MLT – Nomura
First look
The deterioration in leasing markets now appears to be manifesting itself in MLT’s core property portfolio. 3Q09 results were characterised by a 2.3% q-q fall in gross property income, a 6.5% q-q rise in outgoings and a 3.5% q-q fall in net income as portfolio occupancy fell 1.2pp q-q to 97.1%. We expect lower rental growth expectations to impact capitalisation rates and valuations, and, ultimately, MLT’s book value of S$0.88/unit. REDUCE maintained, with a PT of S$0.48/unit.
Property income down 3.5% q-q
CCT – DBS
Awaiting blue skies
• Results in line with estimates
• Leasing environment to turn challenging in 2010
• Downgrade to HOLD, TP S$1.02
Performance in line. CCT reported 3Q09 results in line with our expectations. Gross revenues increased to S$102.6m (+10.9% yoy) and net property income (+15.5% yoy) as a result of continued positive rental reversions achieved at its portfolio. As of 3Q09, CCT’s average portfolio rent increased by c17%yoy, 3%qoq to S$8.49 psf per month. Distributable income came in at 21% higher yoy to S$45.9m (+21% yoy), translating to a DPU of 1.85 Scts.
Lowly geared. Balance sheet remains strong with gearing at 31.2%, interest cover at a healthy 3.1x. NAV per share stands at S$1.49.
Leasing environment to turn challenging in 2010. With the office sector continuing to face a daunting supply over the next 3 years, we expect the operating environment to remain soft in FY10-11F. With average passing rents in FY10-11 higher than current asking rent levels, topline is expected to weaken from projective negative reversions during renewals.
Downgrade to HOLD, TP S$1.02. We are downgrading our call to a HOLD, but lifted our TP to S$1.02 on the back of lower cost of equity assumptions. While stock is trading at P/BV of 0.7x, offering prospective FY10F-11F yields of 6.5% a muted office outlook is also likely to mean a lack of rerating catalysts for the stock in the near term from current levels. As such, we downgrade to HOLD on valuation grounds given the limited upside to our target price.
CMT – Nomura
First look
CMT’s 3Q09 highlighted a slip in gross and net income in the group’s core mall portfolio. Excluding Raffles City, gross income from its retail malls fell 0.6% q-q as negative reversions took hold. Rising retail supply and continued cautious consumer spending will weigh on the outlook for rents, in our view, with some 36.2% of CMT’s leases up for renewal (by gross income) in 2010. With shares trading at 1.1x P/B, we retain our REDUCE rating. Price target S$1.28/unit.
Core mall rents slipping
PST – CNA
PST Q3 DPU fell 25% to 0.818 US cents
Pacific Shipping Trust (PST) said its distribution per unit (DPU) for the third quarter fell around 25 percent to 0.818 US cent from a year ago.
It said the lower DPU is mainly due to its revised distribution policy as well as a rise in the number of units issued.
PST announced in the previous quarter that it would revise its distribution policy to strengthen its cash position. Under the revised policy, PST would only distribute 70 per cent of its available distributable income.
PST said its distributable income for the three months ended September rose 30 per cent to US$4.8 million, from a year ago.
This was on the back of a 120 per cent surge in net profit to US$7 million, partly due to the adoption of hedge accounting and the repayment of loans.
Looking ahead, CEO of PST’s manager, Alvin Cheng said PST is not overly optimistic that the shipping sector will recover rapidly over the next year.
He said: “But certainly we see that the market probably have stabilised because of the over supply of tonnages due to come in during the next year. We see that vessel prices will continue to stay low compared to the previous high. But as the world economy begins to take an upturn, we see that the demand for shipping capacity will slowly improve.”
Mr Cheng added that PST will actively explore various avenues to diversify its vessel portfolio and expand its base of credit-worthy charterers.
With the improving global economic outlook Mr Cheng said the trust sees opportunities to enter into asset acquisitions.