Saizen – BT
Moody’s lowers Saizen; review for possible downgrade
Moody’s Investors Service has downgraded Saizen REIT’s corporate family rating to Ba3 from Ba1.
At the same time, the rating remains on review for further possible downgrade.
‘The downgrade reflects Saizen’s rising liquidity pressure with the presence of material refinancing risk in 4Q2009,’ says Kaven Tsang, a Moody’s AVP/Analyst.
‘While Saizen has suspended dividend payouts to preserve liquidity and is conducting a rights issue to address part of the refinancing needs, a significant portion of the maturing CMBS still does not have any committed funding arrangements. This material liquidity exposure will position Saizen more appropriately at the Ba3 rating level,’ he adds. Mr Tsang is also Moody’s lead analyst for the trust.
‘The slow process in refinancing and the narrow nature of its banking relationships would further increase Saizen’s exposure to market uncertainties, in view of the tightened nature of the global credit environment and the distressed state of the banking sector,’ he said.
‘Meanwhile, Saizen is exposed to the weakening in the operating environment and asset devaluation risk, as Japan’s recession deepens.
‘The latter could narrow the headroom for loan covenant compliance.’
Partly mitigating these concerns is the fact that its properties are in cities whose rental housing markets display fairly stable histories, even during the downturns of the late 1990s and early 2000s.
Saizen’s rating remains on review for possible downgrade and the review will focus on the company’s abilities to raise committed funding to address the unfunded portion of the maturing CMBS in 4Q2009 against the backdrop of turbulence in the financial markets.
Further downward rating pressure would evolve if Saizen’s liquidity position weakens, in the event that 1) Saizen fails to complete its rights issues, and 2) there is no material progress in securing committed funds — over the next 2 months — to refinance the unfunded portion of the maturing CMBS in 4Q 2009.
The last rating action was on 26 February 2009 when Saizen’s rating was downgraded to Ba1 and Moody’s continued its review for further possible downgrade.
MI-REIT – BT
MI-Reit gets loan extension
MacarthurCook Industrial Reit (MI-REIT) on Tuesday said that its lenders, National Australia Bank Limited and Commonwealth Bank of Australia Limited, have granted the property trust a 60-day extension for its existing S$220.8 million loan, which matures on April 18 this year.
This extension is subject to documentation and satisfaction of certain conditions which are within the control of MI REIT, the trust said. With this extension, the loan facility will be due on June 16 instead. ‘The manager remains in advanced negotiations with its lenders in relation to the refinance of the facility,’ the trust added.
MI-REIT’S shares gained 0.5 cents to close at 23 cents yesterday.
CDLHTrust – CIMB
Safe enough
• Fixed rent of S$42.1m alone represents yield of 6.6%. The fixed component of CDLHT’s rent at S$42.1m represents 36.7% of CDLHT’s gross revenue in FY08. In a worst case scenario where the variable rent is zero, (basically implying 0% occupancy) and payout ratio of 90% the fixed rent component alone would represent a 6.6% yield at the current share price level, safe for the entire master lease period which has tenures ranging between 10 to 20 years.
• Visitor arrivals down 15.3% yoy in Feb 09. Visitor arrivals to Singapore reached 689,000 in Feb 09. The decline of 15.3% yoy was the steepest since Jun 08. Average hotel occupancy rate was 76% for Feb 09, representing a 3.3%-point decline from Feb 08. Historical occupancy trends suggest an occupancy support at about 70%. Occupancy hovering near historical supports and the presence of the fixed rent component for CDL-HT makes us turn positive on the stock.
• Upgrade to Outperform at unchanged target price of S$0.68. At the current P/BV of 0.38x, we believe the price is low enough, despite the brief price rally over the last two weeks. The floor on yield downside justifies CDLHT’s premium over Ascott Residence Trust at 0.29x P/BV, and the office REIT sector at 0.26x. We upgrade our recommendation to Outperform based on its relative upside (+32%) to our STI target of 1,800. We maintain our estimates and target price of S$0.68, still based on DDM valuation. Our unchanged estimates imply forward dividend yields of 14.9%.
CDLHTrust – DBS
Looking for value: Here
We see value in CDL HT emerging given that (i) it currently trades at 0.35x P/BV, which implies a valuation per room of S$239k, below our estimated replacement cost, and (ii) offers a FY09-10F DPU yield of 12%, of which 40% is fixed. In addition, we view that refinancing issues should not be a worry given the trust’s superior financial metrics. Positive catalyst in the near term will hinge on the re-financing of its ST debt. As such, we upgrade CDL HT to BUY, TP $0.65 based on DDM.
Trading below replacement cost. CDL HT is currently trading at 0.3x P/BV or an implied valuation per room of S$239k, which is below our estimated replacement cost of S$347k. Current valuation for its CDL HT’s hotel portfolio is unjustified given its positioning as Singapore’s largest hotel owner with more centrally located hotels which performance will pick up when the two IRs open.
Re-financing of ST debt should be completed. CDL HT’s short term refinancing requirement of S$290m loan should not be a major concern given that (i) the trusts’ low gearing of 19%, placing the trust in a relatively safe zone in the face of possible further writedowns, (ii) high interest cover in excess of 4.0x in FY09-10F, and (iii) strong sponsorship (M&C Holdings) backing.
Weak earnings should have already been priced in. Latest statistics from STB in Feb’09 showed hotel RevPAR declining 30% yoy but was higher m-o-m driven by higher occupancies. For CDL HT, we are revising RevPAR to decline by 25% in FY09-10 (15% previously) on the back of lower occupancy assumptions to 70%, resulting in a FY09-10 DPU estimate of 6.3-6.2 cts.
DPU yield of 12%. We believe that current price is an attractive entry point for investors to leverage on the positive medium term outlook for Singapore’s tourism sector. Investors of CDL HT will be rewarded with an attractive 12% DPU yield for their patience.
CMT – BT
CMT’s rights issue over-subscribed
CAPITAMALL Trust (CMT), Singapore’s largest real estate investment trust by market capitalisation, yesterday said that its $1.23 billion rights offer was over-subscribed based on initial tallies at the close of the rights offer on March 25.
‘Acceptances and excess applications have been received for more than the total number of rights units offered pursuant to the rights issue,’ CMT said in a filing to the Singapore Exchange.
The trust did not provide details of the amount of the oversubscription. Parent company CapitaLand similarly said on March 13 that its $1.84 billion rights issue had been over-subscribed.
CMT shares gained 16 cents, or 12.5 per cent, to close at $1.44 yesterday amid a broad gain in the market. The benchmark Straits Times Index closed 4 per cent up at a two-month high.
CMT on Feb 9 announced the $1.23 billion rights issue in a 9-for-10 rights offer. The trust, which is 29.7 per cent owned by CapitaLand, said that it will use most of the proceeds to pay off $956.2 million of debt due this year.
The balance will be used to pay for asset enhancement initiatives as well as for general corporate and working capital purposes. The rights issue will also reduce CMT’s gearing from 43.2 per cent to 29.1 per cent.
In a report earlier this month, UBS Investment Research forecast an 8.3 per cent distribution per unit (DPU) yield for CMT this year – even on conservative assumptions, which included signing rents in suburban and central areas falling 8 per cent and 18 per cent respectively in 2009 as well as a 10 per cent rental rebate for central area malls.
‘We maintain our ‘buy’ rating as CMT is relatively defensive with 50 per cent of its portfolio in suburban malls, and there is little doubt on its capital structure.’