CDLHTrust – DBSVickers
Call for Capital
New share issue: CDLHT is issuing 130m new shares in two tranches: 1) A non-renounceable preferential offering to Singapore-registered security holders on 3 for 20 basis; and 2) A private placement to institutional and other investors. The issue price is expected to be close to 10% discount to the weighted average price for trades done for the day the placement agreement is signed. The purpose is to repay certain existing debts and for general corporate and working capital. It will also help to lower the gearing ratio, providing the REIT flexibility to make further yield accretive acquisitions.
Maintain Buy, TP S$2.81: We assume the pricing for the new tranches to be at S$2.20 per share, translating to a potential increase in capital of S$286m. This will help to offset the capital for the Novotel Clarke Quay purchases of S$201m and some other outstanding debts. The capital call will also lower their gearing. We remain positive on the stock as current hotel demand outweighs supply plus the upcoming mega projects and events will help sustain visitor arrival growth. We have raised our forecast for Singapore hotel rates to increase at a 18% y-o-y from 2007 to 2012 for RevPAR under their portfolio. Maintain Buy, target price increased to S$2.81 at parity to our DCF calculation based on fully diluted basis. This is the best stock within the property sector with the highest exposure and benefits the most from the tourism sector’s upturn.
CCT – OCBC
CCT’s associate grows. CapitaCommercial Trust’s (CCT) 30% Malaysian associate Quill Capita Trust (QCT) recently announced its intention to acquire 2 properties in Kuala Lumpur for RM215m. This would be QCT’s first acquisition post IPO and is in line with its growth strategy to double its asset size to RM 560m by end 2007. The acquisition is to be equity funded and CCT intends to subscribe to its allocation to maintain its proportionate stake in QCT, and the amount is small at under S$30m. More importantly, with its gearing standing at 32% and an investment portfolio value of about S$3.8bn, its balance sheet is well able to support additional debt of over S$500m.
Divestment gains. One of the assets that QCT is buying is Wisma Technip, which CCT has an interest via its 100% investment in its junior bonds. The acquisition price of RM125m will result in CCT recognizing a divestment gain of RM4.4m (about S$2.0m). As completion is in 4Q07, we will adjust our forecast upon the release of CCT’s 1H07 results expected in late July.
Asset enhancement at Raffles City. Presently, the key development is the asset enhancement works (AEW) at Raffles City. CCT intends to decant space currently used for mechanical and engineering equipment. This will release about 41,000 sq ft of space for retail use. It will be spread over 3 levels and will encompass building a 3-storey island podium. The estimated cost is S$56m and funding will be via debt. As stated previously, we see no issues with respect to debt funding. Construction has started and completion is expected by end 2007. The estimated bottom-line accretion from this AEW is about S$2.7m, or a DPU of 0.20 cent.
Maintain HOLD. In light of the development and the expected rapid growth of QCT, we are including QCT’s market capitalization into CCT’s valuation. Presently, the effect is small at about S$0.04/CCT unit. However, depending on how the REIT sector pans out in Malaysia, QCT’s valuation to CCT could be meaningful in the future. More significantly is the expected asset size growth for CCT, and management has guided on S$5-6.0bn by 2009. We see this as achievable with the positive outlook for the office sector. Our valuation has an asset target size of $5.5bn. Finally with the inclusion of QCT, our fair value estimate is revised up from S$2.58 to S$2.62. We maintain HOLD rating.
AllCo – SGX
RIGHTS ISSUE PRICE AND UNDERWRITING PRICE
Further to the announcements made by Allco REIT on 25 May 2007 and 26 May 2007, the Board of Directors of Allco (Singapore) Limited, as manager of Allco REIT (“Manager”), is pleased to announce that the Rights Issue Price per Rights Unit is S$1.04. Applications for Excess Rights Units by Eligible Unitholders will be made at the Underwriting Price of S$1.14. Any Remaining Rights Units will be underwritten by the Sole Underwriter at the Underwriting Price.
Further details will be set out in the circular (which includes the Offer Information Statement) to be lodged with the MAS and despatched to Unitholders in due course.
Source : SGX
Cambridge – SGX
COMPLETION OF THE ACQUISITION OF 28 SENOKO DRIVE AND DP COMPUTERS BUILDING LOCATED AT 128 JOO SENG ROAD FOR A TOTAL SUM OF S$22.0 MILLION.
