Previous Day Closing price: $3.22
Recommendation: BUY (maintained)
Target price: $4.44 (reduced from $4.57)
SingLand recorded a loss of $117.4m in FY08, compared to a staggering net profit of $1.36 bn the previous year. However, the bottomline volatility is largely caused by fair value revaluations of its investment properties. On a core earnings basis, net profit actually rose by 15% yoy to $158.5m due to higher rental and hotel income.
Operationally, SingLand enjoyed a 24% yoy increment in its gross rental income. Gross revenue from Pan Pacific Hotel also improved by 47% to $117.4m. We expect SingLand to continue to benefit from positive rental reversions from its office properties, but the negative impact of the economic downturn is likely to hit its hotel earnings.
SingLand’s portfolio of investment properties experienced a 6.3% overall decline in fair value as compared to June 08. Flagship SingLand Tower suffered a 10% decline in its valuation, but Marina Bayfront suffered a steep 25% drop in value, possibly due to Merrill Lynch shifting some of its operations to its new building at Harbourfront. Capital values are likely to decline further, and we expect more fair value losses going forward.
UOL has made a conditional cash offer for UIC, which owns 72.4% of SingLand. Should the offer be unconditional when UOL receives a 50% acceptance for UIC shares, UOL will then make a mandatory conditional cash offer of $3.57 per SingLand share, by virtue of the chain principle. The offer price is at a steep 60% discount to our FY09 RNAV.
We believe that the shareprice has already over-compensated for further fair value losses on its investment properties. We also believe that UOL’s bid for UIC is in part motivated by the value they see in SingLand, which forms a substantial part of UIC’s NAV. We maintain our BUY recommendation, with a target price of $4.44 at a 50% discount to RNAV.
Friday, February 13, 2009
Thursday, February 12, 2009
Fraser Commercial Trust: FY08 Results
Previous day closing price: $0.205
Recommendation: SELL (downgraded from HOLD)
Target price: $0.14 (reduced from $0.21)
Full year results were disappointing, although not unexpected. Revenue was up 42.1%, net property income up 31.8%, but DPU fell 5.1%. Revenue increased on the back of full year contributions from acquisitions and the fall in DPU is mainly attributed to higher borrowing cost.
Portfolio size dropped 13%, mainly due to translation losses of the Australian properties and also downward valuation of AWPF wholesale fund, Keypoint building and Cosmo Plaza. NAV thus fell from $1.42 in FY07 to $0.97 in FY08.
FCOT has $620 million to refinance this year, $70 million of which comes due in May 2009 and the rest in Dec 2009. In Nov 2008, F&N demonstrated its show of support by extending a loan of $70 million to FCOT at an interest rate of 3.73%. With its sponsor support, short term financing is not a problem for FCOT. The real test is towards the end of the year where the refinancing quantum is much higher.
We do not think DPU is going to get any respite in the near term. We factor in lower contributions from Australia and also make an allowance for higher tenant vacancies. Another dilution to DPU is the issuance of management fees in units. Approximately 29 million units were issue in lieu of management fee for FY08 versus 8.3 million units in FY07. If share price continues to remain depressed, we project a further 45 million units will be payable for FY09 and DPU will thus be further diluted. We do not rule out an equity fund raising either as gearing is currently at a high of 57%.
Shares: 736.047 mil
Market Cap: S$147.21 mil
Trailing PER: N.A
Forward FY09 PER: 6.06
P/BV: 0.21
52-weeks Price Range: S$0.195 – S$0.87
52-weeks PER Range: 1.47-21.6
Major Shareholder: F&N (20.6%), Capital Group (9.86%)
Dividend Yield: FY07 - 32.8%, FY08 - 30.8%, FY09F - 21.8%
Source: PhillipCapital, 12 Feb 2009
Recommendation: SELL (downgraded from HOLD)
Target price: $0.14 (reduced from $0.21)
Full year results were disappointing, although not unexpected. Revenue was up 42.1%, net property income up 31.8%, but DPU fell 5.1%. Revenue increased on the back of full year contributions from acquisitions and the fall in DPU is mainly attributed to higher borrowing cost.
