FCOT – Phillip
2QFY10 Results
• 2Q10 revenue of $29.8 million, net property income of $23.6 million, distributable income available to unitholders of $9.8 million.
• 1Q10 DPU of 0.32 cents.
• Maintain Buy, fair value $0.18
Things have stabilized
FCOT recorded 2Q10 revenue of $29.8 million (+24.3% y-y, +0.4% q-q), net property income of $23.6 million (+26.5% y-y, +0.5% q-q) and distributable income available to unitholders of $9.8 million (+81.6% y-y, +33.0% q-q). 1Q10 DPU was 0.32 cents (-55.6% y-y, +33.3% q-q). The y-y better performance is mainly due to the revenue contribution from Alexander Technopark as well as the favourable AUD exchange rate. As can be seen from the q-q results, 2Q10 results have stabilized from 1Q10 (Fig 1 and Fig 2). Revenue contribution from Singapore, Australia and Japan are 51%, 35% and 14% respectively.
Average portfolio occupancy rate is 92.4%. Occupancy for the Singapore and Australia properties remained high at 95.2% and 96.3% respectively. The strong occupancies are backed by master leases. 36.3% of revenue is backed by master leases of Alexandra Technopark and China Square Central. Whereas for Australia, 27.5% of total revenue includes blue chip tenants with long leases. The single biggest is the Centrelink property at 9.5% with a long term lease expiry at 2025. The Japan properties average occupancy rate was 74.2%, effectively adversely affected by the Cosmo Plaza master lease tenant who is in financial difficulty. Effective occupancy of the building is only 23.2%. FCOT has already classified Cosmo Plaza as a divestment asset and will be looking to sell the asset. The portfolio weighted average lease expiry (WALE) is 4.2 years
Capital management
FCOT has no near term refinancing needs. It has total debt of $829.7 million which is due in 2012. Gearing is at 40.1%.
Forecasts
We hold our view that FCOT is still on the rebuilding process. We think the injection of Alexandra Technopark was a prudent decision and it has proven to be so, having a stabilizing effect on total revenue. The overseas properties have also fared respectably, especially the Australia properties, with long WALE and high occupancies. Coupled with the rebound in the AUD dollar, contributions to total revenue are strong. The Japan properties continue to be a drag on the portfolio, stemmed mainly from Cosmo Plaza. Our main concern now is on how soon FCOT managed to divest Cosmo Plaza and also the AWPF investment, since these are not contributing effectively to the revenue. It would be a plus to use the divestment proceeds to pare down debts, therefore lowering gearing and we think that would be a re-rating catalyst. Maintain our buy recommendation and fair value of $0.18.
FCT – BT
Frasers Centrepoint Trust posts Q2 distributable income of $15.9m
FRASERS Centrepoint Trust (FCT) yesterday posted income available for distribution of $15.9 million for its second quarter ended March 31, 2010, an increase of 31 per cent from a year ago.
FCT’s Q2FY10 distribution per unit rose 11 per cent to 2.06 cents. It said $1.1 million of Q2 income will be retained for distribution in the second half of FY2010.
Chew Tuan Chiong, chief executive officer of the trust’s manager, Frasers Centrepoint Asset Management, said: ‘FCT achieved record quarterly gross revenue and net property income of $28.3 million and $20.4 million respectively this quarter.’
He added: ‘In addition to existing assets all achieving higher revenues, this excellent financial performance was made possible by the accretive acquisitions of Northpoint 2 & YewTee Point. These acquisitions achieved our strategic aim to enlarge FCT’s asset base, thereby allowing us to reap the benefits of scale and income growth.’
FCT acquired Northpoint 2 & YewTee Point in February 2010, with total assets growing 26 per cent to $1.5 billion as a result.
The trust said net property income was supported by topline growth and tight cost controls. Portfolio occupancy rose to 99 per cent as the existing and the newly acquired malls registered full or close to full occupancy.
‘As we continue to build upon the strong foundations of FCT’s portfolio, we will announce in due course our plans to revamp Causeway Point, with a view to capitalising on the recovery in Singapore’s economy and retail sentiments,’ said Mr Chew. ‘By improving its retail mix and amenities, a rejuvenated Causeway Point would better serve the needs of the 300,000 residents living within its trade catchment.’
First REIT – BT
First Reit posts 1.3% rise in distributable income in Q1 to $5.25m
FIRST Real Estate Investment Trust (First Reit) has posted a 1.3 per cent year-on-year rise in distributable income for its first quarter to $5.25 million, its manager Bowsprit Capital Corporation said yesterday.
Distribution per unit (DPU) for the quarter ended March 31 rose 1.1 per cent to 1.9 cents from 1.88 cents a year earlier.
Using an annualised DPU of 7.71 cents, distribution yield for the quarter is 8.9 per cent based on the Reit’s closing price of 86.5 cents on April 21. First Reit will close its books at the end of the trading day on May 3 and pay out the distribution entitled to unitholders on May 27.
Its gross revenue increased 0.6 per cent to $7.5 million, while net property income inched up by 0.3 per cent to $7.34 million from the year-ago period.
Bowsprit Capital said that the marginal increase in gross revenue resulted from the deferment of rental income from its Adam Road Hospital property, which is undergoing redevelopment for a cancer centre under the name Pacific Cancer Centre @ Adam Road. This partly offset the higher rental income that was received from First Reit’s Indonesia properties.
Including the deferred rental income, the Reit’s gross revenue would have increased by 4.6 per cent to $7.7 million, said Bowsprit in a statement.
