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SGX Stocks and Warrants

Author: kimeng   |   Latest post: Mon, 20 Jan 2020, 3:24 PM

 

Mapletree North Asia Commercial Trust: Worst Likely Over

Author: kimeng   |  Publish date: Mon, 20 Jan 2020, 3:24 PM


  • 3QFY20 DPU fell 13.3% YoY
  • Expect sequential improvements ahead
  • Occupancy at Gateway Plaza dipped

3QFY20 Results Met Our Expectations

Mapletree North Asia Commercial Trust (MNACT) reported its 3QFY20 results which came in within our expectations. Gross revenue and NPI dipped 36.3% and 40.0% YoY to S$67.3m and S$50.8m, respectively. This was primarily attributed to the closure of Festival Walk (FW) mall from 13 Nov 2019 to 16 Jan 2020, which resulted in no rentals being collected while the mall was closed. There was also weaker contribution from Japan due to the expiry of a single tenancy and from Gateway Plaza (GP) as a result of higher vacancies.

DPU fell by a smaller magnitude of 13.3% YoY to 1.671 S cents as there was a distribution top-up of S$25.8m (~0.809 S cents per unit) in relation to FW’s closure (office component was closed from 13 to 25 Nov 2019). On a 9MFY20 basis, MNACT’s NPI fell 10.0% to S$220.6m, while DPU was down 3.1% to 5.558 S cents and this formed 75.3% of our FY20 forecast.

Some Challenges Seen in China Too

Operationally, MNACT’s portfolio occupancy declined 2.6 ppt QoQ to 96.3%. Although FW’s occupancy remained full, that of GP fell 4.9 ppt to 91.6% due to the soft economic conditions and more intense competition. Average rental reversions were -3% for GP for 9MFY20 (1HFY20: -4%), but remained stable at +12% for FW’s retail component as there were not many leases renewed in 3QFY20 (% of expiring leases in FY20 which were renewed/re-let increased from 85% in 1HFY20 to 90%). FW’s footfall and tenants’ sales slipped 5.1% and 8.7% for 7MFY20 (1HFY20: -3.6% and -6.6%, respectively). Figures for Nov and Dec were not provided given the closure of the mall from 13 Nov.

FY21F Distribution Yield of 6.1%, as at 17 Jan Close

Looking ahead, as FW mall has reopened on 16 Jan and this was earlier than management’s previous expectations, MNACT highlighted that it will no longer be providing any distribution top-ups in 1QFY21 (within our expectations). The distribution top-up for 4QFY20 will still be in place. There is no visibility on when the insurance reimbursements would come in.

As the bulk of the period of FW mall’s closure was in 3QFY20, we believe the worst is likely over for MNACT, although uncertainties remain. We increase our fair value estimate marginally to S$1.37 (previously S$1.36) due to lower estimated units to be issued for management fees given the recent recovery in share price. We opine that FY21 distribution yield of 6.1% (based on S$1.24 closing price) remains relatively attractive.

Source: OCBC Research - 20 Jan 2020

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Singapore Press Holdings: Media Still the Drag

Author: kimeng   |  Publish date: Wed, 15 Jan 2020, 10:12 AM


  • S$7.2m one-off retrenchment cost booked
  • UK PBSA competition increasing
  • FV of S$2.28

1QFY20 Results Came in Under Expectations

SPH’s 1QFY20 results came in below our expectations. Operating revenue fell 4.1% YoY to S$244.0m, on the back lower advertisement (-16.1%) and circulation revenue (-4.3%), though these were partially offset by higher property revenue from the group’s PBSA portfolio and Figtree. The group also recorded a one-off S$7.2m retrenchment cost associated with the media segment.

The group’s media business continues to struggle, with declines in newspaper print ad revenue still yet to find a bottom (-19.8% YoY; was -7.2% and -19.0% in 1QFY19 and 4QFY19, respectively). The group recorded a fair value gain of S$10.5m from its Mayflower student housing portfolio following an adjustment of the purchase consideration.

Share of losses of associates/JVs narrowed from S$2.4m in 1QFY19 to S$0.8m in 1QFY20, due largely to contribution from M1. Core PATMI came in at S$35.8m, comprising 22% of our full-year forecast.

Maintaining Fair Value of S$2.28

Prospects for the group’s media business remains challenging, with advertisers scaling back due to the uncertain business outlook. Still, media’s current contribution to PBT is relatively low at ~11% in 1QFY20, down from the ~43% level seen in 1QFY19.

Moving forward, we believe the group’s property vertical will continue to be the key area of focus to bolster recurring income, as seen by the post- 1QFY20 addition of 2,383 beds to its UK PBSA portfolio and the expansion of SPH REIT into Adelaide. This brings the group’s PBSA portfolio to 7,726 beds across 18 cities in 2 countries. Still, there appears to be growing recognition that it might be increasingly difficult to bulk up in the UK.

For its latest Student Castle portfolio, we believe that the cap rate should be below 5%, while the blended basis of the group’s larger portfolio is mid-5%. To that end, other markets like Germany might prove to be more attractive.

