CDL H-Trust – CIMB
Time for a breather
• Downgrade to Neutral from Outperform; switch to PLife REIT. We are still positive on an IR-led recovery in Singapore, as reflected in our relatively bullish above-consensus estimates. We maintain our earnings estimates and DDM-based target price of S$1.41 (discount rate 9.06%). However, at 1.04x P/BV and yields of 5.5%, we believe CDLH-HT has been fairly valued. We recommend a switch to Parkway Life REIT (Outperform, S$1.10, target price S$1.31). PLife REIT trades at 0.8x P/V with a forward yield of 6.8%.
• 2H09 recovery likely to be stronger. Tourism indicators including visitor arrivals, average hotel room rates and occupancy levels are showing clear signs of emerging from trough levels. Additionally, we expect the short-term supply of hotel rooms to remain tight as the opening of new rooms at Singapore’s two integrated resorts is expected to be staggered over 2010-11. The likely early opening of Resorts World Sentosa is likely to revive REVPAR in 2H09.
• Acquisitions not likely in short term. Even though rising prices have depressed dividend yields, near-term acquisition catalysts appear to be lacking due to a conservative and value-hunting management.
• Up to 30% REVPAR recovery priced in for FY10. At our target price of S$1.41, we have assumed a REVPAR recovery of 30% for CDLHT’s Singapore hotels. At this level, CDL-HT will be trading at its book level of S$1.42/share.
IndiaBulls – BT
Indiabulls plans $200m rights issue at 16 cents a unit
Business trust also seeks to expand portfolio beyond office space
INDIABULLS Properties Investment Trust (IPIT) has proposed to issue some 1.25 billion new units at 16 cents each to raise $200.1 million.
The business trust also intends to look beyond office space to invest in retail, residential or hospitality assets.
IPIT is conducting the 53-for-100 renounceable and underwritten rights issue to reduce debt as the Mumbai office space market weakens – occupancies and rents have both declined, it said yesterday.
The trust had borrowings of $258.3 million as at June 30, against cash and cash equivalents of $6.7 million. The ratio of borrowings to total assets was 10.4 per cent.
Lower debt obligations would put it in a ‘better position to make commercial decisions’ and in a ‘stronger negotiating position with potential tenants’, it said.
The rights issue price of 16 cents is at a 48.4 per cent discount to IPIT’s closing price of 31 cents on Wednesday. The trust asked to halt trading in its units yesterday because of the cash call.
Of the $200.1 million to be raised, around $193 million, or 96.5 per cent, will go towards debt repayment. The remaining $7.1 million will pay for expenses incurred for the rights issue, and for corporate and working capital purposes.
Morgan Stanley Asia (Singapore) is the sole lead manager and underwriter of the deal.
Grapene Limited, which as at Sept 4 holds a stake of around 34 per cent in IPIT, made an irrevocable undertaking to take up its pro rata entitlement of 425.1 million rights units.
Grapene also inked a standby commitment agreement with Morgan Stanley Asia (Singapore) to subscribe for up to 700.4 million rights units in total, or 90 per cent of the rights units. The rights issue is subject to a whitewash resolution.
IPIT also proposed to adjust its principal objectives. ‘Having the flexibility to change the development mix of IPIT’s portfolio . . . would be prudent especially in light of the current slowdown in rentals as well as the softening of market demand for office space,’ it said.
From its initial focus of investing primarily in income-producing office space in India, IPIT could start looking at retail, residential or hospitality properties. It said it will keep more than 50 per cent of total lettable area in its portfolio in income-producing office space. IPIT could also start selling residential properties upon their completion.
IPIT will hold an extraordinary general meeting on Sept 29 to seek unitholders’ approval for the rights issue, whitewash resolution and expansion in objectives.
Business trusts and Reits allow unit-holders to receive dividend payments from operating cash flow instead of accounting profit. While Reits are required to pay 90 per cent of distributable income to unit-holders, there is no such requirement for business trusts.
ART – BT
Ascott Reit’s $1b note programme
ASCOTT Residence Trust (ART) now has access to $1 billion by way of a multi-currency medium term note (MTN). Ascott Residence Trust Management Ltd (ARTML), the Reit manager, has appointed DBS Bank to act as the arranger and the dealer of the MTN programme.
In a statement released yesterday, ARTML said the MTN may be used to refinance existing borrowings, to finance/ refinance investments, to on-lend to any trust, fund or entity in which ART has an interest, to finance/refinance any asset enhancement works and for the general working capital of the group.
In July, it was reported that ART plans to renovate Somerset Grand Cairnhill and Somerset Liang Court in phases. It was also reported then that ART had posted year-on-year declines in distributable income of 17 per cent for the second quarter and 20 per cent for H1. On a quarter-on-quarter basis, the Q2 2009 figure was up 2 per cent from the preceding quarter.
Most Reits have been adversely affected by the economic downturn. Since June, five other Reits have conducted rights issues or private placements for funds to raise more than $1.23 billion.
IndiaBulls – CNA
Indiabulls Properties renegotiating lease agreements with tenants
Singapore-listed Indiabulls Properties Investment Trust said Wednesday it is currently re-negotiating lease agreements with tenants of its One Indiabulls Centre.
The property trust, which owns office properties in India, said that due to the global financial crisis, market conditions in India have deteriorated and rental rates for office space in Mumbai have dropped significantly.
It said some tenants of One Indiabulls Centre have recently renegotiated terms of their leases to reduce the monthly rental charges.
Indiabulls said it is currently in negotiations with the remaining tenants.
It continued to say that apart from rentals, other terms such as deposits payable and the size of the office space to be leased have also been revised downwards.
FSL – DBS
Positioning for growth
• Placement to raise proceeds of about US$29m, comes on the heels of successful negotiation of two year covenant waiver on existing borrowings
• 3Q09 DPU guidance of 1.50UScts maintained, dilution thereafter, if any, limited to 7% at worst
• DPU accretive acquisitions could be on the radar, maintain BUY with target price S$0.70
Placement fortifies balance sheet… FSL Trust has successfully placed out 80m new units at an issue price of S$0.525 per unit, raising S$41m (US$29m) in net proceeds. This latest development follows an earlier DPU cut and a recent two-year waiver on its loan-to-value covenants; and puts the Trust firmly on the road towards a less aggressive and more sustainable business model.
…and adds acquisition angle. Apart from reducing gearing and satisfying the more stringent covenant requirements on the Trust’s minimum equity level following the recent waiver negotiations, the placement provides a growth option to demonstrate the continued viability of the business model. The proceeds should enable the Trust to enter up to 2 small sized sale and leaseback deals and amidst the current shipping downturn, the Trust is looking at opportunistic deals promising more than 15% asset yield.
Manager keeps guidance intact. While 3Q09 DPU guidance has been reconfirmed at 1.50UScts, we believe that the Trust should be able to distribute a minimum of 1.40UScts on the expanded share base, going forward, without accounting for acquisitions. This implies a mere 7% dilution and brings FY10 yield down to 13.1% from 14.0% pre-placement, which is still attractive given the embedded growth option. Acquisitions, even at a conservative 12% asset yield, could potentially boost DPU by another 9% in FY10. Thus, we maintain BUY, TP slightly reduced to S$0.70 owing to near term dilution effects.