a-iTrust – DBSV
Operationally stable
• DPU of 1.66 Scts (-19% yoy, -7% qoq)
• Operationally stable, development pipeline on track
• Lowered DPU estimates by 9-3% due to weaker Rs/S$ forex assumptions
• Maintain BUY with lowered TP of S$1.06 offers total return of 17%.
DPU of 1.66 Scts (-19% yoy. –7%qoq). Ascendas India Trust (a-itrust) reported steady performance with topline and NPI up 4% and 3% to S$30.9m and S$18.9m respectively. Distributable income was 19% lower yoy due to a one-off realized gain of S$4.1m a year ago vs a loss of S$0.7m in the current quarter.
Operationally stable, development pipeline on track. Occupancy remained stable at 97% while its 200,000 sqft of space were renewed at flat rates in the current quarter. Development pipeline remains on track for completion by the end of 2010 – Zenith (ITPC) and Park Square Mall (ITPB) expected to contribute 1.2m sqft of space (25%) earliest in 4Q11. Takeups are understood to be <20% currently but to pick up progressively as the building completes.
Adjusting estimates. We moderated our rental assumptions slightly for FY11 and reduce our INR-S$ assumptions from Rs32.5/S$ to Rs34/S$ in view of current hedging levels done for Nov’10 distributions. We keep our longer-term rates at Rs33.5/S$ in line with DBS Bank economists’ forecasts.
BUY, TP lowered to S$1.06 but still offers total return of 17%. A-itrust continues to offer a strong DPU growth of 13% with the completion of its development pipeline by yearend. Potential acquisitions could present upside earnings surprise. Key risks will lie on the forex fluctuations as its operations are based in India, while paying dividends in S$.
ART – CIMB
2H catalysts sighted
• 1H10 results broadly in line; maintain Outperform and target price of S$1.35. 2Q10 DPU of 1.87cts was broadly in line with our forecast (23% of our FY10 estimate) and the Street’s (24% of full year). 1H10 DPU of 3.53cts forms 43% of our FY10 forecast (45% of consensus), as Singapore grew slightly less quickly than expected due to ongoing refurbishment. Nonetheless, we are keeping our estimates and DDM-based target price of S$1.35 (discount rate 8.3%), in anticipation that Singapore’s 2H would catch up with refurbished units able to command higher rents. Management is also exploring divestment and acquisition opportunities. We see catalysts form an anticipated strong 2H as well as potential acquisitions.
• Performance up 3% qoq. Gross profit was S$20.8m, up 3% qoq. Positive qoq growth in Singapore (+8%, higher occupancy and rates), Australia (+25%, mainly on strengthening A$ against S$) and China (+32%, higher rates and occupancy with World Expo in Shanghai) was diluted by poor performances in Indonesia (-18%, higher operational expenses due to currency differences), and the Philippines (-9%, higher utility rates), as well as a flat performance in Japan.
• RevPAU up 5%; Singapore to shine in 3Q. Portfolio RevPAU was S$125/day, up 5% from one year ago. Excluding units taken out for refurbishment, Singapore’s occupancy was above 90% in 2Q10. Management expects strong 2H growth of 25-30% hoh in Singapore, moderate growth of about 5% in China and the Philippines; and flat performances in Australia, Indonesia, Japan and Vietnam.
• Exploring divestment and acquisition opportunities. Divestment targets are assets whose rental growth has stagnated but with sharply appreciating asset values. Acquisition targets are likely to come from the parent Ascott which still has more than S$1.2bn worth of assets in the Asia Pacific. Management is comfortable with a 45% long-term gearing, and all potential acquisitions would have to be accretive with a combination of debt and equity funding. ART has debt headroom for S$179, or up to 45% asset leverage.
FCT – DMG
Growth intact; asset enhancement in focus
3QFY10 results in-line with expectations. FCT reported 3Q10 DPU of 2.07¢ (+6.7% YoY; +0.5% QoQ), representing 25% of our FY10 DPU forecast of 8.3¢. Net property income rose 46.3% due to accretive contributions from Northpoint 2 and YewTee Point. FCT will trade ex-3QFY10 distribution on 29 July. We expect asset enhancement works of Causeway Point to be yield accretive in the long term. Maintain BUY, DDM-based TP of S$1.66.
Causeway Point refurbishment likely to boost long term DPU by 10%. FCT has commenced the refurbishment of Causeway Point and the AEI programme is expected to take 30 months to complete. Capex is estimated at S$72m and will be financed fully with debt (~3.5% interest). Management guided a 22% increase in net property income upon completion in 1QFY13. This is based on a projected passing rent of S$12.2/sqft (current S$10.2/sqft), which we believe is reasonable. Occupancy for Causeway Point is likely to decline to the 75% level in FY11, resulting in a 7% decline in DPU. We expect a strong DPU recovery in FY12 as the bulk of lower level refurbishment works will be completed. Upon completion, we estimate FY13 DPU to be 0.9¢ (or 10%) higher than our current estimates. Over the course of this AEI programme, we expect net DPU to be marginally higher at 0.1¢.