Late last month, Bowsprit said that it will expand its investment policy to include, among other things, medical clinics, pharmacies, laboratories and diagnostic facilities. It will also include real estate and real estate-related assets that are used in areas like healthcare research, education, lifestyle and wellness management, manufacture, drugs and other healthcare goods and devices. Its current investment policy is to own and invest in real estate and real estate-related assets in Asia that are primarily used for healthcare and healthcare-related purposes.
The expanded policy will come into play from May 2.
Said Bowsprit’s chief executive Ronnie Tan on the expanded investment policy: ‘The broader mandate will enable us to invest in a wider range of income-producing assets within the healthcare sector. The increased spread and diversity will enable us to improve the stability of returns to First Reit’s unitholders.’
On top of the expansion of its investment policy, Bowsprit is looking to create more value-add for unitholders by making more investments in Indonesia.
‘We also look forward to more investment opportunities from our sponsor, Lippo Karawaci, which has a pipeline of healthcare assets in Indonesia. Some of these may prove to be suitable and yield-accretive acquisitions for First Reit,’ said Dr Tan.
He added that First Reit is unlikely to jump into China even though it is a market that offers vast opportunities.
‘China is another market that offers much potential. But presently it looks like any healthcare asset acquisition there will require more evaluation and restructuring work for it to be able to meet First Reit’s criteria.’
First Reit’s current portfolio is made up of eight properties located in Indonesia and Singapore. In Indonesia, it has three hospitals under the Siloam Group name and a hotel. Its Singapore properties are made up of three nursing homes and the Pacific Cancer Center @ Adam Road, which will be completed by the middle of next year.
First Reit will keep to its payout policy of 100 per cent of distributable income for FY2010.
Yesterday, First Reit shares rose 0.6 per cent, or half a cent, to 87 cents.
CRCT – BT
CRCT maintains Q1 DPU at 2.14 cents
CAPITARETAIL China Trust (CRCT) has maintained its distribution per unit (DPU) for the first quarter ended March 31 at the year-ago level of 2.14 cents.
This translates to an annualised DPU of 8.68 cents or a yield of 7 per cent based on the trust’s closing price of $1.24 on April 23.
CRCT is managed by CapitaRetail China Trust Management Limited (CRCTML), which is an indirect wholly owned subsidiary of CapitaMalls Asia.
Income available for distribution was marginally up at $13.34 million. Due to a 6.2 per cent depreciation of the renminbi against the Singapore dollar in 1Q10 from 1Q09, gross revenue was 2.9 per cent lower at $29.5 million, while net property income (NPI) was slightly higher by 1.2 per cent at $19.34 million compared to $19.17 million.
Earnings per unit were 1.86 cents compared to 1.78 cents previously.
Wee Hui Kan, chief executive officer of CRCTML, said: ‘Our strategy of refining mall-positioning and tenancy mix to meet changing consumer demands continues to show results. Our committed occupancy rates stayed high at about 95.2 per cent.’
CRCT, which is the first China shopping mall real estate investment trust (Reit) in Singapore, has a portfolio of eight retail mall properties in five cities in China. As at Dec 31, 2009, CRCT’s total assets equalled $1.2 billion.
Separately, CRCTML also announced yesterday the appointment of Tan Tee Hieong as deputy chief executive officer of the company with immediate effect. Mr Tan, who joined the company in 2007, will continue to hold his current position as head of finance. Prior to joining CRCTML, Mr Tan was with Ikea for over nine years, where he held positions as treasurer and finance manager for the Asia-Pacific region.
MLT – CIMB
Nearing acquisition catalysts
• Results in line; upgrade to Neutral from Underperform. 1Q10 DPU of 1.5cts met Street and our expectations, forming 27% of our estimate. Distributable profit grew 8% yoy on tight cost control and lower borrowing costs. We raise our acquisition assumptions in view of management’s historical strong pursuit of growth via acquisitions, as well as higher new net property income margin and lower interest expense assumptions. Our DPU estimates increase by 9-12% for FY10-12. Our DDM-based target price (discount rate 8.6%) rises accordingly to S$0.86 (from S$0.74). MLT offers forward dividend yields of 7%. We upgrade it to Neutral in view of an improving outlook for industrialists. Re-rating stock catalysts could include announcements of acquisitions and development work in the near term, we believe.
• Second quarter of improving net property income (NPI). We were impressed with MLT’s tight cost control of property-related expenses which drifted down 4% qoq and 21% yoy. As a result, NPI of S$45.8m represented the second sequential quarter of improvement (+2% qoq). Portfolio occupancy was stable at 98%. On a quarter comparison basis, both distributable profit and DPU had declined due to a one-off contribution from the extension of leases at 201 Keppel Road in 4Q09.
• Expect acquisitions and BTS in near term. Management is closely looking at the acquisition of assets developed by its sponsor, Mapletree Investments. These acquisitions could take place in China, Vietnam or Malaysia. MLT’s portfolio cap rates are 8-9% in these countries and we expect properties to be acquired at such levels. Separately, MLT is exploring build-to-suit (BTS) properties with end-users. We believe announcements for acquisitions and BTS projects could come by 1H10 as the recent compression in its dividend yields makes yield-accretive acquisitions likely in the near term. Nonetheless, we are cautious on the attractiveness of upcoming acquisitions, depending on: 1) country-specific risks; and 2) the need for equity which would dilute acquisition yields.
• Changes in assumptions. Given management’s historical strong ambitions in growth via acquisitions and improving industrial indicators, we have increased our acquisition assumption to S$357m in 2010 (from S$157m), 60:40 funded by debt:equity. Separately, we increase our NPI margin assumptions to 89% (from 87.5%) and lower our cost-of-debt assumption to 2.5% (from 3%).