 basis points) and Malaysia (+300 bps). Recall that in 2Q10, the manager had chosen not to renew leases of certain single-tenanted buildings because of unsatisfactory rent negotiations. Instead it increased its weighting to multi-tenanted buildings with three assets converted from single-user assets to multi-tenanted buildings in 2Q10 (two in Malaysia and one in Singapore).
Still in acquisition mode. MLT recently raised S$305m through a non-renounceable preferential offering to existing unitholders as well as a private placement. Excluding the S$145m of assets acquired on the back of the Nov 09 private placement, MLT has announced approximately S$447m worth of acquisitions this year. The gross proceeds from the equity issue are intended to partially finance these purchases, and are also expected to take MLT's leverage down from about 46% (assuming all acquisitions were debt-funded) to approximately 38%. This is lower than MLT's 45% mediumterm leverage strategy and will allow it to continue to acquire third-party and sponsor-owned assets.
DPU mechanics. Because of the recent private placement, MLT has already declared a "cumulative distribution" estimated at ~1.73 S cents for the period from 01 Jul to 14 Oct (the day immediately prior to the issue of the private placement units). This cumulative distribution will be paid on or around 29 Nov. The next DPU payout will be for the period from 15 Oct to 31 Dec (the "adjusted 4Q10 distribution").
Still compelling. 4Q10 income is likely to be boosted (in our opinion) by contributions from recent acquisitions, offset by an increased equity base post-equity fund raising. MLT has a proven track record in executing a virtuous cycle of accretive acquisitions and competitive fund-raising; we believe more accretive acquisitions are likely in the coming months. After adjusting our valuation inputs to price in a higher possibility of positive rental reversions over FY11 (as per more optimistic guidance from manager), our fair value estimate increases from S$0.90 to S$0.97. Maintain BUY (14% estimated total return).
MIT – BT
GLP, MIT take a breather, count their gains
Their trading volumes continue to reflect healthy interest; both end higher for the week
SHARES of Global Logistic Properties (GLP) and Mapletree Industrial Trust (MIT) – the two largest initial public offerings (IPOs) this week – pulled back yesterday, as the broader market struggled for direction.
But their trading volumes continued to reflect the healthy interest in the counters – and both finished higher for the week.
Shares of GLP finished four cents down at $2.25 apiece yesterday, seeing almost 66 million shares change hands. MIT closed five cents down at $1.11, with almost 112 million shares traded.
One local trader attributed the dips in share price yesterday to investors being keen to lock in their profits on the two stocks before the end of the week.
And certainly, there was much to be had for MIT, whose share price soared 29 per cent to $1.20 in intra-day trade on its debut on Thursday, from an offer price of $0.93, before closing at $1.16. And, despite slipping yesterday, MIT still locked in a 19 per cent gain for the week.
Its closing price yesterday brings MIT's market cap to a total of $1.62 billion, based on a float of 1.46 billion shares. It is the largest Singapore real estate investment trust (Reit) IPO, to date.
MIT brings the combined market capitalisation of all the Reits and property trusts listed on the Singapore Exchange (SGX) – 24 in total – to some $36 billion, making Singapore the largest Reit market in Asia outside of Japan.
GLP also finished significantly stronger for the week. Its closing price of $2.25 yesterday is a 15 per cent gain on its $1.96 offer price. The counter also touched a high of $2.29 on Tuesday, the day after it made its trading debut.
Its market cap now stands at $10.1 billion, making it one of the larger stocks on the exchange.
GLP – which has Government of Singapore Investment Corporation (GIC) as its single-largest shareholder – is also the largest Reit IPO in the world.
It raised a total of $3.9 billion from its offering, having exercised its overallotment option of 234.6 million shares this week. This means, GLP beat out the previous record holder, Hong Kong-listed Link Reit which, in 2005, raised US$2.9 billion (S$3.8 billion) in its IPO.
GLP's IPO is also Singapore's second-largest after SingTel's in 1993, which raised $4 billion.
The sterling performance of the two new listings this week is expected to breathe life into the IPO market. Market watchers say GLP and MIT's performance this week should inspire other IPOs to come to the market.
SGX chief Magnus Bocker has said that he expects more IPOs in the current quarter, and that the number of IPOs should touch levels seen in the first quarter of fiscal 2010. In that quarter – or the three months ended September 2009 – SGX ushered in 11 new listings.
MIT – BT
Buoyant MIT defies sombre sentiment
Mapletree Industrial Trust (MIT) made a strong debut on the Singapore Exchange (SGX) yesterday – a day when the broader market was dampened following news of China's surprise interest rate hike on Tuesday.
MIT soared to a high of $1.20 in intra-day trade, from its offer price of $0.93, before eventually closing at $1.16 – giving it a market capitalisation of $1.70 billion. The counter topped the volume list, with over 345 million shares changing hands.
And MIT, which raised $938.5 million from the initial public offer, said yesterday an over-allotment option of 91.75 million units – or 15.4 per cent of the total number of units in the offer – will be exercised in full by the joint book-runners.
This means a total of some 1.28 billion units will be sold, resulting in aggregate takings of $1.19 billion, at the offer price of $0.93.
The IPO – which included 489 million units that were placed out and 106 million units that were sold to the public – was 37.9 times subscribed, led by strong demand from institutional players.
323 million shares were subscribed for by six cornerstone investors – AIA, Prudential Asset Management (Singapore), Henderson Global Investors, Columbia Wanger Asset Management, US investment firm DE Shaw and Dutch pension fund APG. Mapletree's two subsidiaries, Mapletree Dextra Pte Ltd and Sienna Pte Ltd, subscribed for 359 million units.
MIT's performance compares with that of GIC's logistics arm, Global Logistic Properties (GLP) – Singapore's biggest IPO since 1993. Its shares jumped 11 per cent on its trading debut earlier this week, after raising $3.45 billion.
Shares of GLP continued to gain yesterday, closing $0.03 up at $2.29.
MIT's offer price represents an annualised distribution yield of 7.6 per cent for fiscal 2010, which is estimated to rise to 8 per cent for fiscal 2011. It expects to pay out all of its distribution income to unit-holders from listing until March 31, 2012.
MIT is managed by Mapletree Investments, in turn owned by Temasek Holdings. Mapletree Investments also manages Mapletree Logistics Trust and Lippo-Mapletree Indonesia Retail Trust. Part of the proceeds from MIT's IPO will be used to repay its existing debt and the purchase consideration for Mapletree Singapore Industrial Trust.
Tham Kuo Wei, CEO of Mapletree Industrial Trust Management, which manages Mapletree Industrial Trust, said yesterday: 'We believe the Singapore real estate investment trust market will continue to grow from strength to strength and that SGX offers an excellent platform for MIT to reach out to a large pool of sophisticated local and international investors.'
SGX said in a statement yesterday that it welcomes MIT's listing: 'With an extensive portfolio consisting of high-quality industrial properties, and a large and diversified tenant base, MIT presents investors an attractive opportunity to participate in Singapore's industrial property market.'