MapleTree – CIMB
Stable growth
• In line. Full-year distributable income of S$97.4m was in line with expectations. However, full-year DPU of 7.24cts was above consensus and our expectations due to fewer units in issue than forecast after the rights issue. Full-year gross revenue of S$184.9m was up 30.5% yoy mainly on contributions from 11 acquisitions completed in 2008. Net property income margins declined from 87.4% to 86.1% on higher property-related expenses. Portfolio occupancy improved to 99.6% from 99.0% in the last quarter.
• Strong reversions in 4Q08. Average rentals achieved for leases renewed in the quarter were 51.2% higher than preceding rentals. These were mainly leases in Singapore and Hong Kong, and partly contributed by several new tenants who are data centre operators.
• Outlook not so negative. After the rights issue, MLT’s asset leverage is a healthy 38.1%. Short-term debt of S$218m (19% of total debt) due for refinancing in 2009 looks manageable. Despite the fact that acquisitions are expected to take a back seat, full-year contributions from the 11 acquisitions last year should supplement organic growth. Additionally, management highlighted that concerns over warehouse oversupply in Singapore are exaggerated, as 81% of the 682,000sq m of upcoming supply over the next two years has been pre-leased or is being built by end-users. In Hong Kong, MLT’s second largest market, there is no new supply expected for the two years.
• Maintain Outperform; unchanged target price of S$0.60 (discount 9.6%). We maintain our assumptions for FY09-10 and introduce our DPU forecast for FY11. MLT offers dividend yields of 14.1%. We remain confident that performance in the current year will be stable with some room for upside on the back of full-year contributions from the previous year’s acquisitions. Maintain Outperform.
FCOT – DBS
Equity Raising Possible
FCOT results were in line with our expectations. FY08 DPU of 6.35 cts translates to a 25% DPU yield at current trading price, one of the highest in the sector. We believe current price reflects investor nervousness of near term refinancing requirements and possibility of an equity raising exercise. Until more clarity on that front, share price is unlikely to re-rate. Based on our estimates, FCOT is trading at c.17% FY09-10 yield. Maintain HOLD, TP S$0.23.
Results in line. 4Q08 distributable income was -40% yoy at S$9.3m due to increased interest expense from higher debt margins incurred in 2H08 on top of increased property expenses. FY08 distributable income came in at S$45.8m (- 3.5% yoy), pulled up by a better 1H08 performance, translating to a DPU of 6.35cts for the full year. Book NAV of S$0.97 per share as at Dec’08 reflects (i) further devaluations to Keypoint (-7%) and Cosmo Plaza (-10%) and (ii) translation losses due to a declining A$ offset by a stronger yen. As a result, gearing spikes up to 54.4%.
Adjusting FY09 DPU estimates. We lower our forward DPU estimates by 12% to reflect (i) lower than expected A$-S$ exchanged rates for FY09 (ii) tenant default at Cosmo Plaza as the main master lessee, Restoration Asset KK (60% of asset NLA) is in rental default and is not expected to contribute to earnings further. The manager has begun marketing the space and is in progress of releasing c.30% of the vacated space.
Recapitalization a likely catalyst. Given a gearing of 54.4%, FCOT is dangerously near the regulatory limit of 60%. We view that a re-rating for the stock will hinge on further details of a potential recapitalization exercise aimed at strengthening the trust’s fundamentals and resolving its ST financing needs.
CMT – DBS
Still going strong
CMT’s FY08 results were within expectations, lifted by organic improvement amid a fully occupied portfolio. Continued shopper traffic growth despite a weakening spending environment underlines the more resilient suburban retail sector. The stock offers FY09 yield of 9.7%. Near term catalysts from successful rollover of its debt and recapitalising newsflow within the Sreit sector could spur share price. Upgrade to Buy with DCF-backed TP of $1.92.
Continuous organic growth. CMT reported Q4 revenue of $134.5m, +16% yoy and +3.7% qoq while distribution income came in at $60.9m, -2.1% yoy and +0.3% qoq. Topline benefited from The Atrium income and organic improvement within its portfolio. Occupancy remained at c100% and new lease/renewals were transacted at an average 9.3% over preceeding levels. However, a hike in expense ratio to 36% (vs 33% previously) after charging a $4m capital allowance and greater interest cost eroded bottomline growth. Asset values rose by 9% yoy despite a 15- 25bps hike in cap rates, bringing book NAV to $2.41 and gearing 43%.
