CRCT – BT
CRCT placement snapped up
Institutional investors take up 136m new units in CapitaRetail China Trust in 30 mins
A PRIVATE placement by CapitaRetail China Trust (CRCT) was snapped up by institutional investors within half-an-hour after its launch yesterday.
Approximately 136 million new units in CRCT were fully subscribed by investors under the private placement at an issue price of $1.36 per unit, the trust’s manager, CapitaRetail China Trust Management Ltd (CRCTML) said.
The total gross proceeds from the private placement amount to $185 million. The issue price was set at a discount of approximately 10 per cent to CRCT’s volume-weighted average price of existing units on the Singapore Exchange on Thursday.
CapitaLand Retail Ltd, on behalf of CapitaLand Ltd and its subsidiaries, and CapitaMall Trust subscribed for approximately $74 million worth of new units so as to maintain their proportionate unit- holdings in CRCT at their pre-placement levels. The joint lead managers, bookrunners and underwriters for the private placement were Citigroup Global Markets Singapore, DBS Bank and JPMorgan.
Lim Beng Chee, CEO of CRCTML, said: ‘Despite the soft and volatile market conditions, CRCT was able to raise capital and garner strong participation from investors, who had quickly subscribed for the new units within 30 minutes after the launch of the private placement. This demonstrates the resilient qualities of CRCT and the highly accretive benefits of this quality acquisition.
‘We remain positive in achieving our target asset size of $3 billion by the end of 2009.’
Following the equity fund-raising for the acquisition of Xizhimen Mall and the issue price of $1.36 per new unit, unitholders can expect a distribution per unit (DPU) of 6.67 cents for FY2008, the trust manager said. This is an accretion of 4.1 per cent to the forecast DPU of 6.41 cents for CRCT’s existing portfolio.
CRCT is also making a public ATM offering, in which approximately 2.2 million new units will be made available through the ATMs of DBS (including POSB) on a first-come, first-served basis at the issue price of $1.36 per new unit. The maximum number of new units per application under the ATM offering is 250,000.
The ATM offering will open at 10.30am today and close two hours later, subject to early closure if all the units under the ATM offering are fully taken up before that.
The expected date of listing of the new units is Feb 5.
a-iTrust – DBS
Growing Strongly
Comment on Results
A-iTrust reported a strong set of 3Q08 results. Gross revenue was up 60% yoy and 7% qoq to S$27.0m. The strong performance was attributable to strong rental renewals at 91% above preceding rates and completion of 2 buildings, Vega at V and Crest at ITPC which added 1.1m sf to portfolio. Net profit was up >100% to S$33.2m mainly due to revaluation gain of S$28.1m (net of deferred tax) on its Vega property.
Revaluation gain. More revaluation gains are expected in the pipeline in 4Q08 when the Crest obtains the necessary certification. Gearing at a low 4%, giving the trust ample borrowing capacity of S$550m for acquisitions up to management’s imposed limit of 60% gearing.
Recommendation
We are positive that A-iTrust is poised to benefit from India’s growth in the IT/ITES sector through having assets locations at key IT-related industry clusters in Hyderabad, Chennai and Bangalore. Therefore, A-itrust provides the opportunity for investors to ride the real estate up-cycle in India.
Strong sponsor support in terms of future acquisitions that will potentially grow A-iTrust’s portfolio by 85% through its 2 ROFR agreements with Ascendas Land International and Ascendas India Development Trust. We maintain BUY with TP S$1.84 based on DCF valuation.
CCT – BT
CCT posts 14.5% rise in Q4 distributable income
CapitaCommercial Trust (CCT) posted distributable income of $32.3 million in last year’s final quarter, an increase of 14.5 per cent from a year previously.
Full-year 2007 distributable income rose 52.7 per cent to $120.4 million on the back of a 54.2 per cent jump in gross revenue to $240.1 million – due mainly to the consolidation of CCT’s 60 per cent interest in the Raffles City complex which was acquired in September 2006. Higher rental income, car park income and other income from the trust’s properties also boosted the bottom line for the year.