Portfolio size dropped 13%, mainly due to translation losses of the Australian properties and also downward valuation of AWPF wholesale fund, Keypoint building and Cosmo Plaza. NAV thus fell from $1.42 in FY07 to $0.97 in FY08.
FCOT has $620 million to refinance this year, $70 million of which comes due in May 2009 and the rest in Dec 2009. In Nov 2008, F&N demonstrated its show of support by extending a loan of $70 million to FCOT at an interest rate of 3.73%. With its sponsor support, short term financing is not a problem for FCOT. The real test is towards the end of the year where the refinancing quantum is much higher.
We do not think DPU is going to get any respite in the near term. We factor in lower contributions from Australia and also make an allowance for higher tenant vacancies. Another dilution to DPU is the issuance of management fees in units. Approximately 29 million units were issue in lieu of management fee for FY08 versus 8.3 million units in FY07. If share price continues to remain depressed, we project a further 45 million units will be payable for FY09 and DPU will thus be further diluted. We do not rule out an equity fund raising either as gearing is currently at a high of 57%.
Shares: 736.047 mil
Market Cap: S$147.21 mil
Trailing PER: N.A
Forward FY09 PER: 6.06
P/BV: 0.21
52-weeks Price Range: S$0.195 – S$0.87
52-weeks PER Range: 1.47-21.6
Major Shareholder: F&N (20.6%), Capital Group (9.86%)
Dividend Yield: FY07 - 32.8%, FY08 - 30.8%, FY09F - 21.8%
Source: PhillipCapital, 12 Feb 2009
MacarthurCook Industrial REIT 3QFY09 Results
MIREIT’s credit rating was downgraded by Moody’s to B1. The main reason for the downgrade is the impending refinancing need of MIREIT for its debt of $220.8 million due in April 2009. This is also our main concern regarding MIREIT. Although we understand the REIT manager has been in talks with various parties, nothing has been announced thus far.
Financial results are in line with expectations. Revenue for 3QFY09 is up 54.0%, net property income increases 49.1% and DPU increases 22.4%. MIREIT has maintained a quarterly DPU of 2.35 cents for FY09. Quarterly payout ratio was 92.7%, 87.7% and 98.5%. We believe the REIT manager has anticipated higher operating cost and therefore has maintained a fixed quantum of quarterly DPU so that there is buffer to withstand any volatility. With the retained cash on hand, MIREIT should be able to maintain at least the same amount of DPU for 4QFY09.
Shares: 261.716m
Market Cap: S$69.35m
Trailing PE: 1.65
Forward PE: 3.73
P/BV: 0.27
52-week Price Range: $0.225 - $1.20
52-week PE Range: 0.77 – 7.25
Major Shareholder: MCK Ltd – 15.21%; UBS AG – 5.75%
Dividend yield: 2008 - 28.3%; 2009F - 36.3%; 2010F - 32.4%
Source: Phillip Securities, 12 Feb 2009
Financial results are in line with expectations. Revenue for 3QFY09 is up 54.0%, net property income increases 49.1% and DPU increases 22.4%. MIREIT has maintained a quarterly DPU of 2.35 cents for FY09. Quarterly payout ratio was 92.7%, 87.7% and 98.5%. We believe the REIT manager has anticipated higher operating cost and therefore has maintained a fixed quantum of quarterly DPU so that there is buffer to withstand any volatility. With the retained cash on hand, MIREIT should be able to maintain at least the same amount of DPU for 4QFY09.
Shares: 261.716m
Market Cap: S$69.35m
Trailing PE: 1.65
Forward PE: 3.73
P/BV: 0.27
52-week Price Range: $0.225 - $1.20
52-week PE Range: 0.77 – 7.25
Major Shareholder: MCK Ltd – 15.21%; UBS AG – 5.75%
Dividend yield: 2008 - 28.3%; 2009F - 36.3%; 2010F - 32.4%
Source: Phillip Securities, 12 Feb 2009
OCBC 4Q08 earnings preview - HOLD (Kim Eng)
Previous Day Closing price: $5.08
Recommendation: Hold (maintained)
Target price: $5.10 (maintained)
Yield: 5.0% (2008F)
OCBC will be releasing its 4Q08 results on 18 Feb. We are expecting the group to post a net profit of $382m in 4Q08 which is moderately below Bloomberg consensus estimates of $389m. Assuming that its dividend payout policy stays at 45%, a final DPS of 9 cents could be expected.
