FirstREIT – BT
First Reit Q1 DPU increases 15.6% to 1.85 cents
HIGHER rents and contributions from new properties led healthcare-focused First Reit to a 15.8 per cent gain in first-quarter distributable income to $5.1 million.
The performance lifted distribution per unit 15.6 per cent to 1.85 cents, from 1.60 cents in Q1 last year. On an annualised basis, this translates to 7.5 cents or a distribution yield of 10.7 per cent, based on last Friday’s closing price of 70 cents a share.
Ronnie Tan, CEO of the Reit’s manager Bowsprit Capital Corp, said that the results reflect the structure of the Reit, which focuses on long-term stability.
‘Our properties are leased to master lessees for relatively long tenures of 10 and 15 years, with provisions for favourable yearly rental increases,’ he said. ‘This minimises the risk associated with short-term leases and multiple tenants.
‘In addition, the base rent for our Indonesian properties is pegged to a relatively stable Singapore dollar, which helps reduce forex volatility.’
First Reit has eight properties in its portfolio, including three Siloam Hospitals and the Imperial Aryaduta Hotel and Country Club in Indonesia. Between Q2 and Q3 last year, the trust acquired Adam Road Hospital, The Lentor Residence and two nursing homes in Singapore.
For the three months ended March, net property income rose 24 per cent to $7.4 million. Management fees rose 27.2 per cent to $701,000. The trust also incurred $490,000 in finance costs for external borrowings used to fund the Singapore acquisitions.
With a debt-to-property valuation ratio of 15.6 per cent, Dr Tan said that there is ample space to support further growth in assets. The Reit is aiming for a portfolio size of $400 million by the end of this year, from $326 million now. It is eyeing opportunities in China, Indonesia and Malaysia.
Amid expectations of a global economic downturn, Bowsprit Capital remains optimistic that First Reit will continue to perform ‘because of its stable revenues which are based on long-term rental leases’.
Shares of First Reit went up half a cent yesterday to close at 70.5 cents.
CMT – BT
CMT Q1 annualised DPU up 15%
92% of forecast net property income for 2008 locked in, says trust manager
CAPITAMALL Trust (CMT) has announced a distribution per unit (DPU) of 3.48 cents for the first quarter ended March 31.
This represents, on an annualised basis, a DPU of 14 cents – 15 per cent higher than for the previous corresponding period – and a distribution yield of 4.02 per cent based on the unit price of $3.48 on Monday.
Pua Seck Guan, CEO of CMT manager CapitaMall Trust Management Ltd, said: ‘The top-line numbers achieved by CMT remains very strong, supported by robust rental renewals and multiple asset enhancement initiatives.’
While Mr Pua expects organic growth driven by asset enhancement programmes to continue to ‘take centre stage in the coming quarters’, he revealed that as at March 31, over 92 per cent of its forecast net property income for 2008 has already been locked in.
He added: ‘With a gearing of 35.3 per cent, we have a capacity to acquire at least $1.2 billion worth of assets through 100 per cent debt funding, without resulting in a change in our corporate rating of A2 assigned by Moody’s Investors Service. We will continue to actively pursue yield-accretive acquisition opportunities to grow our local target asset size to $8 billion by 2010.’
As at April 21, CMT had an asset size of about $5.9 billion.
CMT’s gross revenue for the first quarter came to $121.1 million, an increase of $3.9 million or 3.4 per cent over its forecast.
Net property income of $84.7 million for the quarter exceeded forecast by 8.2 per cent or $6.4 million. CMT added that IMM and Bugis Junction outperformed forecasts by 11.5 per cent and 15 per cent respectively.
Rental renewal rates for the quarter registered growth of 10.4 per cent over preceding rental rates and 4.3 per cent over forecast rental rates.
For 2008, CMT said that a significant amount of asset enhancement initiatives will be in progress at various malls across its portfolio amounting to some $179.1 million in capital expenditure.
These include on-going works, such as the redevelopment project at Sembawang Shopping Centre, which commenced in Q107 and is expected to be completed by Q408, Lot One Shoppers’ Mall, which commenced in Q307 and is expected to be completed in Q408, and upcoming works such as the redevelopment of Jurong Entertainment Centre, as well as enhancement schemes at Bugis Junction and Plaza Singapura.
CMT said that vacancy voids may have a varying impact on operational costs in the coming quarters in 2008. As such, CMT has retained $5.5 million of its taxable income available for distribution to unitholders for the quarter.
CMT said that the retained taxable income would provide a sustainable pool of funds that would help negate the impact of fluctuating operational cash flows, thereby providing unitholders with stable 2008 quarterly distributions.
At the end of trading yesterday, CMT unit price was up five cents to close at $3.53 per unit.
