CDLHTrust – CIMB
Negatives priced in
• Meeting expectations. 3Q08 results were in line with consensus and our estimates. DPU of 2.93cts grew 24.2% yoy to form 26% of our forecast of 11.2cts for FY08. Gross revenue of S$29.1m was up 21.3% yoy on double-digit revenue per available room (REVPAR) growth in its Singapore properties. YTD DPU forms 78.5% of our full-year estimate, in line.
• Average room rates up but occupancy slow. Room rate increases for Singapore hotels remained strong at 27.6% on a yoy basis, boosted by F1 in September. However occupancy levels slowed from the high base in 3Q07, dropping 4.4- percentage points to 85.5%
• Debt facilities due in Jul 09. All of CDLHT’s debt of about S$297m would be due for refinancing by Jul 09. All-in cost of funding as at Sep 08 was 3.1%. With CDLHT’s low asset leverage at 19.3%, high interest cover of 12.2 times, BBBrating and strong sponsor M&C, we believe that refinancing would not be difficult for the company.
• Changes to assumptions. In line with our house view that the US financial crisis could result in a marked slowdown in Asia, we cut our REVPAR forecasts (a function of occupancy and average daily rates) to reflect between 10-20% decline in FY09-10. Separately, we remove our earlier acquisition assumptions of S$300m per annum over FY09-10 as we do not expect any acquisitions in the current credit climate. We also increase our cost of debt assumptions by another 50bps from FY09.
• Maintain Neutral at lower target price of S$0.77 (from S$1.78). Following our adjustments, our FY09-10 estimates decrease by 19-29%. We apply a higher discount rate of 10.8% (previously 8.5%) to our DDM valuation to reflect increased risks for the short-stay tenures of the hospitality industry in this climate vs. other property segments (average 3-year leases). Our earnings reductions account for 72% of the change in our target price. Our new target is S$0.77 (from S$1.78). CDLHT’s sharp price fall of 77% since Jan 08 has priced in the negatives of slowing growth. Maintain Neutral.
MP REIT – Nomura
3Q08: in line with expectations
MMP’s 9M08 results were broadly in line with expectations, with reported DPU of S¢5.32/unit (up 18.0% y-y) representing 77.1% of our full-year forecast. Still, the deteriorating macro outlook (we have lowered our Singapore GDP forecast for 2009F to 1.3%, from 3.6% previously) amid higher retail supply likely calls for a review of our rental forecasts and yield assumptions with a negative bias. This will likely hurt our core net asset valuation of S$1.27/unit.
REITs – BT
Reit shares up on Macquarie deal
Shares of Singapore real estate investment trusts (Reits) rose yesterday, helped by improved sentiment after Malaysia’s YTL Corp bought a 26 per cent stake in Macquarie Prime Reit at a more-than-50-per cent premium.
‘YTL’s investment indicates there are investors who are confident in the longer-term prospects of Singapore property,’ Goldman Sachs said in a report. ‘We view this development as positive for Macquarie Prime Reit and for the Singapore Reit sector.’
CapitaCommercial Trust closed trading at 89 cents, up 1.1 per cent after an intra-day high of $1.05, while CapitaMall Trust hit a high of $1.84 before easing 1.8 per cent to $1.62. Macquarie Prime too surged 9.3 per cent before closing 1.9 per cent up at 55 cents.
YTL, a property and infrastructure conglomerate, said on Tuesday it will buy 26 per cent of Macquarie Prime and 50 per cent of the Reit’s management firm for $285 million. The price of $0.82 a unit represents a 52 per cent premium to the Reit’s last traded price and a 49 per cent discount to book value. — Reuters
CRCT – BT
CRCT’s Q3 distributable income rises
CAPITARETAIL China Trust (CRCT) reported a 52.6 per cent jump in its distributable income for its 2008 third quarter yesterday and said it has secured refinancing for a US$105 million loan facility maturing soon.
