Fortune – BT
Fortune Reit’s Q4 net property income up 6.8%
FORTUNE Reit has reported a net property income of HK$121.34 million (S$23.54 million) for the fourth quarter ended Dec 31, 2008, up 6.8 per cent from HK$113.57 million a year ago. Revenue for the period was HK$166.18 million, 5.1 per cent higher than HK$158.14 million a year ago.
Income available for distribution for the quarter was HK$80.78 million, up 4.1 per cent year-on-year (yoy). Distribution per unit was HK$0.099, up 3.1 per cent yoy.
Stephen Chu, CEO of ARA Asset Management (Singapore) Ltd, the manager of Fortune Reit, said: ‘These results underscore the defensive nature of the Hong Kong suburban retail sector in general and Fortune Reit in particular.’
He added that, under the current volatile market conditions, the management will focus on sustaining organic growth through proactively managing its portfolio of assets, cost management and execution of its ongoing asset enhancement initiatives.
As at end-December 2008, Fortune Reit’s aggregate amount of secured borrowings repayable after one year was HK$2.34 billion.
Its cash and cash equivalent position at the end of the same period was HK$243.36 million. It also has a gearing of 26.4 per cent.
Fortune Reit has a portfolio of 11 suburban retail properties.
The performance of the Reit was attributed to organic growth at City Shatin Property and Ma On Shan Plaza as well as results from the completed asset enhancement works at Waldorf Garden Property.
As at end-December 2008, the portfolio occupancy was 96 per cent, up from 92.1 per cent a year earlier. Rental reversion of 18.8 per cent was achieved for renewals in 2008.
Overall tenant retention was 83.6 per cent in 2008.
The portfolio passing rent was HK$27.03 psf as at Dec 31, 2008, an increase of 7.1 per cent yoy.
At the end of trading yesterday, Fortune Reit closed at HK$2.40 per unit, up 7 cents.
FSL – BT
First Ship Lease revises distribution policy
Lower 75-78% Q1 payout seen; 4Q08 DPU up 27.3%
THE cloudy outlook for the shipping industry and the capital market have led First Ship Lease (FSL) Trust to revise its distribution policy.
Target distribution per unit (DPU) for the first quarter of this year is 2.45 US cents, representing 75-80 per cent of expected distributable cash flow, compared with 100 per cent usually. The retained cash will be used to reduce the trust’s gearing and to seize growth opportunities.
FSL Trust Management (FSLTM) chief executive Philip Clausius said the move is a proactive one amid the global uncertainty. ‘This is not something we have done because we think there is going to be a default or because our lending banks asked us to,’ he said.
Rather, the retained funds will come in handy should the unexpected happen. DPU guidance will be provided on a quarterly basis until longer-term visibility returns.
Chief financial officer Cheong Chee Tham said: ‘Given FSL Trust’s secure long-term cash flow and lack of near-term refinancing needs, it is well-placed to take advantage of attractive opportunities that will present themselves in the next 24 months.’
For Q4 2008 ended Dec 31, FSL Trust will distribute US$15.4 million, excluding an incentive fee of US$590,000 payable to FSLTM. This works out to DPU of 3.08 US cents, up 27.3 per cent from Q4 2007.
FSLTM is confident that FSL Trust will not see any charter rate renegotiations or payment defaults by clients, despite volatility in the industry.
FSL Trust’s portfolio comprises 23 vessels which are leased out on long-term basis. The earliest lease expiry is in 2014. As at Dec 31, 2008, the lease portfolio had a net book value of US$900 million and remaining contracted revenue of US$858 million.
While FSL Trust’s leading bankers did not invoke a market disruption clause during the latest round of interest rate re-sets, Mr Clausius does not rule out the possibility of this happening.
‘The interbank market is so volatile. The banks are still funding themselves at costs way above the quoted Libor,’ he said.
FSL Trust’s net profit fell 75.8 per cent to US$456,000 in Q4 2008 as vessels acquired post-IPO were wholly financed by debt, and interest and depreciation charges for these vessels were higher than the lease rates.
However, revenue jumped 70.2 per cent to US$25.7 million due to the acquisition of two crude oil tankers and three container ships.
For FY 2008, net profit was 23.5 per cent lower at US$4.8 million, while revenue came in 113.4 per cent higher at US$86.62 million. DPU for the year was 11.52 US cents.
Q4 2008 DPU will be paid on Feb 27. FSL Trust’s units closed unchanged at 46.5 cents yesterday.
CRCT – BT
CRCT sees China business remaining resilient
Trust’s net property income for Q4 jumps 76% to $20.4m; DPU at 2.27 cents
CAPITARETAIL China Trust (CRCT) expects its mall business in China to remain fairly resilient even as the country’s economic growth slows this year.
The trust shared this outlook yesterday as it unveiled a 76 per cent year-on-year jump in net property income to $20.4 million for the fourth quarter ended Dec 31, 2008.
As a result, income available for distribution rose 64 per cent to $14.1 million. This translates to a distribution per unit (DPU) of 2.27 cents, exceeding the 1.80 cents in 4Q 2007.
On an annualised basis, CRCT’s DPU in Q4 2008 was 9.03 cents, generating a distribution yield of 15.1 per cent based on the unit closing price of 60 cents as at Dec 31, 2008. The trust gained 3.5 cents to close at 66 cents yesterday.
For FY2008, income available for distribution also improved 43 per cent from a year ago to $45.9 million. This led to a DPU of 7.53 cents, higher than the 6.72 cents in FY2007. The distribution yield reached 12.6 per cent.
