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Posts Tagged ‘Frasers Commercial Trust’

S-Reits: Gd analysis

In Property, Reits on 06/02/2013 at 6:21 am

The reason for the highest yield spread for SReits against other markets is due to the proportion of industrial, healthcare or emerging market REITs within the index.

In the case for Singaporean industrial properties, these are leasehold interests so the yield profile against Japanese assets is always going to be higher. Did’nt know that abt Jap assets

Hotels, Indonesian/Indian healthcare/retail properties trade at higher yields than office & retail properties.

So basically although the SReit index trades above its peers – there is a reason for it! And should not imply that SReits are cheap.

A reader made this comment on http://atans1.wordpress.com/2013/01/10/s-reits-cheong-all-the-way-says-ocbc-sec/

S-Reits: “Cheong all the way” says OCBC Sec

In Property, Reits on 10/01/2013 at 7:41 am

Especially industrial Reits ’cause of the 7% yields.

“Looking into 2013, we believe S-REITs would likely retain their shine, underpinned by three key drivers. First, the sector offers the highest yield spreads among its peers in other major markets. Second, S-REITs are likely to be in favour amid the uncertain macroeconomic outlook, given their defensive low beta nature. Lastly, the outlook and financial position of S-REITs are generally positive, which should translate to firm performances going forward.”

S’pore Biz Review

I wouldn’t be a seller, but I sure am not going to add to my exposure to Lippo-M, AIMSAMP or Fraser Commercial, or to buy any other reit. But watching like a hawk to find a reason to sell.

FCT, Suntec: Cheong all the way say brokers

In Property, Reits on 11/10/2012 at 6:00 pm

OCBC Investment Research raised its fair value on Frasers Commercial Trust (FCT) to S$1.31 from S$1.23 while maintaining its “Buy” call. The interest savings arising from the early refinancing of a S$500 million loan facility and stronger rental income after the acquisition of direct tenant leases at China Square Central are also positives, OCBC Investment said. And after selling KeyPoint for S$360 million (US$292.7 million), FCT is likely to sit on net proceeds of S$357.8 million and book in a gain of S$72.8 million. Frasers is likely to use the bulk of the sale proceeds to redeem half of its series A convertible perpetual preferred units and reduce its existing debt, OCBC said.

DBS Vickers says, “We continue to like FCT due to its stable income profile and the positive impact coming in from its management execution, as evident in Causeway Point’s enhancement strategy. Thirdly, given that it’s trading above book, we see opportunities of inorganic growth.” What the last means is that FCT can issue new units to acquire properties. 

Then there is Suntec REIT, with DBS Vickers citing its attractive yield and the positive earnings impact in the medium term from its asset enhancement initiatives.

Maybank Kim Eng, which earlier this week upgraded its rating on the REIT to “Buy” from “Hold”, while increasing its target price to S$1.66 from S$1.42, agrees citing as positives the progress of refurbishment work at Suntec Mall and Convention Centre and the near complete occupancy of its office portfolio against the negative of  a looming supply glut.

FYI1, AIMS AMP Capital Industrial Reit portfolio value has risen by 5.6 per cent, said the Reit on Tuesday. Based on the new valuation made on September 30, 2012, the Reit’s portfolio is now valued at S$965.7 million. Its previous valuation was on March 31, 2012.

FYI2,Bloomberg reported last month that the local REIT market has led the global league table so far this year, returning an average 37 per cent. That is twice the gains in the United States, United Kingdom and Japan, according to Bloomberg data, and better than Australia, which advanced 24 per cent.

FCOT: Great insight!

In Property, Reits on 29/06/2012 at 6:31 am

“FCOT sold a S$10 mil yielding KeyPoint for S$360 mil and bought a S$10 mil yielding Caroline for S$113 mil!”

http://www.investmentmoats.com/money-management/reit/frasers-commercial-trusta-reit-worth-looking-out-for/

Effectively it’s get the same yield but reducing the capital used by 31%, releasing the balance of 69% for hopefully more proftable use. Great financial engineering. F&N’s chairman should tell his sis-in-law at Temasek to pay F&N and FCOT to teach Temasek financial engineering.

And great insight by Investment Moats: worthy of a Buffett.

Bad PR by FCOT. It should enhance shareholder value be publicising its financial egineering skills.

Though must point out that the returns in Caroline’s case are in A$. Nevertheless …

But given that FCOT was gifted the Alexandra Technopark by F&N when F&N was trying to salvage its investment in FCOT during the financial crisis, there’s a danger that FCOT may have to return the favour. I was surprised that F&N shareholders did not kick up a fuss as the valuation then looked rather low, even taking into account the crisis. But then the property is “peanuts’ in relation to F&N’s assets. So there’s a gd chance that F&N would not ask FCOT for a favour.

As to the best use of the Keypoint money, redeem the convertibles in full: increasing leverage. Rely on F&N’s balance sheet: maybe pay it a fee for “renting”. Worst case: rights issue again. But then I’m a bit of a gambler (like the cowboys and cowgals at Temasek), even if I invest in Reits for the yield. Some habits die hard.