Augurs well with the relocation of KTMB to Woodlands. The government recently announced the relocation of Malaysia’s KTMB station from Tanjong Pagar to Woodlands by July 2011. We believe this will likely have a direct impact on retail footfall in Causeway Point given that the mall is located next to Woodlands MRT, and visitors are highly likely to patronise the mall enroute from the railway station to the MRT.
Short term impact, long term gain. Whilst DPU is expected to be impacted in the near term, we expect returns from this investment to be accretive in the long term. Reduce FY10 DPU estimates to 7.9¢. Maintain BUY; TP of S$1.66.
MLT – BT
MapletreeLog Q2 DPU up 1.4%
Amount distributable to unitholders was $30.9 million, up 8%
MAPLETREE Logistics Trust (MapletreeLog) yesterday posted improved results for the second quarter on the back of lower property and other expenses as well as borrowing costs.
Amount distributable to unitholders in Q2 was $30.9 million, up 8 per cent from a year ago. Distribution per unit (DPU) rose 1.4 per cent to 1.5 cents. This was despite gross revenue staying relatively flat at $52 million.
The top line was affected by a repositioning exercise at some of MapletreeLog’s properties. The trust converted three from single-user to multi-tenanted buildings for better rental revenues, but that caused the portfolio occupancy rate to dip slightly to 97 per cent as at June 30. The trust expects occupancies to ‘return to normal’ in the coming quarters.
Also, recent acquisitions have yet to boost results. MapletreeLog bought five properties since December last year but of these, three were completed only in Q2. The trust expects the full benefit from these assets to make an impact from Q3.
Lower costs in Q2 helped support the trust’s earnings. Property expenses dipped 2 per cent from a year ago to $6.2 million, and borrowing costs fell 13 per cent to $7.2 million. Net foreign exchange losses also narrowed 97 per cent to $162,000.
MapletreeLog is upbeat about its prospects. ‘In all the markets that we operate in, we have seen increased levels of activities and enquiries,’ said the trust manager’s CEO Richard Lai.
‘For the renewals that took place during the quarter, we have begun to witness some positive rental reversions especially in Singapore and we believe, as the existing stock of warehouses are taken up, that rental reversions should be stronger in the quarters to come.’
MapletreeLog said it will continue to build its pipeline of acquisitions. In Q2, it financed its purchases fully through debt. This caused its leverage ratio to increase slightly to 38.8 per cent as at June 30, up 0.2 percentage points from three months ago.
For the first half, MapletreeLog’s distributable income was $61.7 million, up 8 per cent year-on-year. DPU was 3 cents, rising 1.7 per cent. The trust will pay out 1.5 cents to unitholders for the period April 1 to June 30 on Aug 27.
MapletreeLog units closed unchanged on Friday at 88 cents.
PST – DBSV
DPU stable; first look at future growth
At a Glance
• PST’s 2Q10 results and distribution of 0.793UScts per unit in line with our expectations
• Existing cash flows look stable, management refocuses on growth plans with diversification into dry bulk sector
• Trading at about 11% FY10 yield, maintain our BUY call at TP of US$0.37 (9% target yield)
Comment on Results
DPU of 0.793UScts was declared for the quarter, which is similar to the 1Q10 payout. 2Q10 revenue of US$15.1m was steady on a sequential basis, and net profit held steady at US$6.6m. After regular loan amortisation of US$4.3m, net cash generated for 2Q10 amounted to US$6.5m – of which approximately US$4.7m will be distributed to unitholders and the remaining US$1.8m retained for future working capital purposes. This implies a payout ratio of about 72%, in line with existing conservative payout policy.
Outlook & Recommendation
As announced earlier, PST plans to acquire two new capesize bulk carriers for a consideration of US$61.6m each, for delivery in September 2011. The vessels come with a 10 -year long-term charter with Jiangsu Shangang Group of China, China’s largest private steel maker and we believe, a reputable counterparty. The 2 vessels represent about 28% of current book value and is PST’s first diversification away from the container sector. While the initial 15% deposit can be paid from existing cash reserves, the remaining 85% will have to be financed by a combination of debt and equity. Given the Trust is only likely to obtain 60% Loan-to-Value financing at best, that leaves a shortfall of around US$25-30m, which we believe could require another round of equity infusion next year.
Given that the new ships will be delivered in end-3Q of FY11, and financing will only be required around that point, we do not foresee any impact to FY10 DPU estimates. However, depending on the timing of equity issue and pricing, FY11 DPU may face some dilution. We are currently looking at about 5-7% DPU accretion in FY12, based on our assumptions. Maintain BUY and TP of US$0.37.