The trust reported $1.3 billion fair value gain on revaluation of its investment properties, boosting its total asset size to $5.3 billion as at the end of December.
Currently less than 5 per cent of CCT’s assets are overseas, but in the medium term the overseas share could grow to 20-30 per cent, CapitaCommercial Trust Management Ltd (CCTML) chief executive Lynette Leong said yesterday.
Vietnam is among the promising markets where CCT sees a lot of growth, Ms Leong said.
The trust said that its interest-rate exposure is small, as 86 per cent of total borrowings are on fixed rates and no major refinancing is required until March 2009.
In addition, its low gearing of 23.9 per cent gives it sizeable debt headroom to support any new asset growth strategy.
Assuming the trust decides to gear up to 40 per cent, it could take additional debt of about $800 million, analysts observed. This should come in handy for CCT when competing for acquisitions with some other Reits with much less room for taking further debt.
The stock market slump has raised the distribution yields at which Singapore Reits are trading. That means equity cost has gone up and Reits will need to acquire assets at much higher property yields if they are going to finance them by issuing new equity rather than using debt.
Riding on the spike in office rents, CCT achieved significantly higher rent reversions for offices leases that were renewed as well as new leases signed during 2007. Rents committed for renewals were on average 36.8 per cent higher than preceding rents, while new leases were committed at 130.8 per cent above preceding rents.
And with about 57 per cent of CCT’s office portfolio (by gross rental income) up for renewal and rent review in 2008 or 2009, the trust can look forward to further positive rent reversion given the shortage of offices.
This factor, coupled with limited exposure to interest rate risk, led CCTML to say it expects to perform better than its forecast distribution per unit (DPU) of 10.04 cents for the current financial year. The forecast was made in a circular in November last year.
CCT unitholders will receive a DPU of 4.47 cents for the July 1 to Dec 31, 2007 period.
This works out to 8.87 cents on an annualised basis, reflecting a distribution yield of 4.6 per cent based on CCT’s closing price of $1.91 yesterday. The counter ended four cents lower yesterday.
CCT’s adjusted net asset value (excluding distributable income to unitholders) rose from $1.86 as at Dec 31, 2006 to $2.80 as at Dec 31, 2007.
The trust has secured commitments for more than half of the 9,600-sq-m office space at Wilkie Edge in the Selegie area, ahead of the development’s completion expected in Q4 this year.
CCT – CIMB
Ripe for the picking
• 4Q07 distribution above expectations. Despite lower-than-expected revenue in the quarter, CCT’s distribution was higher than expected due to higher contributions from its associate Quill CapitaTrust, lower interest expenses, and fewer-thanexpected shares issued for the period. Revenue was up 10% yoy to S$62m while distributable profit was up 14.5% yoy to S$32.3m. Full-year revenue was S$240.1m with a distributable profit of S$120.4m and DPU of 8.7cts, which is 1% above consensus and 2% above our estimate. As at 31 Dec 07, CCT’s portfolio reached S$5.1bn with revaluation gains of S$1.3bn.
• Ripe for harvest. Asking rents for offices should peak this year before a large supply of office space floods the market from 2009. Some 57% of CCT’s leases (by gross rental income) would be up for renewal over 2008-09. These are expected to enjoy strong rental reversions in the current supply crunch. We also expect occupancy levels to approach 100% from the already-high 99.6% at end-Dec 07. Its mixed development project, Wilkie Edge, is expected to be completed in 4Q08, and is more than 50% pre-committed for its office space.
• Upgrade to Outperform from Neutral, although target price lowered from S$2.80 to S$2.75. Our DPU estimates for FY08-10 have been raised by 0.6-4.1%, following adjustments to our assumptions for QCT contributions and gearing. CCT’s low debt-to-asset ratio of 24% will allow it to continue with acquisitions without the need for equity fund-raising in the current volatile capital markets. On the other hand, our DDM-derived target price has been lowered marginally to S$2.75 as we increase our cost of equity assumption to 5.6% from 5.3% to reflect more volatile capital markets. Nevertheless, upgrade to Outperform as the current share price offers strong upside potential of 44%.