According to Barclays Wealth Research, China’s GDP growth could slide to 7.5 per cent this year and the slowdown has raised doubts on whether internal consumption will hold up.
‘We may not be immune to possible slowdowns in consumer spending,’ said Victor Liew, chairman of trust manager CapitaRetail China Trust Management yesterday. But ‘the large proportion of mass-market retailers selling basic necessities at our malls will provide some resilience for our portfolio’.
The top retailers in CRCT’s mall portfolio are Beijing Hualian Supermarket and Beijing Hualian Department Store, which accounted for 29 per cent of gross rental income as of December last year.
‘We are seeing limited impact from the crisis, especially at second-tier cities,’ said the trust manager’s CEO Wee Hui Kan at a briefing yesterday. ‘Now and then, some tenants may not be doing so well relative to before . . . but we have not seen a significant deterioration.’
CRCT’s focus is to ‘preserve stability’ this year by maintaining occupancy levels, fine-tuning the tenancy mix and driving shopper traffic and sales, he said.
This means that acquisitions are not on the cards yet. According to Mr Wee, distressed retail assets have yet to surface and capital for purchases would not come easily.
But he noted that China’s credit environment has improved in the last few months. At the government’s encouragement, banks are more willing to extend loans and costs may be lower than those for offshore funds. ‘We will put some focus on trying to tap the onshore market,’ said Mr Wee.
CRCT’s gearing as at Dec 31, 2008 was 32.8 per cent, and it has $61 million of debt maturing this year.
CCT – CIMB
Smooth ride ahead
• Met expectations. 4Q08 results were in line with Street and our expectations. DPU of 2.71cts grew 16% yoy to form 26% of our forecast for FY08. Gross revenue of S$97.2m was up 56.6% yoy mainly on contributions from One George Street. Fullyear DPU of 11cts was in line.
• Moderate asset write-down of 3%. As at 1 Dec 08, CCT wrote down 3% of its asset values across its portfolio over their last valuation on 1 Jun 08. StarHub Centre was affected the most, by 7.9% and Raffles City, the least, at 1.4%. After the write-down, asset leverage moved up to 37.3% from 35.9% in 3Q08.
• Portfolio occupancy down to 96.2%. Committed occupancy on a portfolio basis was 96.2%, down from 98.9% in 3Q08. The drag was attributed to Wilkie Edge which was legally completed in Dec 08 and only 70% pre-committed. Average monthly rent for CCT’s portfolio was S$7.44 psf in the quarter, up moderately from S$7.20psf in 3Q08.
• No equity raising in “immediate” term; downside factored in. Refinancing nightmares in 2009 should ebb with S$650m of debt refinanced earlier this month. Management is confident of refinancing the remaining S$116m due in Jun 09. With eight unencumbered assets on hand, there should be sufficient financial flexibility for its upcoming refinancing negotiations. Management said there are no plans for equity-raising in the “immediate” term, although it would not define its duration. Weakening office demand has mostly been factored into our assumptions in the form of recession-level occupancy levels (80-85%) and weakening rents.
• Maintain Outperform; target price raised to S$1.12 (from S$1.08). We further refine our assumptions, factoring in rental declines from actual 2008 passing rents. We also introduce FY11 forecasts. Our DPU estimates for 2009-10 increase by 0.8- 3.6%. Our DDM-derived target price also rises to S$1.12 from S$1.08 (unchanged discount 10.4%). Concerns over widespread rights or equity issuance by REITs sprang after A-REIT’s surprise recapitalisation last week, sending REITs’ share prices down. With a P/BV of 0.29x, CCT remains a value stock with forward yields of 13%. Maintain Outperform.
PST – BT
Pacific Shipping Trust delaying acquisitions
PACIFIC Shipping Trust (PST) will delay acquisitions until the shipping market stabilises, but expects to capitalise on opportunities as vessel prices drop.
‘We see some downside risks in first-half 2009. Until the market stabilises we are not looking at capital commitment or acquisitions,’ Alvin Cheng, CEO of PST Management, told BT, saying acquisitions could be 12-18 months away.
Still, Mr Cheng is confident that ‘opportunities’ will arise, resulting in an ‘attractive return on investment’ as asset prices fall.
PST is paying distribution per unit (DPU) of 0.93 US cents for Q4 2008 ended Dec 31. This is 15 per cent lower than in Q4 2007, largely due to 10 per cent retention of the distributable amount and the timing difference between the receipt of funds from a preferential offer in September last year and the earning of income from new vessels. Part of the US$92.3 million raised through the offer was used to finance vessel acquisition.
Total distributable income for Q4 2008 increased 68 per cent to US$6.27 million, while net profit came in at US$6.35 million, up from US$1.65 million previously.
Gross revenue surged 67 per cent to US$14.5 million, due to the contribution from four vessels delivered during the year. A full quarter’s contribution came from the new vessel CSAV Laja, while 50 days’ time-charter income was attributable to CSAV Lauca. Both have been chartered to Compania Sud Americana de Vapores on fixed rates for five-year periods.
For FY 2008, PST’s net profit was up 75 per cent to US$18.3 million, while distributable income increased 28 per cent to US$18.5 million. Gross revenue grew 29 per cent to US$44.6 million.
PST is upbeat that it will ride out the downturn and expects revenue for 2009 to increase 38 per cent year on year on the back of its four new vessels.
Its fleet of 12 vessels is fully financed with no outstanding capital commitments and no refinancing requirements in the medium-term. Its shortest lease expires in 2013.
DPU for Q4 2008 will be paid on Feb 27.