CMT – JPMorgan
Safer than houses, plus a better return
• Low-risk stock unfairly penalized: The stock has dropped 15% over the last month, and underperformed the STI by 5% over that timeframe. CapitaMall Trust’s (CMT) S$350million placement raised funds to pay down expensive debt, reducing its gearing to 35%. The placement should remove fears of a funding overhang.
• Asset enhancement value-add to become the most significant growth driver: CMT’s manager is undertaking asset enhancement works on 8 out of the 13 malls in the portfolio, and we anticipate the incremental returns should accelerate DPU growth to a three year CAGR of 9.5% to FY Dec 09E. We have adjusted our DPU estimates for the placement, and set a S$4.00 end Dec 08E target price (based on DDM), implying 25% upside from current levels.
• Market is mis-pricing CMT’s cost of capital: Our valuation sensitivity analysis indicates the market is imputing a cost of equity capital more than 100bps above our 5.96% estimate, as
well as a reduction in long-term growth assumption. The trust has the ability to pass through inflationary pressures having fixed almost all of its cost of debt whilst having the pricing power to raise rents through its asset enhancement and active leasing initiatives.
• Key risks to our price target and rating include management’s inability to execute on asset enhancement initiatives, an unexpected slowdown in retail rental growth, and a sudden change in interest rate expectations.
MI-REIT – SGX
– Increases FY2008 DPU by 0.27 cents per unit and FY2009 DPU by 0.27 cents per unit
Singapore, 29 November 2007 – MacarthurCook Investment Managers (Asia) Limited (“MCKIM Asia”), the Manager of MacarthurCook Industrial REIT ( “MI-REIT” ), is pleased to announce that MI-REIT, through its Trustee, HSBC Institutional Trust Services (Singapore) Limited ( the “Trustee” ), has signed a sale and purchase agreement to acquire an office and warehouse facility in the Tai Seng industrial precinct for a total consideration of S$25.0 million.
Under the agreement, Powermatic Data Systems Limited (“Powermatic”), a publicly company listed on the Singapore Exchange, will leaseback 135 Joo Seng Road for five years with the option to extend for another five years. The lease will commence upon completion of the acquisition, which is scheduled for February 2008.
Powermatic is a high end manufacturer and distributor of computer hardware and software products in Asia, Europe and the United States.
135 Joo Seng was transacted at the initial yield of 7.3%, and will be accretive to MI-REIT’s distribution per unit (“DPU”) following completion. The pro forma financial effect(1) of the acquisitions on DPU is:
– an additional 0.27 Singapore cents per unit, representing an increase of 3.64% from the forecast(2) FY2008 DPU of 7.41 Singapore cents per unit for the financial year ended 31 March 2008 (“FY2008”); and
– an additional 0.27 Singapore cents per unit, representing an increase of 3.56% from the forecast FY2009 DPU of 7.59 Singapore cents per unit for the financial year ended 31 March 2009 (“FY2009”).
(2) No comparisons against a corresponding period in the previous year can be made as no pro forma financials are available. SGX-ST had granted MI-REIT a waiver from the requirement to prepare historical pro forma statements of total return, cash flow statements and balance sheets for the purpose of its initial public offering.
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MapleTree – SGX
MAPLETREELOG ACQUIRES 8th PROPERTY IN JAPAN FOR S$18 MILLION
(1) Based on exchange rate of S$1.00 = JPY80.19
(2)Assuming MapletreeLog has purchased, held and operated the property for the financial year ended 31 December 2006 (based on 41 properties) and that the acquisition is 100% debt-funded.
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AllCo – BT
Allco cancels US$104m unit offer
SINGAPORE – Allco Commercial Real Estate Investment Trust, a property trust based on Singapore and Australian assets, said on Wednesday it has cancelled a planned preferential offering that would have raised up to $150 million (US$104 million) due to poor market conditions.
The trust said it was not proceeding with its plan, announced on Nov 16, to sell up to 175.2 million units to existing unitholders under a one-for-four preferential offer.
‘There is no pressing need for Allco Reit to be raising capital at this time,’ Nicholas McGrath, chief executive officer of Allco Reit’s manager, said in a statement.
Rising risk aversion has turned off investors from yield-driven property and asset trusts, sparking the cancellation of two major initial public offers in Singapore worth a combined US$800 million earlier this month.
An aircraft lease backed by a unit of General Electric and a real estate investment trust by Japanese developer Asia Pacific Land Group postponed their Singapore IPOs after a disastrous market debut by Saizen Reit, whose units fell 13 per cent on its Nov 2 debut. — REUTERS
PST – UOBKH
PST (PST SP)
Share Price: US$0.41
Target Price: US$0.50
PST has announced that it is acquiring from its sponsor Pacific International Lines (PIL) two new 1,800 TEU container vessels at US$43m each. The acquisitions are pursuant to a right of first refusal agreement entered into between PST and PIL dated 25 April 2006 and will increase PST’s fleet by 16% from 22,364 TEUs to 25,964 TEUs. The new vessels are currently being built by Dalian Shipbuilding Industry Co. Simultaneously, PST has entered into bareboat charters with PIL. The charter hire per vessel has been agreed at a fixed rate of US$11,550 per day for eight years commencing from the date of completion of the acquisitions.
The vessels have been valued by Howe Robinson Marine Evaluations at US$43m, as at 23 Oct 07 on a charter-free basis. The vessels are scheduled to be delivered by Dalian Shipbuilding to PST in Mar 08 and May 08 respectively. PST expects the acquisitions to be accretive to PST’s distributable cash flow once they are delivered and in operation. The vessels will increase PST’s current aggregate contracted revenue by 15.7 % to approximately US$ 61.9m per annum. The acquisitions will also increase PST’s current contracted fleet from 10 to 12 vessels.
PST intends to fund the acquisitions wholly with debt finance although the final financing structure will be subject to further evaluation by the trustee manager. In determining the appropriate financing for PST in respect of the acquisitions, the Trustee-Manager will take into account amongst others prevailing market conditions and the relative costs of financing with a view to arriving at an efficient capital structure for PST. There will be no acquisition fee payable to the Trustee-Manager in connection with the acquisitions.
We estimate the two vessels will contribute a gross charter income of US$4.2m per vessel. Net of trustee fees, the operating profit before funding cost is US$4.0m per vessel. This translates into a net asset yield of 9.4% (operating profit before funding). Assuming cost of debt at 6%, the accretion to PST’s distributable cash flow before debt repayment is 3.4% or a total US$2.9m for both vessels. This represents an increase of 16% on our FY09 projected distributable cash of US$17.9m for PST. The actual impact on distributable cash flow will depend on the debt repayment structure. If PST were to adopt the same debt structure of as the other two shipping trusts, Rickmers Maritime and FSL Trust (i.e. a balloon or bullet repayment structure with no or minimal debt repayment in the vessels’ initial years), the acquisitions will be significantly accretive to distributable cash. Among the three shipping trusts, PST is already the most conservative in repayment of debt related to the initial shipping fleet. It is currently repaying its debt over 10-12 years from IPO against its initial fleet’s remaining useful lifespan of 26 years from IPO.
Maintain BUY and our target price of US$0.50. PST currently trades at a net dividend yield of 10.4%.