a-iTrust – BT
Ascendas India Trust DPU rises 35% in Q3
ASCENDAS India Trust (a-iTrust) said yesterday that distributable income for its third quarter ended Dec 31, 2008 rose 36 per cent to $15.3 million, from $11.3 million a year earlier.
Distribution per unit (DPU) for Q3 rose 35 per cent to 2.02 cents. Distribution is semi-annual, so the Q3 distribution will be made with that of Q4. Including 3.47 cents already distributed for first-half FY 2008/09, the nine-month DPU comes to 5.49 cents.
Total property income for Q3 was $28.8 million – 7 per cent higher than the $27 million figure the previous year – while net property income grew 9 per cent to $17 million, from $15.7 million
Property income grew on the back of higher occupancy and resilient rental rates. Expenses grew at a slower pace mainly due to the fall in oil prices. As a result, net property income rose.
‘Notwithstanding current weak global economic conditions, a-iTrust’s portfolio occupancy edged up to 99 per cent from an already high level,’ said Jonathan Yap, chief executive of the trust’s manager. ‘Average portfolio rentals also improved since our last results announcement. These results demonstrate the portfolio’s resilience and appropriateness of its positioning vis-a-vis the target customers.’
a-iTrust’s portfolio comprises 4.8 million square feet of completed space in the key Indian cities of Bangalore, Chennai and Hyderabad. About 1.2 million sq ft of this space – or a quarter of a-iTrust’s current income-producing space – was renewed or leased in the nine months ended Dec 31, resulting in a higher average portfolio rental. The real estate investment trust (Reit) aims to renew or replace expiring leases in advance, it said.
‘Looking forward, less than 6 per cent of space is due for renewal in the current financial year, and less than 13 per cent in the next year,’ a-iTrust said. ‘The leases, with locked-in terms and expiries stretching beyond 2014, will also enable the trust to enjoy income stability.’
Barring unforeseen circumstances, a-iTrust is confident of meeting the FY 2008/09 DPU forecast of 6.85 cents stated in its 2007 listing prospectus.
The trust’s shares closed unchanged at 50 cents yesterday.
PLife – CIMB
Staying defensive
• In line. 4Q08 DPU of 1.84cts and FY08 DPU of 6.83cts were in line with Street and our expectations. Full-year gross revenue of S$53.9m was up 218.9% yoy (only four months of contribution in 2007 because of listing in August). Qoq growth was strong in 4Q08 at 21.2% on full contributions from portfolio assets and higher minimum rents from Singapore hospitals. This minimum had been fixed at 6.25% based on the CPI + 1%, effective from 23 Aug 08 to 22 Aug 09. Foreign-exchange loss from an appreciating yen (related to its Japanese assets) in 4Q08 was significant at almost S$8m, although this did not affect distribution. As at 31 Dec 08, portfolio value was S$1.048bn, down S$3.3m because of acquisition costs. Asset leverage remained low at 23.3%.
• New CEO and CFO appointed; capital management remains prudent. Acting CEO and CFO Mr Yong Yean Chau has been confirmed as the new CEO. Vice President of Corporate Finance, Mr Loo Hock Leong, will take over as CFO. Both appointments take immediate effect. With the ex-CFO at the helm, we expect PLife to take a more conservative stance. PLife’s current capital management is positive: 1) 100% of its debt is now long-term debt with a weighted average tenure of 2.8 years; 2) PLife has no refinancing risks until 2011; 3) interest cost has been fixed at 2.85% for 100% of its debt for three years; and 4) foreign-sourced income has been hedged for five years. Acquisitions in 2009, if any, are likely to be opportunistic and funded by debt. PLife has S$210m of unutilised revolving credit facilities and a S$500m medium-term note programme established last August.
• Maintain Outperform with lower target price of S$1.20 (from S$1.30). The outlook for organic growth is positive as the CPI-pegged base-case rents are set to grow by 6.25% in the first eight months of FY09. We refine our revenue projections based on actual FY08 income and lower our CPI assumption (for Sep 09 onwards) to 0% from 2%. Our DPU estimates for FY09-10 decrease by 6-8%. We also introduce FY11 forecasts. Our target price has been lowered to S$1.20 (from S$1.30). At 0.56x P/BV, PLife is cheaper and has less rental downside and refinancing risks than the other “premium” REITs, A-REIT (0.78x) and CMT (0.64x).
FrasersCT – DMG
Flat Is The New Up
Modest 1Q09 performance. Frasers Centrepoint Trust (FCT) recorded a 3.7% YoY improvement (-18.3% QoQ) in 1Q09 DPU to 1.67¢, which accounted for 24% of our FY09 estimates (in line) and 22% of the Street’s (slightly below). Operating-wise, topline inched lower by 3.2% YoY (-11.8% QoQ) to S$19.5m, attributable to ongoing AEIs at Northpoint. NPI was down by a wider margin (- 8.0% YoY, -9.0% QoQ) to S$12.8m, due to higher property taxes and other property operating expenses.
