FSL – BT
FSL Trust’s Q1 DPU falls 39% to 1.5 US cents
DPU, down from Q1 2009 2.45 US cents, in line with guidance
FIRST Ship Lease Trust (FSL Trust) saw first-quarter distribution per unit (DPU) plunge 39 per cent to 1.50 US cents from 2.45 US cents in the previous corresponding quarter.
But the DPU, which represents a distribution of US$9 million to unitholders, is in line with the DPU guidance provided previously and represents a payout of 55 per cent of the net cash from operations for the quarter ended March 31. The 1.50 US cent payout is also unchanged from the DPU of the preceding 2009 fourth quarter.
Net cash generated from operations for Q1 FY’10 held steady at US$16.3 million compared with US$16.2 million in the quarter before and is 4 per cent lower compared with US$17 million in Q1 FY’09.
‘FSL Trust’s lease portfolio continues to deliver steady cash flow that underpins the sustainability of regular distribution to unitholders. We continue to be encouraged by the positive signs of a demand recovery in the shipping industry, although the oversupply of new ships continues to be an overhang over the mid-term. Our focus for this year remains on growing and diversifying the portfolio. We believe that asset values in the shipping industry have begun to bottom out, and we see the second half of this year as an exciting period for growth,’ said Philip Clausius, chief executive officer of trustee-manager FSL Trust Management.
The financial performance for Q1 FY’10 was predictably similar to that in the previous four quarters as the number of vessels and lease terms of FSL’s lease portfolio have remained unchanged since October 2008.
Lease revenue in Q1 FY’10 declined marginally by 1.6 per cent to US$24.4 million compared with Q1 FY’09, due primarily to lower lease payments received from two vessels leased to Geden Lines which are pegged to the US$ three-month Libor and reset on a quarterly basis. The US$ three-month Libor has declined between Q1 FY’09 and Q1 FY’10.
Finance expenses for Q1 FY’10 increased 5.6 per cent due to higher interest margin on the outstanding indebtedness, following the credit facility amendment agreement with FSL’s lenders in September.
Commenting on the industry outlook, Mr Clausius said: ‘The shipping industry is not out of the woods yet, but prospects should get better with demand on a recovery path, asset values slowly improving and access to capital becoming more readily available. Against this background we are now making progress in finalising our first acquisition post-crisis. Such acquisition, when consummated, will further diversify our portfolio from a lessee and sector perspective.’
FSL is providing a DPU guidance of 1.50 US cents for the second quarter.
K-REIT – DBSV
Lifted by Australian income
• 1Q10’s distribution income up 14% yoy, in line
• Stronger 2H earnings fuelled by Australian contributions
• Upgrade to Hold with TP of $1.17
Lifted by Australian contributions. Kreit reported a set of in-line results. Distribution income rose 14% yoy to $17.8m (DPU: 1.33cts) on a 23% yoy improvement in revenue to $18.2m.
However, on a qoq basis, topline rose by a modest 7% thanks to the maiden $1.4m profit (1 month) from its Australian acquisition, completed in Mar 2010. In terms of its Spore assets, the group achieved a slight increase in occupancy to 96% while average portfolio passing rents inched up 1.3% qoq to $8.30psf/mth. Gearing remains healthy at 25.2%.
Earnings growth to be back-end loaded. Going forward, with the better than expected economic growth prospects, we view that office rents have reached a low and are likely to hover at the bottom until more of the new stock is digested. We expect K-reit’s earnings to be stronger in 2Q10 with the full impact of the Australian contributions as well as an expected reduction in withholding taxes in Australia from July this year. Furthermore, with majority of renewals and rent reviews due this year largely completed, the impact of negative reversions is likely to be felt from next year when 15.5% of its leases expire and another 10% due for review.
Upgrade to Hold. We have upgraded Kreit to Hold on the back of our more upbeat view on the office sector given the improved GDP performance. However, in terms of earnings, we have nudged FY10-11 DPU down by 5.5% and 2.9% respectively to account for changes in the non-tax deductible items, to adjust for the change in management fee payment mode from 100% units to 50/50 cash and units. K-reit’s share price had retraced from the recent peak and is currently trading at FY10/11 DPU yields of 6.1%/5.8% and 0.76x P/bk NAV. Our DCF-backed target price of $1.17 translates to an absolute return of 9%.
A-REIT – DBSV
Forward earnings should improve
At a Glance
• 4Q10 DPU of 2.73 Scts in line
• Forward quarters should exhibit earnings growth
• HOLD on premium valuation of 1.2x P/BV, TP maintained at S$2.11
Comment on Results
Topline holds steady. 4Q10 distributable income of S$51.1m (DPU of 2.73 Scts) was in line with our expectations. Lower topline of S$103.9m (-0.4% yoy, -1% qoq) was due to loss of income from One Senoko Avenue (asset enhancement works) and TT Int’l Building (lease restructuring activities). This was slightly offset by earnings from recently completed built-to-suit (“BTS”) projects. NPI margins were lower yoy due to the expiry of land rental and property tax rebates in Dec 2009. Interest costs was 44% higher yoy due to one-off charge for refinancing activities in 4Q09.
