FCT – SGX
ACQUISITION OF FURTHER UNITS IN HEKTAR REAL ESTATE INVESTMENT TRUST IN MALAYSIA
1. In its announcement dated 5 June 2007, Frasers Centrepoint Asset Management Ltd., as manager of Frasers Centrepoint Trust (“FCT”, and manager of FCT, the “Manager”), announced that HSBC Institutional Trust Services (Singapore) Limited, as trustee of FCT, had acquired 86,400,000 units in Hektar Real Estate Investment Trust (“H-REIT”, and units in H-REIT, “H-REIT Units”), representing 27.0% of the total issued and outstanding H-REIT Units.
2. Pursuant to Rule 704(15)(d) of the Listing Manual, the Manager is pleased to announce the acquisition by FCT of a further 13,000,000 H-REIT Units (“Additional Units”), thereby increasing FCT’s unitholding in H-REIT to 31.06%. The purchase consideration was at RM1.33 per H-REIT Unit at an aggregate purchase consideration of RM17.29 million. The purchase consideration was arrived at on a “willing buyer, willing seller” basis.
3. The acquisition of the Additional Units is funded, at least initially, wholly with debt, save for the acquisition fee payable to the Manager, computed as one percent (1.0%) of the purchase consideration of the Additional Units, which is to be satisfied in the form of FCT units issued to the Manager at the prevailing market price.
PST – UOBKH
Raising earnings forecasts to reflect ship acquisitions
Raising our forecasts for ship acquisitions. We are raising our earnings forecasts for the acquisition of four new ships from Pacific Shipping Trust’s (PST) sponsor Pacific International Lines (PIL). Two of these ships are chartered back to PIL for a term of eight years while the other two ships will be chartered to CSAV, the largest liner shipping company in South America, for a term of five years. The four new ships will expand PST’s portfolio of vessels by 50% to 12 from its initial fleet of eight ships (which are on remaining charters of 6-8 years). In total, the four new vessels are expected to raise PST’s total contracted revenue p.a. by 79% to US$61.9m. We raise our 2008 and 2009 earnings forecasts to US$14.0m and US$17.8m for 2008 and 2009 respectively from US$13.9m and US$14.6m respectively, and initiate our 2010 forecast at US$19.4m.
Acquisitions to be funded by debt, thus causing gearing to spike up. PST is funding these new ships entirely by debt. We estimate PST’s net gearing will rise rapidly from 69% as of end-07 to 217% by end-08. However, we have assumed an issue of new shares of 25% of total share capital in 2009 and 10% in 2010. If the Singapore stock-market’s weakness continues into 2009, a rights issue would be more likely than a share placement. PST’s net gearing is forecast to fall below 100% by 2011. The trust has an acquisition target of US$200m p.a. Apart from the four new ships that have been announced, we have not factored in other ship acquisitions.
Despite issue of new shares in 2009 and 2010, DPU should still improve. Despite our assumption of new share issues in 2009 and 2010, we expect DPU to improve from 4.3 US cents in 2007 to 4.4 US cents in 2008 and 4.7 US cents in each of 2009 and 2010. These translate into DPU yields of 10.7-11.5% over the next three years. We maintain our target price of US$0.50 for PST, based on a fair value 2009 net yield of 9.5%. Maintain BUY.
Rickmers – BT
Rickmers secures US$627.5m facilities
RICKMERS Maritime has secured US$627.5 million in new credit facilities. The funds will be used in its fleet expansion. Rickmers said it will benefit from attractive interest rates ranging from 0.95 per cent to 1.2 per cent above US$ Libor per annum. A significant portion of the credit facilities will be hedged, thereby fixing the future cost of debt financing, it said.
FrasersCT – UOBKH
Defensive Anchor From Suburban Malls
Frasers Centrepoint Trust (FCT) is a retail-focused real estate investment trust (REIT). It delivers sustainable growth through four growth strategies: positive rental reversions, asset enhancement initiatives (AEIs), building up a pipeline of quality malls for injection into FCT and overseas expansion. FCT’s initial portfolio comprises Causeway Point, Northpoint and Anchorpoint in Singapore. FCT was assigned a corporate rating of A3 with a stable outlook by Moody’s Investors Services in Mar 07.
Ready pipeline of acquisitions. FCT has a ready pipeline of acquisitions that will double net lettable area (NLA) to more than 1.2m sf when fully completed. It has entered into a put and call option agreement with sponsor Frasers Centrepoint Limited for the purchase of Northpoint 2 at S$139.5m-170.5m. Northpoint 2 is expected to obtain temporary occupation permit by Aug 08 and to be injected into FCT in 1QFY09. We expect YewTee Point and Bedok Mall with NLA of 80,000sf each to be injected into FCT in 3QFY09 and 2QFY11 respectively. We estimate the three new malls to contribute about 29.1% of total revenue in FY12.
Contributions from Northpoint affected by AEI. FCT commenced S$30m major AEI at Northpoint. Gross floor area will be transferred from the fourth floor to level one to three, which will provide higher rental yield. Average rental is expected to increase from S$11.00 to S$12.40psf pm after the revamp. However, contributions from Northpoint will be affected from 3QFY08 to 3QFY09 with average occupancy estimated to decline from 100% to 85%.
Initiate coverage with HOLD. FCT focuses on suburban retail malls, which provides defensive qualities. Contributions from new malls to be acquired come much later, starting 1QFY09. Growth momentum would slow down in the near term due to AEI at Northpoint. FCT provides FY08 distribution yield of 5.47%. Our fair price for FCT is S$1.39 based on two-stage dividend discount model.
AREIT, CMT – DBS
West Side Story
Extreme Makeover – Jurong Edition: The government’s proposal to turn Jurong into a commercial and entertainment hub is a major concerted effort to transform the Jurong Lake District into a unique lakeside destination for leisure and business over the next 10-15 years. This is likely to have a positive impact on property capital values there in the long term.
Go West: Plans for the 360ha land area, close to the size of Marina Bay, includes developing the area around the Jurong East MRT station into a commercial hub serving the west region and creating a new leisure destination around Jurong Lake. About 70ha of land is allocated for development into a vibrant commercial hub with 5.4msf of GFA for office use while a further 2.7msf GFA is slated for retail, entertainment, F&B and other complementary uses. There is potential for 2,800 hotel rooms and more than 1,000 private residential units. The other major development would involve converting 220ha of land and 70ha of water into a major leisure destination with plans for 4-5 new ‘edutainment’ attractions in addition to current attractions.
Western Exposure: The office component is sizeable and would likely complement the existing business needs catering to R&D, biotech, pharmaceutical, and chemical industries. However, development will take place over 10-15 years in tandem with market demand and take-up, allaying fears of oversupply in the medium-term. The government will adjust its land supply and consequently, the development timeframe, through the Government Land Sales (GLS) mechanism. In terms of beneficiaries, CMT (BUY, TP S$3.93) has established a presence in this area through Jurong Entertainment Centre and IMM Building that could benefit from higher population mass, while A-REIT (BUY, TP S$2.80) has properties in the International Business Park that could benefit from higher capital values in the long-term. TT International is also developing a big-box retail scheme, to be completed in 2009.