Flat (reversions) is the new up. With 90% of FY09 gross rental income already locked in, we reckon earnings should be rather stable for the remaining three quarters of FY09. Any possible growth in FY10 DPU should herald from a full year contribution from the post-AEI Northpoint (annual incremental NPI of S$4.1m, completion in end-Jun 09). Occupancy rate should also then revert to > 90% (88.7% currently), from our view. For FY09F and FY10F, we have tweaked our occupancy levels to 95% (96% previously). Flat (-1% to 2% previously) rental reversion rates have been assumed for the 16.6% and 12.1% in NLA which are up for renewal in FY09 and FY10 respectively. FY09F and FY10F DPU thus slip by 1.5 – 1.8% to 6.9¢ and 7.1¢ respectively.
Maintain BUY at lower fair value of S$0.82. As FCT enters the third major economic downcycle, we cannot stress enough the unfailing resilience of Causeway Point and Northpoint (90 – 95% of topline and NPI), as exhibited by their > 95% occupancy and minimal loss of rental income during the previous two crises. This is not unjustifiable given that their suburban malls target mainly the consumers who shop for non-discretionary items regardless of the general economic performance. Further, we believe supply-side competitive pressures from upcoming malls are insignificant, as there is still a paucity of new malls within the close vicinity of FCT’s properties, aside from the surrounding small mom and pop neighbourhood shops. We also welcome FCT’s move to pass on the 40% property tax rebates within the recent Budget 09 to tenants. At 28.5%, FCT remains one of the lower-geared S-REITs, with its next major loan only due in 2H11. At current levels, the stock is trading at FY09F – FY10F yields of ~ 10%. Maintain BUY at lower fair value of S$0.82 (S$0.86 previously). Key risks include more macroeconomic dampeners and prolonged credit crunch.
a-iTrust – DBS
Facing headwinds
Ascendas India Trust (AiT) delivered a 3Q09 DPU of 2.02 Scts on the back of continued strong portfolio performance. Looking ahead, AiT faces a deteriorating business environment, which could translate to softer demand for space at its various IT tech parks. As such, we maintain HOLD, TP $0.53 based on DDM. AiT current trades at a FY09-11 yield of c. 12-15%
Results in line. AiT’s 3Q09 gross revenues and net property income continued to remain firm at S$28.7m and S$17.0 m respectively (+ 7% yoy and + 9% yoy), backed by continued strong portfolio occupancies and contributions from The Crest and Vega. Net profit, however, was slightly ahead at S$15.5m, due to a slower than expected drawdown of their construction loan. As a result, distributable income was also slightly ahead at S$15.3m for 3Q08 (+36% y-o-y, 10% q-o-q), translating to a DPU of 2.02 Scts for the quarter. NAV currently stands at S$0.99 with a gearing ratio of 9%.
Outlook remains challenging. While portfolio occupancies have remained stable at c.98% till date, we anticipate demand for IT outsourcing services to weaken on the back of new supply and down-sizing activities at various MNCs, which form a major proportion of AiT’s tenant base. We estimate occupancy levels to decline 5- 10% over FY09-10.
Moderating DPU estimates. We lower FY10 DPU estimate by c.9% to take into account (i) increased vacancies (5%-10%) at the various tech parks, (ii) lower SGD-INR exchange rates (assumed @ 1SGD=30 INR) due to expiry of currency forward in March’09, offset by (iii) earning contributions from completing buildings from FY11 onwards compared to FY10-11 previously.
Suntec – OCBC
Results flat on QoQ basis
Results flat QoQ. Suntec REIT (Suntec) posted a 16.8% YoY and 3.3% QoQ gain in gross revenue to S$63.5m for the quarter ended 31 December. Suntec will pay out 2.858 S cents per unit for the quarter, up 25.4% YoY but flat QoQ, translating to an annualized yield of roughly 17%. We note that Suntec had enjoyed a marginal uptick during the property revaluation completed in the previous quarter. Just three months later, Suntec booked a revaluation deficit of S$328.7m driven by the valuers’ more conservative projection of rental rates.
Achieved office rentals slip, as expected. Office revenue contributed 45% to total gross revenue (ex One Raffles Quay revenue). For the quarter, Suntec City office replacement and renewal leases were secured at an average of S$11.20 psf per month – 11% lower compared to the S$12.57 psf pm achieved in the previous quarter but higher than preceding rents. The REIT will see about 65% of its office portfolio ex ORQ up for renewal in the next two years. We expect achieved rentals to continue softening down to high single digits this year. But the average passing rent at Suntec City Office of around S$6.50 psf pm (our estimate) gives an adequate margin of safety.
Uncertain retail landscape. Retail revenue contributed 55% to total gross revenue (ex ORQ). We expect that like its peers, Suntec will pass on the bulk of the savings from the recently announced property tax rebate to its tenants. Suntec’s manager said the “real test” for retailers will be the post- Christmas and Chinese New Year shopping landscape. The manager said that there isn’t a long queue, so far, looking for renegotiations but it was willing to work out something mutually satisfactory with its tenants. It said the main priority was to maintain occupancy levels. We understand that a typical response would be to restructure the lease (a lower rental today but a longer lease term, etc). We have priced in a 8-10% per annum decline in Suntec City Mall rentals over the next two years.
Refinancing key overhang. Suntec has about S$825m of debt, or about 44% of its total borrowings, up for refinancing in the next 12 months. The manager said Suntec is in the midst of engaging with several financial institutions. This is a lengthy process but the sooner Suntec can clear this overhang, which is weighing down valuations, the better. The REIT is currently leveraged at 0.34x debt-to-assets. Maintain BUY with S$0.90 fair value on valuation grounds.