FirstREIT – BT
First Reit goes on acquisition trail
It aims to boost its asset portfolio to $500m by 2009
FOLLOWING the recent announcement by First Real Estate Investment Trust that its distributable income of $4.5 million for the second quarter exceeded forecasts by 3.8 per cent, the Reit is embarking on an acquisition trail to raise asset portfolio to $500 million by 2009.
Singapore’s first healthcare real estate investment trust recently completed its acquisition of Adam Road Hospital for $14.9 million.
With its first hospital acquisition in Singapore, earnings from hospitals will contribute further to First Reit’s revenues.
In the second quarter ended June 30, First Reit reported that net property income rose 8.6 per cent to $6.5 million on the back of maiden contributions from its three recently acquired nursing homes in Singapore.
‘We believe that our yield of 8.19 per cent continues to be one of the highest among Singapore Reits. With a clear focus in Asia’s booming healthcare sector, First Reit offers investors a unique and growing asset class which holds immense potential for yield and capital growth,’ said Bowsprit Capital Corporation chief executive Ronnie Tan, who manages the Reit.
Since its listing in December, First Reit has expanded its asset base by about 20 per cent and now holds eight healthcare assets totalling $308 million. It has four assets in Indonesia, three of which are hospitals. In Singapore it has three nursing homes and a hospital.
Dr Tan said: ‘We will continue to be fairly aggressive in looking for assets, not only in Indonesia and Singapore but we are very keen to look at Chinese assets. In the near term, China will present us with very good opportunities and we hope that in three to six months we will be able to firm up positions in China.’
In Singapore, First Reit will continue to look for further nursing homes. Dr Tan said they provide a stable business in the long term, due to Singapore’s ageing population.
The Singapore Reit is also exploring potential acquisitions with its Indonesian sponsor Lippo Karawaci. Possible projects include Siloam Hospitals Lippo Cikarang and Siloam Hospital Semanggi, which will house Indonesia’s first private cancer treatment centre.
To finance its acquisitions, First Reit has a $90 million term loan facility with OCBC. Including the latest acquisition of Adam Road Hospital, First Reit’s gearing stands at 16.5 per cent.
First Reit’s distribution per unit for the second quarter was 1.65 cents – 3.8 per cent above forecast. The Reit’s shares closed at 82 cents yesterday, up 1.2 per cent.
AscottREIT – SGX
ART’S UNITHOLDERS’ DISTRIBUTION 58% ABOVE 2Q 2006
Achieved DPU growth of 18% in 2Q 2007 vs 2Q 2006
Singapore, 25 July 2007 – Ascott Residence Trust (ART) achieved a unitholders’ distribution of S$12.1 million for the period 1 April 2007 to 30 June 2007, a 58% increase over the same period last year. Distribution per unit (DPU) for the same period is 2.01 cents, 18% increase over 2Q 2006. This is also 10% higher than the forecast DPU of 1.821 cents as stated in the Offer Information Statement dated 12 March 2007.
Based on the 2007 forecast annualised DPU of 7.272 cents and closing price of S$2.00 per unit on 24 July 2007, ART’s trading yield is 3.6%.
Mr Chong Kee Hiong, Ascott Residence Trust Management Limited’s (ARTML) CEO said: “Comparing 2Q 2007 against 2Q 2006, ART has clearly demonstrated its ability to acquire yield-accretive assets post-listing that have boosted unitholders’ distribution to S$12.1 million, and DPU to 2.01 cents, representing a 58% and 18% increase respectively.”
“ART’s properties have done well to report a performance better than forecast. This is attributed to higher revenue and gross profit achieved by the portfolio. In particular, our Vietnam and Singapore properties achieved the strongest performance, with double-digit growth in revenue and gross profit. ART is on track to deliver the forecast annualised DPU of 7.27 cents for the full year,” he added.
Mr Lim Jit Poh, ARTML’s Chairman said: “Since its listing in March 2006, ART has achieved a geographically-diversified asset portfolio, with properties located in both stable and emerging markets. Going forward, ART will further grow its portfolio by acquiring quality, yield-accretive serviced residences and rental housing from The Ascott Group as well as from third parties.”
ART’s portfolio currently comprises 2,942 serviced residence units in 18 properties in 10 cities across seven countries.
An advanced distribution of 1.50 cents per unit for the period 1 January to 25 March 2007 was paid on 28 April 2007. The next distribution of 2.10 cents per unit to be paid on 28 August 2007 will comprise ART’s distributable income for the period from 26 March 2007 to 30 June 2007.