Portfolio occupancy of 95.7%. Tenants giving back space at Multitenanted buildings (“MTB”) caused occupancy rates to fall marginally to 91.2%. This was offset by an improved take-up for new space. Looking ahead, we expect portfolio occupancies to remain stable.
Earnings should start to improve in 1Q11, backed by contributions from recently completed acquisitions and stable renewal activities. With low gearing of c34%, we expect A-reit to opportunistically grow earnings through new BTS developments and from 3rd party sources. We have assumed S$150m worth of new assets in our FY11 numbers.
Recommendation
Maintain our HOLD call and TP of S$2.11. While we like A-reit, we maintain our hold call with valuation at 1.2 x P/BV, 33% premium to the sector average of 0.95x P/BV. But forward yields of 7% in our view, should limit share price downside.
A-REIT – BT
Ascendas Reit’s Q4 DPU dips
ASCENDAS Real Estate Investment Trust (A-Reit) saw a 1.4 per cent dip in its distribution per unit (DPU) for the fourth quarter ended March 31, from 2.77 cents to 2.73 cents.
For the financial year, the Reit saw an 11.4 per increase in its DPU from 11.76 cents to 13.10 cents.
These comparisons were based on the proforma DPUs from the previous financial year, which took into account the units issued from the placement in August and units issued in lieu of the 20 per cent base management fee in May and December last year.
Net income available for distribution for the year also rose 11.4 per cent from $210.9 million to $234.9 million. Net property income grew by $24 million to $320 million, an 8 per cent increase.
Out of the $24 million, $9.1 million had been from one-off items in revenue and property operating expenses, such as a land rental rebate of $1.2 million and a property tax rebate of $2.7 million.
‘We are pleased to conclude the financial year with improvements in A-Reit’s operational metrics despite the challenging economic environment in 2009,’ said Tan Ser Ping, chief executive officer and executive director of Ascendas’ manager, Ascendas Funds Management (S) Limited.
‘Occupancy rate for the portfolio moderated to 95.7 per cent from 96.5 per cent a quarter ago. Nonetheless, occupancy for the various sectors continued to be higher than market average.’
A-Reit’s multi-tenanted properties also declined from 93.3 per cent to 92.1 per cent.
During the financial year, Ascendas completed three development projects and two acquisitions – DBS Asia Hub and 31 Joo Koon Circle.
The two acquisitions, which were completed at the end of March this year for a total of $131 million, are estimated to provide a full year net property income contribution of about $9 million for the next financial year.
As at March 31, A-Reit had a portfolio of 93 properties with a total asset value of about $4.8 billion.
The Reit’s counter closed one cent lower in trading yesterday, at $1.98.
K-REIT – BT
K-Reit Asia’s results lifted by acquisitions
Net property income up 28% to $13.9m in Q1; distribution per unit at 1.33 cts
RECENT acquisitions have boosted K-Reit Asia’s financial results for the first quarter ended March 31, 2010.
K-Reit yesterday posted a net property income of $13.9 million – 28 per cent higher than a year ago. The trust received more rental income from the six strata floors in Prudential Tower which it bought late last year, and from the 50 per cent stake in 275 George Street in Brisbane which it purchased early this year.
As a result, distributable income to unitholders rose. It was $17.8 million in Q1, up 14 per cent from the same period last year.
Distribution per unit (DPU) in Q1 was 1.33 cents, or 5.39 cents on an annualised basis. The annualised distribution yield is 4.9 per cent based on K-Reit’s closing unit price of $1.10 on March 31.
DPU in Q1 fell 44 per cent from the 2.38 cents a year ago as the unit base expanded from a $620 million rights issue in November. Adjusting for the cash call, DPU in Q1 2009 would have been 1.18 cents, leading to a year-on-year growth of 13 per cent.
Several performance indicators for K-Reit have improved in the past year. Its portfolio occupancy rate as at end-March was 96 per cent, up slightly from 95.8 per cent year-on-year. The average gross rental rate rose to $8.30 from $8.06 over the same period.
K-Reit’s leverage ratio dropped to 25.2 per cent at end-March from 27.7 per cent a quarter ago. It will fall further to 15.2 per cent this month when the trust uses some proceeds from the rights issue to partially repay a revolving term loan.
K-Reit’s portfolio size as at end-March was $2.3 billion, up from $2.1 billion as at end-December last year due to acquisitions. The trust is eyeing further growth as business sentiments improve and the office sector stabilises.
K-Reit said in its financial statement that it ‘intends to pursue opportunities for strategic acquisitions in Singapore and across Asia’. It will also identify potential asset enhancement initiatives for its properties.
The counter lost two cents yesterday to close at $1.13.