AREIT – CIMB
Record occupancy lifts DPU
• 3Q08 results exceed expectations. Gross revenue rose 12.8% yoy to S$80.2m in 3Q08 while distributable profit grew 15.1% yoy to S$47.2m. 3Q08 DPU of 3.56 cts represents 26% of our full-year forecast and consensus and fulfils 76% of our FY08 DPU forecast. This could be attributed to higher occupancy levels in its multitenanted buildings (97% vs. 96.2% in 2Q08). A-Reit’s portfolio occupancy reached a record high of 98.7%, up from 96.1% a year ago. Renewal rates for the Business Park and Hi-Tech segments also grew by double digits (+46.1% and +71.5% over previous transacted rates respectively).
• Upcoming acquisitions. A-Reit announced MOUs amounting to S$201m for the acquisition of income-producing properties. In addition, it has completed the acquisition of Goldin Building at Pioneer Walk for S$22.5m. To date, A-Reit has invested S$299m in new acquisitions and S$338m in development projects, which would be completed over 2009-10. We believe it is on track to achieve its target asset size of S$5bn by end-2010.
• HansaPoint @ CBP fully pre-committed. Scheduled for completion in 1Q08, Hansa Point, a multi-tenanted business park building, is now 100% pre-committed with more than 50% of the pre-commitment coming from financial institutions as the office crunch persists.
• Large impending warehouse supply may dampen rents. According to URA statistics, some 6.7m sf of gross warehouse space is due for completion in 2008-09. We estimate this could translate to an average 2.7m sf of net warehouse space p.a., more than double the last five years’ average net new supply of 1.3m sf p.a. This is likely to have a negative impact on A-Reit’s income stream as the logistics segment is its income largest contributor.
• Downgrade to Neutral from Outperform; target price lowered to S$2.83 from S$2.89. In view of the impending warehouse oversupply, we have moderated our income estimates for the logistics segment. This lowers our FY09-10 DPU forecasts by 1.2-1.8%. Accordingly, our DDM-derived target price has been trimmed from S$2.89 to S$2.83 (cost of equity unchanged at 6.2%). Downgrade to Neutral as we believe that the stock will track the STI’s performance in the near term.
AREIT – UOBKH
3QFY08: Fewer acquisitions, more development projects
Rising rental rates for Science & Business Parks and Hi-Tech Industrial sectors. Gross revenue expanded 12.9% yoy to S$80.2m in 3Q08. Overall occupancy reached an all-time high of 98.7%, compared to 96.1% last year. This is driven by demand for office space outside the Central Business District (CBD) and multinational companies expanding their operations in Singapore. A-REIT announced DPU of 3.56 cents for 3QFY08, an increase of 11.3% yoy. This will be paid on 29 Feb 08.
A-REIT has renewed and signed new leases including expansion for total net lettable area of 505,182sf during the quarter. They represented 6.8% of net lettable area for multi-tenanted buildings. Renewal rental rates for Science & Business Parks and Hi-Tech Industrial sectors were 46.1% and 71.5% higher compared to previous transacted rates. New tenants include Pfizer at The Capricorn. A-REIT also completed the acquisition of Goldin Building, a logistics building at Pioneer Walk, for S$22.5m.
Positive impact from rental reversion. A-REIT has a portfolio of 79 properties with average lease to expiry at 6.2 years. It benefits from the surge in office rental within the CBD. This has forced many companies to relocate backend operations to suburban locations. Only 1% of its leases will expire this year. Positive rental reversions will knick in subsequently with 42.7% of its leases expiring from 2009 to 2011. 52.8% of the leases expiring are in the high-growth
Science & Business Parks and Hi-Tech Industrial sectors.
More development projects. A-REIT has four development projects worth S$338m. HansaPoint@CBP, a partial built-to-suit development project, has achieved 100% pre-committed occupancy and is expected to be completed by Feb 08. The other three development projects are also substantially precommitted to tenants such as Zuellig Pharma and Citigroup. Development projects provide yield of 8-9% compared to yield of 6-6.5% from acquisitions.
Maintain BUY. A-REIT’s share price has retraced to a more attractive level and provides annualised distribution yield of 6.5%, among the highest for S-REITs.
AREIT – DBS
Slowly and steadily
Comment on Results
A-REIT reported 15% higher net income available for distribution yoy at S$47.2, on the back of 13% increase in gross revenues to S$80.2m. This was mainly due to additional rental income from completed acquisitions and positive rental reversions from its high-tech industrials and business as well as science parks.
Average occupancy levels rose to 98.7% as at 31 Dec 07 compared to 96.1% a year ago.