Thanks to strong revenue growth, CRCT reported a distributable income of $12.4 million for the three months ended Sept 30, against $8.2 million for Q3 2007. Gross revenue surged 48.8 per cent to $28.3 million, helped by the $7.8 million in revenue contribution from Beijing’s Xizhimen Mall, which was acquired in February this year.
Distribution per unit (DPU) for the quarter stood at 2.01 cents – or 8.01 cents on an annualised basis – 0.3 cent higher than the DPU from a year ago. Its distributable income for the quarter also beat the Reit management’s $11.3 million forecast by 10.5 per cent.
But CRCT missed its Q3 gross revenue forecast by 2.9 per cent, due to poor performance of the Saihan Mall, which has been undergoing asset enhancement works. Saihan Mall’s Q3 revenue of $883,000 was 60.8 per cent lower than projected.
‘Under the current volatile market conditions, the management will focus on driving organic growth through pro-actively managing our portfolio of assets and prudent cost management,’ said chief executive of CRCT management Wee Hui Kan in a media statement. He added that the company will continue to manage its debt conservatively and has secured ‘comfortable refinancing terms’ for the US$105 million loan facility that is maturing late next month.
The refinancing terms of the loan are based on an interest rate that is ‘within the forecast’ of 5 per cent, and the next major term refinancing is set at 2010, the company said. CRCT’s gearing is 31 per cent and has an interest cover of eight times. Total borrowings stand at $344.2 million, including the US$105 million loan.
The trust’s average portfolio rental rates for new leases and renewals registered 16.9 per cent above forecast, CRCT said, adding that the phase 2 acquisition of Xizhimen mall is still set for completion by Q1 of next year. But CRCT said it expects demand to decline in the second half as many retailers have expanded or leased new space prior to the Olympic Games. CRCT said it has retained $400,000 of its Q3 distributable income to ‘help negate any fluctuating income flow in Q4’.
MP REIT – BT
MP Reit’s DPU up 15.6%
Its rental income remains strong in Q3 despite challenging market
MACQUARIE Pacific Star, the manager of MP Reit, said yesterday that the trust’s third-quarter distributable income was $17.2 million.
Distribution per unit (DPU) for the period July 1 to Sept 30 was 1.78 cents, 15.6 per cent higher than 1.54 cents in the previous corresponding period. On an annualised basis, the latest distribution represents a yield of 8.58 per cent.
Gross revenue for MP Reit was $32.6 million, or 24.8 per cent higher than the $26.1 million in the corresponding quarter a year ago. This was driven mainly by higher rents achieved from renewals, new leases and revenue from the overseas properties. Net property income was higher at $23.6 million, an increase of 21.7 per cent from a year earlier.
Stephen Girdis, chairman of Macquarie Pacific Star, said that rental income remained strong in Q3 ‘despite the current challenging market’.
Franklin Heng, Macquarie Pacific Star’s CEO, added: ‘The supply of new office space in Orchard Road in the next few years is limited and we expect to still reap some rent reversions from office leases expiring in the next year.’
Commenting on Tuesday’s announcement that YTL Corporation has entered into a sale-and-purchase agreement to acquire Macquarie Group’s 26 per cent stake in MP Reit and a 50 per cent stake in the holding company of Macquarie Pacific Star, the officials said that in the challenging environment and in the midst of a strategic review, no firm offer to acquire 100 per cent of MP Reit’s units or its investments was received.
‘In light of the above, MP Reit’s strategic review has been concluded and Macquarie Pacific Star looks forward to working with the new sponsor, YTL Corp, in the interests of unitholders, in assessing and implementing the new strategic initiatives available to MP Reit,’ the trust manager said.
MP Reit refinanced $220 million through a club deal with three foreign banks in August 2008. As at Sept 30, MP Reit’s gearing level was 28.9 per cent, and 89.4 per cent of its borrowings were fixed.
It ended trading yesterday up one cent to $0.55.