MIIF & FCT: Useful updates

In China, Property, Reits on 17/05/2012 at 6:51 am

Never summed up the courage to buy MIIF because although it is a China infrastructure play, yirld is super, and MIIF is net cash, its underlying investments are up to their eyebrows in debt: could affect MIIF’s payouts, NAV and price. But chk out for yrself  http://www.investmentmoats.com/money-management/dividend-investing/amfraser-have-some-seriously-optimistic-cash-flow-projections-for-miif/

For the working stiffs who got cashflow from day jobs. Not for retiree who gambled his cashflow.

 CIMB likes Frasers Commercial Trust I own shume.

Update: DBSV likes FCT too http://sreit.reitdata.com/2012/05/18/fcot-dbsv-3/

Reits: A blast from the past

In Property, Reits on 21/11/2011 at 7:11 am

Our constructive, nation- building media are promoting Reits as “safe” investments, so maybe it’s time to read or reread “Initially, I wanted to title this post “The Disastrous Singapore REITs Model” but decided otherwise”, written late last year?

It analyses what went wrong in the S-Reit sector in the period up to massive rights issues in 2009.

In a report issued last Thurday, CIMB identified K-Reit Asia, Frasers Commercial Trust (FCOT), Ascott Residence Trust (ART) and Suntec Reit as those likely to engage in equity fundraising in the near future. “The first signs of more cash calls to come have surface.”

The Reit industry is stronger than it was three years ago, CIMB said. Across the sector, the proportion of short-term debt to total debt stood at 8%  in September, much lower than the 38% in June 2008. With reduced pressure from short term liabilities, Reits are less likely to make cash calls, even if the industry’s average gearing did climb to 36%  (from 34% in 2008). But some Reits -(especially those in the office sector) could be vulnerable to asset devaluation as a downturn looms. Lower property values push up gearing ratios.

According to CIMB K-Reit, ART and Suntec Reit had gearings of 42%, 41% and% respectively at end-Sept, higher than the average of 36%.

The risk of a cash call is greatest for K-Reit. Its aggregate leverage remains high despite a massive rights issue (17 for 20) now underway to fund the purchase of Ocean Financial Centre from parent Keppel Land, and 20% of its debt is due for refinancing next year.

 ART not only has high leverage but its European assets could see a devaluation, raising its leverage- a vicious cycle. But if it divests Somerset Grand Cairnhill, which has provisional approval for redevelopment into a residential and hotel project, a near-term cash call could be avoided.

Suntec Reit  may not need a cash call until it is ready to acquire Phase 2 of Marina Bay Financial Centre and its capital expenditure needs could be partly met by proceeds from selling Chijmes.

FCOT is  a potential candidate for a rights issue because of  its relatively high leverage of 37%  and low interest coverage ratio. Also, all of its debt is maturing next year. But it could divest KeyPoint. Given F&N as its “big brother”, it could refinance its debt at lower interest rates.

But CIMB believes that Reits are still safe, maintaining its ‘overweight’ call on the sector.

DBS loves Reits too

In Property, Reits on 03/09/2011 at 6:22 pm

In the recent equity market sell off, the FSTREI (S-Reit index) while corrected by some 5 per cent versus the 12 per cent and 25 per cent fall in the STI and FSTREH (property developers index) respectively. S-Reits now offer a prospective FY11-12F distribution yield of 6.5-6.7 per cent, which represent a 500 basis points spread above the long-term government bond. It is now closer to -1 standard deviation of the sector historical yield trading range. We believe that S-Reits continue to offer a compelling investment proposition.

We reiterate our preference for retail Reits. Even in the event of an economic downturn, retail Reits’ exposure in necessity shopping (eg supermarkets, F&B outlets) have kept earnings fairly stable. Industrial S-Reits also offer strong stability and visibility given a larger proportion of their income deriving from master-lease structures. While we continue to see hospitality Reits delivering good numbers going into a seasonally busier 2H11, we believe that growth momentum should be slowing down.

We see value emerging in CapitaMall Trust (Buy, TP $2.05) which is our big cap pick with attractive FY11-12F yields of about 5.3-5.9 per cent. Mapletree Commercial Trust (Buy, TP $1.09) is attractive for its strong organic growth coming off from a first renewal cycle at its VivoCity retail mall. Among the industrial Reits, Mapletree Logistics Trust MLT (Buy, TP $1.07) stands out post an active H1 FY11 and is poised to deliver strong earnings growth into H2 FY11. We continue to see relative value amongst the smaller cap S-Reits – Cache (Buy, TP S$1.07) and Frasers Commercial Trust (Buy, TP $1.05), which offer higher than average yields with limited earnings downside.

CIMB on Reits

In Property, Reits on 21/08/2011 at 7:54 am

CIMB loves them based on a research note dated Aug 18 2011 where it called for an “Overweight” on the Reit sector.

CIMB recently hosted nine Singapore and Malaysia real estate investment trusts (Reits) at our inaugural Asean Reit conference. While investors were generally not pricing in a double dip, most appeared increasingly cautious.

Coupled with value emerging from the recent selldown, we sensed increased interest in Reits, with a particular preference for those in more resilient segments like industrial, retail and healthcare.