Leverage at 38.6%. As at end Dec 07, AREIT had an aggregate gearing of 38.6%, which was 88% fixed at 3.39% and an average weighted term of 3.92 years. Interest cover ratio was 5.32x.
Recommendation
As at 31 Dec’07, A-REIT’s portfolio consisted of 79 properties with five additional investments worth S$277m and MOUs worth S$200m expected to be included into the portfolio in stages
over the next few years. In the near future, we await HansaPoint @ Changi Business and Plot 7 & 8 Changi LogisPark to be injected into the portfolio (Total value: S$61m).
Moving forward, we expect A-REIT to seek higher yielding development projects and purchase 3rd party acquisitions at the same time.
Maintain BUY at TP S$2.80 based on DCF valuation. We have reduced FY09 DPU contribution by 2% as we are now assuming S$200m worth of acquisitions in FY08 (previous : S$400m). YTD, acquisitions have hit S$98m and we expect part of the MOUs worth S$200m to materialise in FY08. In view of the additional investments secured and possible 3rd party acquisitions coming on stream, we maintain our forward acquisition assumptions of S$400m p.a.
till FY10.
MI-REIT – BT
MI-Reit postpones fund-raising exercise
MACARTHURCOOK Industrial Reit (MI-Reit) is postponing its $200 million equity fund-raising exercise given the poor market conditions, the trust said yesterday.
‘We have taken into consideration the current turmoil in the international capital markets in reaching the decision to postpone the proposed equity fund- raising to preserve the value of unitholders’ equity,’ said Chris Calvert, CEO of MI-Reit’s manager.
The trust announced in December that it intended to raise up to $200 million in gross proceeds. But now, the proposed equity fund-raising will be postponed until ‘markets are more conducive’, the trust said.
MI-Reit had intended to use the proceeds of the exercise to refinance its recent property acquisitions in Singapore and Japan, thereby freeing up capital for further acquisitions.
Following the expected completion of its committed acquisitions in the fourth quarter ending March 31, 2008, the aggregate leverage of MI-Reit and its subsidiary and controlled entity Japan Industrial Property will be about 41 per cent – notwithstanding the equity fund-raising, the Reit said yesterday. ‘This gearing is comfortably within MI-Reit’s long-term target gearing of 40- 50 per cent,’ the trust said in a filing to the Singapore Exchange.
Stock markets across Asia have taken a beating this month on the back of turmoil in the global capital markets, brought on by the sub-prime loans crisis and fears of a recession in the United States.
In Singapore, the benchmark Straits Times Index has slipped 10.4 per cent since the start of the year. In contrast, MI-Reit’s stock has fallen 18.2 per cent, losing three cents to close at a one-year low of 90 cents yesterday.
AREIT – BT
A-Reit distributable income up 15% in Q3
ASCENDAS Real Estate Investment Trust (A-Reit) yesterday reported distributable income of $47.2 million for the three months to end-December, up 15 per cent from a year earlier.
Gross revenue for the third quarter of its financial year, which ends on March 31, rose 13 per cent to $80.2 million, due mainly to additional rental income from a string of completed acquisitions, including the Courts and Giant warehouse retail facilities in Tampines and the completed asset enhancement at The Alpha building in Science Park II.
A-Reit’s distribution per unit for the three-month period was 3.56 cents, 11 per cent higher than a year ago.
For the nine months ended Dec 31, A-Reit’s distributable income came to $138.3 million, up 14 per cent from the same period a year ago. Gross revenue rose 14 per cent to $237.8 million.
The trust’s annualised distribution per unit of 13.92 cents – based on the 10.44 cents for the nine months ended December – translates into a distribution yield of 6.4 per cent, based on A-Reit’s closing price of $2.19 yesterday. The counter ended nine cents higher in yesterday’s trading.
A-Reit’s spokeswoman declined to comment on market speculation that Australia’s Goodman Group is poised to exit Ascendas-MGM Funds Management, a 60-40 joint venture between Ascendas Pte Ltd and Goodman International that manages A-Reit.
A-Reit’s portfolio comprised 79 properties at the end of 2007, compared with 68 properties a year earlier. The trust’s portfolio includes logistics and distribution centres, business and science park buildings, and light industrial and high-tech industrial properties.
In Q3, A-Reit’s portfolio occupancy rate rose to a high of 98.7 per cent, from 96.1 per cent a year ago. The trust’s properties in the business and science park sector achieved a 46.1 per cent increase in renewal rental rates versus existing rental rates while lease renewals for its high-tech industrial properties were at rental rates 71.5 per cent above existing rents, said A-Reit in a statement.