MI-REIT – BT
MI-Reit’s Q2 distributable income meets forecast
MACARTHURCOOK Industrial Reit (MI-Reit) said yesterday that its distributable income for the second quarter ended Sept 30 came in at $4.85 million, with distribution per unit (DPU) at 1.86 cents, both in line with its forecast.
This worked out to an annualised DPU of 7.38 cents, said MI-Reit. The annualised yield is 6.05 per cent based on the closing price of $1.22 per unit on Sept 30.
Its net property income of $5.91 million for the quarter was higher than the $4.7 million seen in the preceding quarter but was a 0.6 per cent dip from its own estimate.
Thanks to a revaluation of the initial 12 properties in MI-Reit’s portfolio, its net asset value per unit rose by 13.3 per cent quarter-on-quarter to $1.28, and raised its book value from $316.2 million to $354 million at the end of the fiscal second quarter.
‘In the short time since listing on April 19, we have successfully executed the acquisition of three properties; two of which are pending completion with an aggregate value of $109.3 million and the third, which has been completed for $16.8 million,’ said Chris Calvert, chief executive of the MI-Reit manager.
‘We continue to be focused on achieving our target of $500 million in acquisitions per annum,’ he added.
He noted that these acquisitions will enhance income stability and diversification as a result of the reduced reliance on any single asset for income.
Over the next 12-18 months, a majority of MI-Reit’s acquisitions will be made in Singapore but investment grade industrial property in Japan, Hong Kong, Korea and Malaysia will also be considered.
Given the bullish outlook on the rents and capital values of industrial space, which are poised for a further rise of up to 10 per cent in the final quarter of 2007, MI-Reit manager said it expects to deliver an annualised distribution of 7.58 cents for the current financial year ending March 31, 2008, in line with forecasts.
MI-Reit also announced yesterday that it has signed an agreement to buy a logistics and warehouse building at 11 Changi South Street 3 from Prologis Singapore Pte Ltd for $20.8 million. The property will then be sub-leased to its current tenant, Builders Shop Pte Ltd, for the remainder of the existing 10- year lease term that commenced on Dec 16, 2004.
At an initial yield of 7.23 per cent, the acquisition is accretive to MI-Reit’s DPU, it said, and is estimated to raise its fiscal 2008 DPU by 0.23 cent to 7.64 cents per unit and fiscal 2009 DPU by 0.22 cents to 7.81 cents per unit.
MapleTree – CIMB
Conducive growth environment
• Expect higher distributable income in 3Q07. MLT will be releasing its 3Q07 results on 25 Oct. We expect increased distributable income of S$20m, up 87% yoy and 13% qoq, powered by the acquisition of 32 properties totalling S$883m YTD. This includes the completion of acquisitions made in FY06 as well as acquisitions announced in FY07. DPU is expected to reach 6.4cts, 10% above our previous estimate of 5.8cts for the whole of FY07.
• DPU upgrade. In view of higher distributable income expectations for 2H07 with more completed properties, we have increased our DPU forecasts for FY07-09 by 10-13%.
• Low interest rates good for acquisitions. As long leases in MLT’s existing portfolio limit rental reversions and escalation, MLT’s income growth would be mainly driven by acquisitions, we believe. The downtrend in US interest rates is therefore a positive for MLT, which is highly leveraged.
• Maintain Outperform with a higher target price of S$1.65. Following our DPU upgrades, we have raised our DDM-derived target price from S$1.43 to S$1.65. We have also rolled over our valuation basis to CY08, with an unchanged cost of equity assumption of 6.9%.
MI-REIT – SGX
MACARTHURCOOK INDUSTRIAL REIT ACQUIRES CHANGI PROPERTY FOR S$20.8 MILLION
– Increases FY2008 DPU by 0.23 cents to 7.64 cents per unit and FY2009 DPU by 0.22 cents to 7.81 cents per unit
Singapore, 24 October 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 conditional call option agreement (the “Agreement”) to acquire a logistics and warehouse building from Prologis Singapore Pte Ltd ( “Prologis” or the “Vendor” ).
The property at 11 Changi South Street 3 (the “Property” ) will be sub-leased to its current tenant, Builders Shop Pte Ltd ( “Builders”) for the remainder of the existing 10 year lease term, which commenced on 16 December 2004. Builders, a division of SGX-listed Shining Corporation Limited, is primarily engaged in the supply of quality building materials. The acquisition is expected to be completed by 4Q FY2007.
At an initial yield of 7.23%, the acquisition of the Property is accretive to MI-REIT’s distribution per unit (“DPU”). The pro forma financial effect of the acquisition on DPU is:
– an additional 0.231 Singapore cents per unit, representing an increase of 3.10% from the forecasted FY2008 DPU of 7.41 Singapore cents per unit2 for the financial year ended 31 March 2008 (“FY2008”); and
– an additional 0.221 Singapore cents per unit, representing an increase of 2.90% from the forecasted DPU of 7.59 Singapore cents per unit2 for the financial year ended 31 March 2009 (“FY2009”).
Rationale for the acquisition
Mr Chris Calvert, CEO of the Manager, said: “We are pleased with the acquisition of 11 Changi South 3, which is a strategic operational fit for MI-REIT’s industrial property portfolio.
The acquisition expands our presence in Singapore’s logistics and warehousing property sector and brings our total investments to over S$500.9 million3 in 16 properties.”
The acquisition increases MI-REIT’s exposure to the tightly held Changi industrial precinct and the average lease expiry profile from 6.3 to 6.4 years.
Other benefits of the acquisition to MI-REIT’s portfolio include:
FrasersCT – OCBC
Investment case remains intact
4Q slightly better than expected. Frasers Centrepoint Trust’s (FCT) delivered 4Q07 revenue of S$19.8m, 5.0% higher than its prospectus guidance, with distributable income of S$10.3m and DPU of 1.67 cents. Distributable income was higher than FCT’s own forecast by about S$1.23m and this was attributed to associate income (from the recent acquisition of Hektar REIT), which was not anticipated in the forecast. The results are broadly in line with our estimates.
Anchorpoint refurbishment to complete in Nov. FCT’s asset enhancement of Anchorpoint Shopping Centre (ASC) is on track for completion by Nov 2007. The indicative rent from the revamped ASC is S$7.2 psf/month and this is about 35% above the preceding rent. The next asset that is likely to be revamped will be Northpoint and construction to commence in early 2008. This refurbishment is likely to be very extensive and would involve a seamless integration with the extension (Northpoint 2) that is presently being built by its sponsor. This in turn will affect DPU marginally and delay growth to FY09. We have thus revised our FY08F
DPU from 7.57 cents to 6.87 cents. FCT has also indicated that Northpoint 2 is likely to be acquired by late FY08 and should increase its portfolio size by about 10%.
Price to book is down as we expected. In our Aug 2007 report on FCT, we had articulated that the market could be punishing FCT for its perceived high valuation as measured by its Price/Book (P/B) ratio. We argued that the high ratio was mainly due to the fact that FCT had not revalued its book at its 1H results, unlike other retail REITs which did, thus resulting in much lower P/B ratios relative to FCT. In the current results, FCT has revalued its assets and has achieved a revaluation surplus of about S$52.5m (+ 5.6%). This in turn has bososted its book value to S$1.16 (from S$1.09). More importantly, this new NAV has lowered its P/B to only 1.29x (down from 1.4x in Aug) and in line with the sector average.
Maintain BUY. The investment case for FCT is simple; pipeline of properties to acquire from its parent, growth from asset enhancements, and rent reversions. The investment case remains intact and growth should start to materialize from FY09. We maintain our BUY rating and our fair value at S$1.67.