Our top picks are Ascendas Reit, Frasers Commercial Trust, Starhill Global Reit and Cache Logistics Trust. We also like CapitaMall Trust and CDL Hospitality Trust at current valuations.

During the conference, we sensed increased caution among investors after the recent market selldown, with more turning to S-Reits given increased risk aversion. Most Reits also gave the feedback that they had been receiving more investor interest and enquiries. While turning cautious, investors were not yet pricing in a double dip.

Questions centred on rental growth and expansion via acquisitions or development. Most agreed with us that S-Reits have emerged with stronger balance sheets and portfolios from the last crisis.

Recent market volatilities and developments in advanced economies have not affected Reits yet.

Notwithstanding slowing growth in advanced economies, industry participants remained positive on growth in the region. However, most would be monitoring developments closely.

Industrial Reits continued to expect positive rental reversions on the back of rising spot rentals and rental step-ups. Investors liked the stability from industrial leases but were slightly wary of a seeming slowdown in manufacturing in Singapore.

Industrial S-Reits, however, noted that manufacturing remains a core component of Singapore’s economy and continued to see bright spots as local manufacturing transitions to higher-value-added products and services.

While spot rents for most office S-Reits remained healthy, more investors were starting to question rental growth next year. We noted a moderation in tone among the office S-Reits, on the back of a slowing leasing momentum, significant physical completions in 2012 and potential growth concerns. Most expected rental growth to be more moderate in 1H12, before picking up again in 2H12 as supply tightens in 2013.

Most Reits are still keen to grow through acquisitions. Opportunities are, however, limited with the system still flush with liquidity.

Industrial Reits noted a difficult acquisition environment, given increased competition from new entrants such as private funds, smaller players and other industrial Reits. Most were thus gravitating towards development (mainly build-to-suit) and redevelopment, given their enhanced yields, the small capital outlays, short gestation periods and Reits’ ability to mitigate leasing risks by building to suit.

Similar concerns on compressed yields and a lack of quality assets for acquisition were expressed by the office S-Reits.

CIMB still likes FCOT

In Property, Reits on 07/08/2011 at 1:14 pm

On I August 2011 when FCOT was at $0.88 (note I own some shares), CIMB came out with report where it maintains ‘outperform’. Q3 2011 distribution per unit (DPU) of 1.38 cents meets our forecast and Street expectation at 24 per cent of our FY2011 figure. 9M 2011 DPU forms 74 per cent of our estimate. DPU was up 10 per cent y-o-y on stronger net property income (NPI) contributions from almost all its self-managed assets mainly on better occupancy. Occupancy at KeyPoint had improved for the ninth consecutive quarter.

An improving underlying portfolio at China Square Central meanwhile should position Frasers Commercial Trust (FCOT) for upside when it takes over direct management in March 2012. No change to our DPU estimates or dividend discount model-based target price of $0.99 (discount rate: 9.4 per cent).

With an improving portfolio, stable capital structure and a strong sponsor in F&N, we see no reason for its 35 per cent discount to book amid forward yields of 7 per cent. We see catalysts from early refinancing, the unlocking of value from AEI at China Square Central and improvements in occupancy and rentals.

NPI was up 10 per cent y-o-y on stronger contributions from Central Park, Caroline Chisholm Centre and Keypoint. Q-o-q, NPI was up 4 per cent as there were improvements at its Australian assets. Occupancy at KeyPoint also continued to improve for the ninth consecutive quarter to 86 per cent since the in-house team took over property leasing in Q2 2009.

Passing rents were stable at about $5 per square foot with limited exposure to higher rollover rents locked in at the 2008 peak.

China Square Central’s underlying occupancy improved 20 basis points, with recent leases renewed at $6.30-8.00 psf versus expiring rents of $6.30 psf and passing rents of below $6 psf. Continued improvements in occupancy and rentals on the back of more proactive management by FCOT and an upcoming Telok Ayer MRT station could position FCOT for upside when it takes over direct management following the expiry of the master lease in March 2012.

Asset leverage had been pared down to about 37 per cent after the divestments of AWPF and Cosmo Plaza. This entire amount ($745 million) will mature in 2012. With a high cost of debt of 4.3 per cent and prolonged low interest rates, FCOT could save in terms of interest following the refinancing of this debt. We estimate that a 50-basis point interest rate reduction could lift its DPU by 11 per cent.

OUTPERFORM

DBS on smaller cap S-Reits

In Logistics, Property, Reits on 15/07/2011 at 7:04 am

We see relative value among certain smaller-cap S-Reits. Cache Logistics Trust (‘buy’, TP: $1.11), which currently offers a yield of over 8.0 per cent, is attractive, backed by transparent earnings structure and armed with a low leverage of 26 per cent, having the headroom to acquire further.

Frasers Commercial Trust (‘buy’, TP: $1.05), at a P/B of 0.6 times, is unjustified in our view, given that the yield-enhancing steps taken by management and plans to re-finance its expiring loans should result in future interest savings.

I’m glad someone sess value in FCT where I have a holding. Yields 6.77%.

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