1 The forecast is extracted from the Offer Information Statement dated 12 March 2007, prorated for 1 April 2007 to 30 June 2007.
2 This forecast is extracted from the Offer Information Statement dated 12 March 2007.
Source : SGX
FrasersCT – UOBKH
3Q07: Topline In Line With Forecast
Gross revenue of S$18.9m and NPI of S$12.6m in line with forecast. FCT reported a gross revenue of S$18.9m and NPI of S$12.6m, in line with forecast. DPU, however, was 14.4% above forecast at 1.67 Scts. Revenue growth was mainly a result of more than 90% of new and renewed leases from Causeway Point, which secured rental renewal rates of more than 10% above preceding rates. Northpoint also extended five expiring leases for a period of one year in anticipation of its pending asset enhancement in FY08.
Key driver from acquisitions and asset enhancements. FCT completed its acquisition of 27% stake in Hektar REIT in Jun 07, Malaysia’s only pure retail REIT listed consisting of suburban regional malls, Subang Parade in Selangor and Mahkota Parade in Malacca. Going forward for the next three years, we believe that the growth driver will come from acquisitions of Northpoint 2, Yew Tee Mall, Bedok Mall and Centrepoint, and also continued asset enhancements to Causeway Point, Northpoint and Anchorpoint.
CRCT – UOBKH
2Q07: DPU Growth Despite Lower Revenue
DPU growth of 9.6% despite lower gross revenue. CRCT’s gross revenue of S$17.6m and NPI of S$12.4m came in lower than its forecast by 7.2% and 1.6% respectively. This lower revenue is largely due to longer than expected time taken to conclude lease negotiations with F&B tenants in Qibao Mall, and also to a smaller extent, weakening of RMB against Singapore Dollars. Despite that, DPU reported 1.27 Scts in 2Q07, a 9.6% increase over its forecast.
Impact of reconfiguration works to come in 2H07. Despite several issues faced associated with its reconfiguration works, such as longer than expected time taken by authorities to approve tenants’ business operations, pretermination of leases as well as affected shoppers traffic, we believe CRCT is capable of resolving the issues with the stabilising of rental income and impact of asset enhancements to come in the second half of the year. Potential upside may also be derived from improvements in occupancy rates of Wangjing Mall, Qibao Mall and Xinwu Mall whose current occupancy rates are at 90.3%, 78.0% and 81.5% respectively.
Aggressive acquisition pipeline. CapitaLand, CRCT’s parent, has signed an agreement with Vanke, China’s largest residential developer to acquire retail malls in China. CapitaLand has already identified a list of retail malls for CRCT where it has the first refusal, allowing its current portfolio to potentially grow multi-fold for the next few years. We believe acquisitions and continued asset enhancements will be the key stock driver going forward.
CMT – DBS
More of Funan Digilife in store
Unutilised GFA paves the way for development plan. Asset enhancement plans are continually unwrapped by CMT, creating value to its portfolio on a consistent basis. This time, it centres around 385,000 sf of unutilised GFA of derived from a maximum plot ratio of 7x. This paves the way for further value creation opportunities for CMT on top of the various asset enhancement initiatives as discussed in our previous note on various assets under its portfolio.
Office extension in store. As revealed by CMT recently, its planning application has received provisional approval from URA, paving for the development of a nine-storey commercial building as an extension to the existing retail mall. To achieve a more efficient floor plate for the proposed new office block extension, CMT is appealing to URA for an additional waiver. We expect CMT to disclose more details for this new development soon as the latest edition of a consistent string of AEI initiatives, pending finalisation of details with URA.
Preliminary assumptions. Assuming S$400 psf development cost for the office extension fully funded by debt with 80% efficiency of floor plate, we expect this piece of asset enhancement to be highly accretive ROI of 15% on book costs of development (inclusive of DC) based on our estimates. We expect DPU accretion of 6% to our 2011 DPU estimates, assuming a three-year development time frame.
Raising TP to S$4.31. Factoring the potential addition of Funan Extension to CMT’s portfolio, we derive accretion of 24 cents to our DCF-based target price of S$ 4.31 (inclusive of surplus on CRCT stake). Maintain Buy on CMT, in our view the primer of S-REITs supported by consistent performance in organic growth, asset enhancement initiatives as well as acquisitions-driven growth reinforced by alternative channels of acquisition pipeline.