On the group’s joint project with Kajima in Bidadari, we believe that the group is pacing itself, with a view that 2H20 might potentially be a better period for sales. We maintain our FV of S$2.28 for now.

Source: OCBC Research - 15 Jan 2020

Labels: SPH
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SPH REIT: In-line Set of Results

Author: kimeng   |  Publish date: Mon, 13 Jan 2020, 10:11 AM


  • High portfolio occupancy rate of 99.3%
  • Positive rental reversions for Singapore portfolio
  • Higher FV estimate of S$1.13

1QFY20 Results Within Expectations

SPH REIT’s 1QFY20 results came in within expectations. Gross revenue grew by S$6.3m or 11.8% YoY to S$60.1m and net property income (NPI) increased by S$5.2m or 12.4% YoY to S$47.0, on the back of higher contributions from Paragon and Figtree Grove Shopping Centre, Australia which was acquired on 21 Dec 2018. DPU reported a growth of 3% YoY to 1.38 S cents, which was inline, at 24% of our initial full-year estimate. Gearing ratio remained healthy at 26.8% and average cost of debt was 2.91% as at 31 August 2019.

Singapore Portfolio Remained Healthy

Overall portfolio committed occupancy remained strong at 99.3%. SPH REIT’s three assets in the Singapore portfolio reported positive rental reversions of 10.9% and high occupancy rate of 99.4%, while Figtree Grove Shopping Centre’s occupancy remained strong at 99.2% in 1QFY20. For Paragon, its rental reversions came in at +10.7%, representing 5.5% of NLA.

For The Clementi Mall and The Rail Mall, they reported positive rental reversions of +10.6% and +12.8% respectively, representing 2.5% and 19.6% of the property’s NLA each. As for NPI, Paragon and The Clementi Mall saw an increase of 5.4% and 3.9% respectively, while The Rail Mall’s NPI remained flat.

Completion of Second Acquisition in Australia

The acquisition of a 50.0% interest in Westfield Marion Shopping Centre, Australia, was completed in Dec 2019. The acquisition was financed through a combination of the proceeds from the S$300m of perpetual securities, proceeds from the private placement of 156,645,000 units at an issue price of S$1.050 per unit and debt. The manager expects DPU accretion of 1.6% for this deal and an implied NPI yield of 5.6%. After factoring this development in our model, our fair value estimate increases slightly from S$1.10 to S$1.13. Maintain HOLD.

Source: OCBC Research - 13 Jan 2020

Labels: SPHREIT
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Mapletree North Asia Commercial Trust: Distribution Top-up and Growing Its Japan Presence

Author: kimeng   |  Publish date: Fri, 6 Dec 2019, 4:05 PM


  • Distribution top-up to mitigate income void
  • No visibility on timing of insurance claims
  • Diversifying income stream with proposed Japan acquisitions

Aiming to Reopen Festival Walk in 1QCY20

Mapletree North Asia Commercial Trust’s (MNACT) Festival Walk (FW) mall has been closed since 13 Nov, and there are major recovery and repair works to be carried out. Management is working towards having the mall reopen (partially or fully) in 1QCY20 (subject to approvals from the relevant authorities). For the office tower, it was also closed on 13 Nov but reopened on 26 Nov. Rental from FW’s retail tenants will not be collected over the duration when the mall is closed. However, as highlighted previously, FW has insurance coverage which includes property damage and loss of revenue due to business interruptions.

Rental Income Void to be Partially Covered by Distribution Top-up in 2HFY20 and 1QFY21

While assessment of the revenue loss amount and property damage is currently underway, there is no visibility yet on when MNACT will receive the insurance claims reimbursement. Given this income void, MNACT will be implementing a top-up to the distributable income for 2HFY20 and 1QFY21. This distribution top-up amounts to ~40% of FW’s retail revenue. Once the insurance claims proceeds are received, it will be used to repay the borrowings undertaken to fund the top-up.

Proposed Acquisitions of Two Properties in Greater Tokyo From Sponsor

Separately, MNACT also announced the proposed acquisition of a 98.47% stake in two freehold, multitenanted office properties (mBay Point Makuhari Building (MBP) in Chiba and Omori Prime Building (OPB) in Shinagawa) in Greater Tokyo, Japan, from its sponsor. The combined agreed property value is JPY38.1b (~S$485.1m), and translates into an NPI yield of 4.5%.

Occupancy rate is 85.9% (84.8% for MBP and 100% for OPB) and hence we see potential upside to the income yield if MNACT manages to ramp up MBP’s occupancy to 90-95%, which is the average occupancy for surrounding buildings. Given Japan’s negative 10-year government bond yield, this acquisition represents a healthy yield spread of 470 bps as compared to MNACT’s existing portfolio outside of Japan (~270 bps for FW and ~160 bps for its China properties), although this is lower than its existing Japan portfolio (~510 bps).

Funding would come in the form of i) issuance of transaction units to its sponsor (subject to whitewash waiver) and ii) debt financing. The funding mix is likely to be ~30/70% equity/debt. Pro forma aggregate leverage is expected to increase from 37.1% to 39.0% post completion, while pro forma FY19 DPU is expected to increase by 1.8% (assuming transaction units are issued at S$1.15 per unit).