Locked in >87% of revenue. While retail sales outlook is dampened by the poorer economic outlook and discretionary spending had weakened towards end 08, shopper traffic at CMT malls continued to grow, showing the resilience of suburban malls. In addition, based on committed leases @ end 08, CMT had locked in >87% of its FY08 revenue for FY09. In terms of capital management, the group has $986m of debt due to be rolled over in 2009, of which $876m is maturing in 2H09. The group is exploring options for refinancing and intends to complete its refinancing ahead of the deadline.
Upgrade to Buy. CMT offers investor exposure to the more resilient suburban retail sector. Share price had fallen by 17% since early Jan 09 and is trading at 9.7% yield based on our stillbelow- consensus DPU forecast of 14.4cts. We expect newsflow on both its debt refinancing and removal of overhanging deleveraging concerns in S-reit sector via recapitalisation activities to be a driver to share price performance in the near term.
MapleTree – BT
MapletreeLog distributable income up 44% in Q4
MAPLETREE Logistics Trust (MapletreeLog) yesterday reported total distributable income of $28.3 million for the fourth quarter ended Dec 31, 2008, up 43.7 per cent from last year’s corresponding period.
But the distribution per unit (DPU) of 1.46 cents for the quarter was 18 per cent lower than Q4 2007’s DPU of 1.78 cents.
MapletreeLog attributed the drop to the full quarter impact from dilution following the rights issue completed in August last year.
For the full year, DPU was 7.24 cents, 10.2 per cent higher than last year’s 6.57 cents.
Last year, Chua Tiow Chye, CEO of Mapletree Logistics Trust Management (MLTM), the Reit’s manager, had said that the rights issue would leave MapletreeLog with a ‘robust balance sheet’ which would help make it ‘well positioned to operate in the current more uncertain times’.
Net property income for Q4 2008 rose by $9.8 million to $45.1 million. This was helped by a $12.1 million rise in gross revenue to $52.4 million due mainly to contributions from 11 new properties acquired during the year.
There was also a $1.4 million fall in Q4 borrowing costs despite the enlarged portfolio.
As at Dec 31, 2008, the trust’s portfolio comprises 81 properties valued at $2.9 billion, including a $94.1 million revaluation gain.
No new acquisitions have been planned for the near term.
Singapore properties accounted for close to half of Q4 2008 net property income, with Hong Kong properties contributing about a quarter.
Portfolio occupancy rates remain high at 99.6 per cent. The trust attributed the resilience of its portfolio to a diversified tenant base and strong leasing covenants.
MapletreeLog’s leverage ratio of 38.5 per cent, as at Dec 31, 2008, is marginally higher than the 36.9 per cent as at Sept 30, 2008.
However, it has assured that it has sufficient committed lines to meet its debt obligations when they become due – hence avoiding any refinancing risk.
FirstREIT – BT
First Reit’s Q4 distributable income up 11% to $5.3m
BACKED by higher rentals from its eight properties in Singapore and Indonesia, First Real Estate Investment Trust (First Reit) achieved an 11 per cent rise in distributable income to $5.3 million for its fourth quarter ended Dec 31, 2008.
The year-on-year rise came as gross revenue rose 4.5 per cent to $7.6 million.
Distribution per unit (DPU) for the quarter grew 10.2 per cent to 1.94 cents, from 1.76 cents for the year-ago period.
Based on its FY2008 DPU of 7.62 cents (FY2007: 6.73 cents) and the closing price of 43.5 cents on Jan 20, the distribution yield is 17.5 per cent.
The quarter saw net property income grow 4.1 per cent to $7.51 million, helped by higher rentals from four Indonesia properties acquired in 2006 and four Singapore properties newly acquired in 2007.
For the full year 2008, First Reit – which is Singapore’s first healthcare Reit – reaped net property income of $29.96 million, 12.3 per cent higher than for 2007.
But it recorded a revaluation loss on investment properties of $700,000 compared with revaluation gains of $16.83 million in 2007.
First Reit’s eight properties have a total value of $324.9 million based on a recent annual revaluation, little changed from its book value in 2007.
Bowsprit Capital Corporation, First Reit’s manager, said it is hopeful that First Reit will continue to perform relatively well in 2009.
‘First Reit is hopeful that the demand for quality healthcare, particularly in Asia, will remain relatively unaffected despite the current global recession,’ it said.