AREIT – UOBKH
Proposed JTC REIT aborted
Risk of direct competition with JTC REIT averted. JTC announced that it would divest a portfolio of high-rise ready-built properties to Mapletree Investments for a total consideration of S$1.7b. The properties comprise 39 blocks of flatted factories, 12 amenity centres, six stack-up and one ramp-up buildings, three multi-tenanted business park buildings and one warehouse building. Mapletree Investments was previously appointed to establish and manage a proposed JTC REIT, which will acquire these properties from JTC. JTC decided not to proceed with the JTC REIT as its REIT financial advisors, DBS Bank, Goldman Sachs and UBS, have advised that current volatile market conditions are not conducive for a REIT IPO.
We view the aborted JTC REIT positively as it prevents unhealthy competition between two industrial REIT under the ambit of JTC. The transfer of these properties to a private trust sponsored by Mapletree Investments is expected to complete by Jul 08. Mapletree will then explore the possibility to list the portfolio as a REIT, possibly in combination with its other industrial assets. Mapletree could list the assets under a separate REIT or inject the assets into Mapletree Logistics Trust. Both scenarios are more palatable compared to having direct competition with a sister REIT with similar investment mandate.
Positive rental reversion for Science & Business Park and Hi-Tech Industrial space. A-REIT benefits from the shortage of office space within the Central Business District (CBD). This has forced many companies to relocate non-client-facing backroom and data centre operations to suburban locations such as Alexandra Technopark and Changi Business Park (CBP). There is also positive impact from inflow multinational companies expanding in Singapore. AREIT has renewed and signed new leases for total net lettable area (NLA) of 784,925sf during 4QFY08, representing 9.7% of NLA for multi-tenanted buildings. Gross rental rates for these new contracts for Science & Business Parks and Hi-Tech Industrial were S$3.76 and S$3.10psf pm respectively, 68.8% and 49.8% higher on a yoy basis.
Maintain BUY. A-REIT provides FY08 distribution yield of 6.32%, a healthy spread of 3.97% over 10-year Singapore government bond yield at 2.35%. Our target price is S$3.00 based on two-stage dividend discount model.
AscottREIT – CIMB
Good start to the year
• 1QFY08 results above expectations. Gross revenue of S$45.6m was up 58% yoy on strong REVPAU growth, particularly in the Philippines (+36%) and Singapore (+34%); and contributions from 18 rental housing apartments in Japan acquired last year. Reported revenue was slightly below expectation (22% of full-year forecast) due to a seasonal first-quarter lull in China, the largest income contributor (22% of gross revenue). However, distribution income of S$14.2m and DPU of 2.3cts came in above Street (26% of full year) and our estimates (28% of full year) on lowerthan- expected operating costs and interest expense, and higher non-tax
deductibles.
• Gross operating margins higher than forecast. Gross operating margins were 51%, or 5% pts above our forecast of 46% for 2008. Strong REVPAU growth coupled with the introduction of higher-margin rental housing in Japan and overall cost efficiencies accounted for the improvement.
• Income stream expected to remain stable. Expected slower economies and higher inflation rates in Asia (including Singapore, China, Japan and Vietnam) are likely to affect the hospitality industry in Asia. However, contributions from ART’s portfolio should remain stable, as: 1) 52% of its income comes from the long-stay segment of six months to beyond 12 months; 2) ART has a geographically diverse portfolio which reduces risk concentration; and 3) hotel supply in some Asian markets, particularly Singapore, the Philippines, and Vietnam, is tight. These are ART’s significant markets.
• Forecasts unchanged; maintain Outperform and target price of S$1.74. Our DDM-derived target price (discount 8.4%) stays at S$1.74. At current price levels, ART offers a prospective total return of 45.7% from a 6.5% yield and 39.2% potential price upside.
AREIT – ML
FY08 results inline
FY08 results inline
A-REIT reported FY08 results with distribution of 14.1cps, up 10.8% vs FY07 and inline with ML estimate of 14.0cps. Distribution growth was attributable to a 16% increase in net property income of which 10% was driven by income contribution from new acquisitions and 6% was driven by organic growth.
Business Parks and Hi-Tech key growth sectors
The spillover effect from tightness in CBD office continues to benefit A-REIT via portfolio exposure to business and science parks. Renewal rates for business parks improved 46% while Hi-Tech renewals were up 40% vs 2007. Portfolio wide occupancy was slightly down vs 3Q however remains high at 98.4%.
Development exposure reaching cap, Gearing 38%
A-REITs has committed developments to the value of S$309mn which equates to 8% of the regulated 10% development cap. In our opinion this limits A-REITs ability to participate in additional near term developments. Current gearing is at 38%. This is below stated target gearing of 45% but close to historical highs.
Maintain Sell
We maintain our Sell on A-REIT and fair value estimate of S$2.09. While operationally the business is sound we believe better relative value can be found in industrial S-REIT peers. To play the Ascendas group strengths we suggest switching into a-iTrust, while to stay exposed to the Singapore industrial market we suggest switching into Cambridge Industrial.