Insurance income is likely to stay subdued (we are expecting a 24% y-o-y decline) as more than 50% of GEH’s revenue is derived from investment profits that are hard to replicate in the current environment. The surge in life assurance profits led by mark-to-market gains seen in 3Q08 is highly unsustainable.
OCBC’s Tier-1 CAR of 14.4% is currently the highest among the Singapore banks after it raised 2 preference share issues of up to $2.5bn last year. The preference shares carry a fixed dividend rate of 5.1% per annum, payable semiannually. Its strong Tier-1 CAR that way exceeded MAS’s requirement of 6%, provides a good safety net to cushion against the downturn.
We believe OCBC’s current premium valuations to the sector average of 0.9x PBV reflect its superior capital strength. We are keeping our Hold rating on the stock and prefer an entry level of $3.60 on 0.8x book value as at Sep 08.
Recommendation: Hold (maintained)
Target price: $5.10 (maintained)
Yield: 5.0% (2008F)
OCBC will be releasing its 4Q08 results on 18 Feb. We are expecting the group to post a net profit of $382m in 4Q08 which is moderately below Bloomberg consensus estimates of $389m. Assuming that its dividend payout policy stays at 45%, a final DPS of 9 cents could be expected.
Insurance income is likely to stay subdued (we are expecting a 24% y-o-y decline) as more than 50% of GEH’s revenue is derived from investment profits that are hard to replicate in the current environment. The surge in life assurance profits led by mark-to-market gains seen in 3Q08 is highly unsustainable.
OCBC’s Tier-1 CAR of 14.4% is currently the highest among the Singapore banks after it raised 2 preference share issues of up to $2.5bn last year. The preference shares carry a fixed dividend rate of 5.1% per annum, payable semiannually. Its strong Tier-1 CAR that way exceeded MAS’s requirement of 6%, provides a good safety net to cushion against the downturn.
We believe OCBC’s current premium valuations to the sector average of 0.9x PBV reflect its superior capital strength. We are keeping our Hold rating on the stock and prefer an entry level of $3.60 on 0.8x book value as at Sep 08.
ASL Marine: 2Q09 Results - BUY (Kim Eng)
Previous day closing price: $0.45
Recommendation: Buy (maintained)
Target price: $ (maintained)
ASL Marine posted a 2Q net profit of $16.3m, up a steady 10.6% over 2Q08, and against revenue growth of 7.7%. The margin improvement came from the shipchartering business, where management has indicated that rates have stayed firm.
Segmentally, shipbuilding and charter turnover were maintained at a steady level sequentially, as shipbuilding continues to convert on its orderbook of S$663m, and utilisation of charter vessels remains high. Shipbuilding margins were maintained at 9.8%, while shipchartering saw gross margins improve to 35.6% due to a firming up of charter rates. However, shiprepair saw a sequential decline in turnover due to recognition timing, but margins remained very healthy at 32.1%.
For shipbuilding, ASL will be recognising approximately S$172m worth of revenue in 2H09. However, it has not received any new orders recently, which is in line with the cautious outlook for shipowners in the current economic climate. However, ASL so far has had no issues with the usual worries currently plaguing the industry: it has not seen any order cancellations nor has any of its customers approached it for re-negotiation or delayed delivery. The overwhelming majority of its orderbook has already secured financing as well.
ASL has advised that its shiprepair business remains healthy, with a high level of enquiries. However, ASL is bracing for potential slowdowns through lower contracts and/or lower scopes of work, which it believes is inevitable. For now, the repair of specialised offshore vessels in particular remains in demand, and ASL will continue to capitalise on this. Its Batam yard expansion is also proceeding on track.