FW’s contribution is expected to decline from 62% to 58% of overall portfolio NPI post completion of the acquisitions. Taking these developments into account and also lowering our rental assumptions for FW, we pare our FY20F and FY21F DPU forecasts by 4.8% and 2.4%, respectively. Correspondingly our fair value is reduced to S$1.36 from S$1.41.

Source: OCBC Research - 6 Dec 2019

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Mapletree North Asia Commercial Trust: Update on Festival Walk and Proposed Acquisitions in Greater Tokyo

Author: kimeng   |  Publish date: Thu, 5 Dec 2019, 11:10 AM


Mapletree North Asia Commercial Trust (MNACT) provided an update on Festival Walk (FW) mall. The mall has been closed since 13 Nov, and there are major recovery and repair works to be carried out. Management is working towards having the mall reopen in 1QCY20, although this is also subjected to approvals from the relevant authorities.

For the office tower, it was also closed on 13 Nov but reopened on 26 Nov.

As highlighted previously, FW has insurance coverage which includes property damage and loss of revenue due to business interruptions. Rental from FW’s retail tenants will not be collected over the duration when the mall is closed.

While assessment of the revenue loss amount and property damage is currently underway, there is no visibility yet on when MNACT will receive the insurance claims reimbursement. Given this income void, MNACT will be implementing a top-up to the distributable income for 2HFY20 and 1QFY21. This distribution top-up amounts to ~40% of FW’s retail revenue. Once the insurance claims proceeds are received, it will be used to repay the borrowings undertaken to fund the top-up.

Separately, MNACT also announced the proposed acquisition of a 98.47% stake in two freehold, multi-tenanted office properties in Greater Tokyo, Japan, from its sponsor. The agreed property value is JPY38.1b (~S$485.1m), and translates into an NPI yield of 4.5%. Occupancy rate is 85.9% and hence we see potential upside to the income yield if MNACT manages to ramp up its occupancy.

Given Japan’s negative 10-year government bond yield, this acquisition represents a healthy yield spread of 470 bps as compared to MNACT’s existing portfolio outside of Japan (~270 bps for FW and ~160 bps for its China properties). We will provide more details after the analyst conference call.

For now we have a BUY rating and S$1.41 fair value estimate on MNACT.

Source: OCBC Research - 5 Dec 2019

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Ascott Residence Trust: Unlocking Value

Author: kimeng   |  Publish date: Fri, 22 Nov 2019, 3:03 PM


  • Partial sale of 15,170 square metres GFA
  • New Somerset serviced residence with a hotel license
  • Expected to open in 2024

Joining the consortium to redevelop Liang Court Site

Ascott Residence Trust (ART) will join the consortium led by City Development (CDL) and CapitaLand (CL) to redevelop Liang Court Site with a partial sale of its 15,170 square metres gross floor area (GFA) for Somerset Liang Court Singapore for S$163.3m to CDL. The divestment price is 44% above the property’s book value as at 30 Sep 2019 and 138% above ART’s acquisition price in 2006. Total net gain from the sale and fair value gain from ART’s retained GFA in the land is estimated to be S$84.3m.

ART will redevelop the retained GFA of 13,034 square metres into a new Somerset serviced residence with a hotel license using the net proceeds from the partial sale of land. The consortium which includes City Development (CDL), CapitaLand (CL), CDL Hospitality Trusts (CDLHT) and Ascott Residence Trust (ART) intends to redevelop the Liang Court Site into an integrated development with a total gross floor area of more than 100,000 square metres, comprising the new Somerset serviced residence with a hotel licence (owned by ART), the New Hotel (owned by CDLHT), two residential towers expected to offer around

700 Apartment Units (owned by CDL-CL), and a Commercial Component (owned by CDL-CL).

Land lease is refreshed to 99 years The new Somerset serviced residence will offer 192 units, comprising 84 studio, and 108 units of 1 or 2 bedroom, with a flexibility to cater the needs of both short-stay and long-stay travellers. The property’s land lease is refreshed from 57 years to 99 years. Total expected development expenditure is approximately S$300m, with a target EBITDA yield of 4%.

The new serviced residence is expected to open in phases from 2H 2024. Management sees that it is an opportune time to recycle ART’s capital by redeveloping the aging Somerset Liang Court serviced residence which has been in operation for over 35 years and is likely to incur high AEI costs in the future.

Short-term Impact on DPU

Impact on ART’s gearing will be minimal as the redevelopment is mainly funded by the net divestment proceeds. As at 30 September 2019, ART’s gearing was 33% with a debt headroom of about S$1.1b, assuming gearing limit of 45%. However, we note that there will be an income shortfall due to the redevelopment period and DPU is estimated to drop 4.6% after the sale, on a pro forma FY2018 basis. That said, the net proceeds of the sale could be used for distributions to smoothen DPU volatility in the interim. Maintain HOLD.

Source: OCBC Research - 22 Nov 2019

Labels: Ascott Reit
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