1. Cambridge Industrial Trust Management Limited (the “Manager”), the Manager of Cambridge Industrial Trust (“CIT”), is pleased to announce the completion of the acquisition of two properties with a combined acquisition value of S$22.0 million. 28 Senoko Drive, Singapore 758214 was acquired at a purchase price of S$12.0 million while DP Computers Building located at 128 Joo Seng Road, Singapore 368356 (collectively known as the “Properties”) was acquired for S$10.0 million on 25 June 2007.
2. On 25 June 2007, RBC Dexia Trust Services Singapore Limited as trustee of CIT (the “Trustee”) exercised the put and call option agreement dated 25 April 2007 with Tat Seng Packaging Group Ltd (“Tat Seng”) for the purchase of 28 Senoko Drive. On the same day, the put and call option agreement dated 9 April 2007 (collectively known as the “Option Agreements”) with DP Computers Pte Ltd (“DP”) was also exercised by the Trustee for DP Computers Building.
3. Pursuant to the exercise of the respective Option Agreements, the Trustee signed and completed the sale and purchase agreements for the two Properties respectively.
4. The purchase price and other acquisition-related costs of the Properties are fully funded by debt.
5. 28 Senoko Drive – Located along Senoko Drive, the Property is a single-storey industrial cum warehouse facility with a four-storey ancillary office building. It has a gross floor area of 14,803.0 sq m, and is built on a land area of 20,070.9 sq m. The land has a leasehold title of 30 years commencing from 16 December 1979 with an option for further term of 30 years. The Property will be leased back to Tat Seng for 15 years with an option to renew for a further term of 5 years upon the completion of the sale and purchase. The rent escalation of 7% will commence at the beginning of the fourth, seventh, tenth and thirteenth years.
DP Computers Building – Located at the junction of Joo Seng Road and Kampong Ampat, the Property is a seven–storey light industrial building. It has a gross floor area of 8,626.0 sq m occupying a land area of 3,458.4 sq m. The land has a leasehold title of 30 years with effect from 1 May 1992 with an option for a further term of 30 years. DP and Seng Huat Packaging Pte Ltd will jointly leaseback the Property for 7 years with an option to renew for a further term of 3 years. The rent escalation of 5% will commence at the beginning of the third and fifth years.
Source : SGX
A-REIT : UOBKH
Quasi-Office Play
Ascendas Real Estate Investment Trust (A-REIT) is our top pick in the industrial segment in view of its quasi-office play. With industrial rents being significantly lower than office rents, A-REIT’s high-growth assets (business parks and hi-tech industrial space) are quality alternative solutions for limited office space.
Key beneficiary of strong spillover from office demand. A-REIT’s portfolio, with business & science parks making up 20.1% and hi-tech industrial space 24.2%, is valued at more than S$1.4b. This makes A-REIT a key beneficiary of the spillover from office demand for the next 2-3 years. Also, most leases in the business & science parks (73.9%) and hi-tech industrial (64.6%) segments are on a short-term basis, so A-REIT can ride on the upward rental reversions.
Acquisitions still the key driver. A-REIT’s aggressive acquisition trail will be the key growth driver. A-REIT is on track to reach its target of S$5b worth of investment properties by end-2010. Although management plans to focus on the domestic market in the short term, it can also tap on parent Ascendas’ operational experience in India and China for overseas exposure in the longer term. A-REIT will be a likely exit option for properties under the various funds in which Ascendas has a stake, including Ascendas India Development Trust and Ascendas India IT Parks Fund. Management estimates every S$100m worth of acquisitions at the current capitalisation rates would translate into a 10-cent rise in DPU.
Development projects to lift yields. In 2006, A-REIT pioneered two warehouse-retail developments: Courts Megastore and Giant Hypermart. Such development projects could lift yields by 1.5-2% and double the DPU of acquisition projects, although with a longer time lag. The company is also undertaking other development projects, namely HansaPoint @ Changi Business Park, Zuellig Pharma and Goldin.
Re-iterate BUY, revised target price: S$3.13. Based on our new WACC assumptions, we re-iterate BUY and revise our target price from the previous S$2.87 to S$3.13, implying an upside of 11.1% and total return of 17.6%. Other earnings surprises could come from asset-enhancement activities to maximise plot ratio and occupancy rate improvements.