Our FY09 net profit of $72.2m is maintained, as is core net profit at S$60.2m, which excludes an S$11.3m one-off gain in 1Q09. Our target price of S$1.62 still stands, based on 8x core FY09 earnings. This implies significant upside for an undervalued stock, trading at just 2.3x core PER and a Price to Book of just 0.5x.
Recommendation: Buy (maintained)
Target price: $ (maintained)
ASL Marine posted a 2Q net profit of $16.3m, up a steady 10.6% over 2Q08, and against revenue growth of 7.7%. The margin improvement came from the shipchartering business, where management has indicated that rates have stayed firm.
Segmentally, shipbuilding and charter turnover were maintained at a steady level sequentially, as shipbuilding continues to convert on its orderbook of S$663m, and utilisation of charter vessels remains high. Shipbuilding margins were maintained at 9.8%, while shipchartering saw gross margins improve to 35.6% due to a firming up of charter rates. However, shiprepair saw a sequential decline in turnover due to recognition timing, but margins remained very healthy at 32.1%.
For shipbuilding, ASL will be recognising approximately S$172m worth of revenue in 2H09. However, it has not received any new orders recently, which is in line with the cautious outlook for shipowners in the current economic climate. However, ASL so far has had no issues with the usual worries currently plaguing the industry: it has not seen any order cancellations nor has any of its customers approached it for re-negotiation or delayed delivery. The overwhelming majority of its orderbook has already secured financing as well.
ASL has advised that its shiprepair business remains healthy, with a high level of enquiries. However, ASL is bracing for potential slowdowns through lower contracts and/or lower scopes of work, which it believes is inevitable. For now, the repair of specialised offshore vessels in particular remains in demand, and ASL will continue to capitalise on this. Its Batam yard expansion is also proceeding on track.
Our FY09 net profit of $72.2m is maintained, as is core net profit at S$60.2m, which excludes an S$11.3m one-off gain in 1Q09. Our target price of S$1.62 still stands, based on 8x core FY09 earnings. This implies significant upside for an undervalued stock, trading at just 2.3x core PER and a Price to Book of just 0.5x.
Metro 3QFY09 Results by Kim Eng
Previous Day Closing price: $0.28
Recommendation: Hold (reduced from Buy)
Target price: $0.27 (reduced from $0.69)
Metro reported a 97% slide in 3Q09 net profit to $0.6m due mainly to the following. First, a $6m unrealised fall in investments, mainly holdings in REITs. Second, retail profit was affected by lower sales following a store closure in Singapore last year and poor economic conditions, as well as new store start-up costs in Indonesia. Third, a exceptional gain of $24.5m in 3Q08 from the sale of Gurney Plaza did not recur this year.
We estimate core net profit before the investment mark-to-market loss was $6.6m, bringing 9M09 net profit to $20m, or 81% of our original full year forecast. 9M09 profits are also higher by 22% from an estimated profit of $11.5m in 9M09, which is adjusted for MTM losses and measured on a continuing operation basis (i.e. excluded Gurney Plaza rental and closing down profits from Metro Tampines).
In the past two years, Metro had declared a 1 cent interim dividend and a 3 cent special dividend. This year, it did not declare an interim dividend and a special dividend is also in doubt. While cashflow is unimpeded, it may reserve cash to repay debt and to fund its new China projects. Without a special dividend, yield becomes merely ordinary at 7%.
We have cut our RNAV for Metro to 28 cents. As the last valuation of its investment properties (which account for 85% of RNAV) was done a year ago, the China slowdown could lead to severe loss of capital value. As such, we have deepened our discount assumption from 50% to 80%. Downgrade to Hold.
Source: Kim Eng, 11 Feb 2009
Recommendation: Hold (reduced from Buy)
Target price: $0.27 (reduced from $0.69)
Metro reported a 97% slide in 3Q09 net profit to $0.6m due mainly to the following. First, a $6m unrealised fall in investments, mainly holdings in REITs. Second, retail profit was affected by lower sales following a store closure in Singapore last year and poor economic conditions, as well as new store start-up costs in Indonesia. Third, a exceptional gain of $24.5m in 3Q08 from the sale of Gurney Plaza did not recur this year.
We estimate core net profit before the investment mark-to-market loss was $6.6m, bringing 9M09 net profit to $20m, or 81% of our original full year forecast. 9M09 profits are also higher by 22% from an estimated profit of $11.5m in 9M09, which is adjusted for MTM losses and measured on a continuing operation basis (i.e. excluded Gurney Plaza rental and closing down profits from Metro Tampines).
In the past two years, Metro had declared a 1 cent interim dividend and a 3 cent special dividend. This year, it did not declare an interim dividend and a special dividend is also in doubt. While cashflow is unimpeded, it may reserve cash to repay debt and to fund its new China projects. Without a special dividend, yield becomes merely ordinary at 7%.
We have cut our RNAV for Metro to 28 cents. As the last valuation of its investment properties (which account for 85% of RNAV) was done a year ago, the China slowdown could lead to severe loss of capital value. As such, we have deepened our discount assumption from 50% to 80%. Downgrade to Hold.
Source: Kim Eng, 11 Feb 2009
Ascott Residence Trust: Initiating Coverage by Kim Eng
Previous Day Closing price: $0.455
Recommendation: BUY
Target price: $0.77
We initiate coverage on ART with a BUY recommendation at a target price of $0.77. Its projected yield of 16.1% and 13.7%, and 0.31x P/NAV represent a chance to buy the premium Ascott brand at a bargain. ART owns and operates 38 well-located serviced residences in gateway cities of both emerging and stable markets.
Sponsor, The Ascott Group, is the serviced residence arm of Capitaland Ltd. It owns and operates 18,000 serviced residences outside of the US, with another 6000 units under development in Asia Pacific. These represent a strong pipeline of units that could be included in ART’s portfolio in the future.
ART’s gearing of 38.3% is well within the regulatory gearing limit. The bulk of its S$111m in bank loans maturing in 2009 is due only in Dec-09. We expect management to be able to refinance or secure fresh loans. ART faces no major refinancing need until 2011. Its low borrowing costs, averaging 3.5%, was achieved by good interest rate management.
Our target price is derived based on the dividend discount model (DDM) at a 9.7% cost of equity and 1% terminal growth rate. The key risk is a greater-than-expected decline in REVPAU in major operating markets. We are estimating a gentler decline in its FY09F DPU due to rental support from the long-stay segment. ART’s discount compared to its closest peer CDLHT is unjustified. We initiate coverage on ART with a BUY.
Source: Kim Eng, 11 Feb 2009
Recommendation: BUY
Target price: $0.77
We initiate coverage on ART with a BUY recommendation at a target price of $0.77. Its projected yield of 16.1% and 13.7%, and 0.31x P/NAV represent a chance to buy the premium Ascott brand at a bargain. ART owns and operates 38 well-located serviced residences in gateway cities of both emerging and stable markets.
Sponsor, The Ascott Group, is the serviced residence arm of Capitaland Ltd. It owns and operates 18,000 serviced residences outside of the US, with another 6000 units under development in Asia Pacific. These represent a strong pipeline of units that could be included in ART’s portfolio in the future.
ART’s gearing of 38.3% is well within the regulatory gearing limit. The bulk of its S$111m in bank loans maturing in 2009 is due only in Dec-09. We expect management to be able to refinance or secure fresh loans. ART faces no major refinancing need until 2011. Its low borrowing costs, averaging 3.5%, was achieved by good interest rate management.
Our target price is derived based on the dividend discount model (DDM) at a 9.7% cost of equity and 1% terminal growth rate. The key risk is a greater-than-expected decline in REVPAU in major operating markets. We are estimating a gentler decline in its FY09F DPU due to rental support from the long-stay segment. ART’s discount compared to its closest peer CDLHT is unjustified. We initiate coverage on ART with a BUY.
Source: Kim Eng, 11 Feb 2009
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