Bowsprit Capital Corporation Limited, as manager (the “Manager”) of First Real Estate Investment Trust (“First REIT”), wishes to announce that independent annual valuations of Siloam Hospitals Lippo Village, Siloam Hospitals Kebon Jeruk, Siloam Hospitals Surabaya, Imperial Aryaduta Hotel and Country Club, Pacific Healthcare Nursing Home @ Bukit Merah, Pacific Healthcare Nursing Home II @ Bukit Panjang, The Lentor Residence and the proposed Pacific Cancer Centre @ Adam Road in First REIT’s portfolio as at 28th December 2010 (the “Existing Portfolio”) have been completed.
KJPP Hendra Gunawan & Rekan in Association with Colliers International valued the 4 Indonesia properties, namely, Siloam Hospitals Lippo Village, Siloam Hospitals Kebon Jeruk, Siloam Hospitals Surabaya and Imperial Aryaduta Hotel and Country Club. CB Richard Ellis (Pte) Ltd valued the 4 Singapore properties, namely, Pacific Healthcare Nursing Home @ Bukit Merah, Pacific Healthcare Nursing Home II @ Bukit Panjang, The Lentor Residence and the proposed Pacific Cancer Centre @ Adam Road.
The Existing Portfolio were revalued at S$355,500,000, which represents an increase of S$14.6 million over First REIT’s book value as at 31st December 2009. The revaluation of the Existing Portfolio will be reflected in the financial statements of First REIT for the fourth quarter ending 31st December 2010.
EBITDA growth of 8.1%. NPAT growth of 22.6% driven by lower income tax expense
On track to deliver a full year distribution of at least 8.000 cents per security
Fully franked dividend component increased to 39.8% of total distribution
Continuation of Distribution Reinvestment Plan for the 2010/11 interim distribution
Higher net finance charges, mainly due to $11.8m of hedge de-designations. No economic loss as recovery will occur over the term of the hedge
Financial:
30-Sep-10
30-Sep-09
Total Assets
A$8.8 bn
A$7.9 bn
Total borrowings
A$4.6 bn
A$4.0 bn
Net debt
A$4.1 bn
A$3.8 bn
Total Gearing
62%
59%
Net Gearing
59%
58%
NTA
S$1.15
EPS (Cents)
2.38
1.87
Operation Review:
(1) Electricity distribution business SP AusNet’s electricity distribution business contributed A$361.6m in total revenues for the HY2010/11. Revenues were 19.5% higher than the previous corresponding period, principally driven by increased revenues from incentive scheme payments due to improvements in network reliability, additional revenues from the AMI (Advanced Metering Infrastructure) program, strong growth in customer numbers and favourable weather conditions. Total electricity distributed through the network was 4,163 GWh representing an increase of 2.7% from the previous corresponding period.
In the HY2010/11, 6,382 additional customers were connected to the network, representing an increase of 1.0% in total customers. Total capital expenditure for the period, excluding AMI, was A$129.6m, of which A$49.9m was customer initiated. The total capital expenditure for the period in relation to AMI was A$56.8m.
(2) Gas distribution business SP AusNet’s gas distribution business contributed A$139.5m in total revenues for the HY2010/11, up 4.0% on the previous corresponding period due to a growth in consumer numbers and a colder winter resulting in higher volumes. Total gas delivered through the network was 46.1PJ, an increase of 1.8% over the previous corresponding period.
Demand in Victoria’s growth corridors is continuing to generate consumer connections to the network. In the HY2010/11, 9,477 additional customers were connected to the network, representing growth of around 1.7%. Capital expenditure for the period, excluding AMI, was A$30.9m of which A$22.1m was customer initiated.
(3) Electricity transmission business SP AusNet’s electricity transmission business contributed A$291.5m in total revenues for the HY2010/11, up 2.8% on the previous corresponding period due to the increased revenues under the regulated price path. Total electricity transmitted through the network was 26,367 GWh, an increase of 3.0% from the previous corresponding period, due to higher demand in the second quarter combined with a more consistent winter demand. Transmission regulated revenue is not subject to volume risk.
The program of capital expenditure on the transmission network has progressed well during the year, and total capex for the period, excluding AMI was A$68.6m, of which A$20.1m was customer-initiated.
(4) Select solutions business During the period, Select Solutions contributed $55.6m in service revenue and $2.0m in other revenue, an increase of $7.4m over the previous year. Select Solutions contribution to EBITDA for the year was $6.3m.
Select Solutions provides services to SP AusNet and also provides niche asset services, in particular metering and vegetation management, asset inspection and technical services to external parties including Jemena Asset Management Pty Ltd (referred to as “Jemena”). The agreements with Jemena commenced 1 April 2009 and are for an initial five year term. The agreements will continue for further five year terms unless terminated by either party by giving notice to terminate at the end of the current term. These agreements have resulted in SP AusNet extending its footprint to introduce these niche services into New South Wales.
My Comments: Overall half year revenue of SP Austnet is looking good. However, with the current high gearing, it is necessary to watch closely how SP Austnet will refinance its huge debts. The near term debt which matures on Mar 2011 is A$685M and another A$435M is due in Nov 2011. Total undrawn bank debt facilities is only A$725M. SP Austnet will need to secure further debt facilities soon. Although having such a high borrowing, SP Austnet is still issuing A$0.04 per share which is consistent with previous distributions. This imply that future distributions may not sustain. In any case, im vested and prepared to bear risks on this company based on its high yield.
OCBC upgrades the S-REIT sector to Overweight from Neutral; says going into 2011, “the persistently low interest rate environment is expected to stimulate the property market and continue to drive prices higher.”
Coupled with hot capital inflows pouring into Asia, says it’s likely that spot rental rates and asset prices will continue to be inflated. “At the same time, many REIT managers are capitalizing on the recovery cycle for further asset enhancement initiatives and acquisitions.”
Expects investors’ interest in S-REITs to remain piqued in 2011, being an inflation hedge, but says different sectors may experience different rates of recovery; says “the recovery is likely to be more pronounced for the office sector, followed by the industrial sector,” while retail is likely to remain subdued next year.
Preferred picks among large-caps are Mapletree Logistics Trust (M44U.SG), Buy with $1.00 fair value, Ascendas REIT (A17U.SG), Buy, $1.38 fair value.
First REIT (AW9U.SG) +0.7% at $0.740, in line with broad market, STI +0.8%; units not reacting to news during break.
REIT lodges offer information statement with MAS, detailing plans to raise $172.8 million via rights issue to fund acquisition of hospitals in Indonesia, as news well flagged after REIT’s manager Bowsprit Capital announced issue on Nov 8.
Also plans to buy Mochtar Riady Comprehensive Cancer Centre for $170.5 million, Siloam Hospitals Lippo Cikarang for $35 million.
REIT offering 345.66 million new units at $0.50 apiece, on basis of 5 rights units for every four units held at Friday’s close; issue will open Dec 8, close Dec 22; price represents 32% discount to Friday’s close at $0.735.
REIT usually thinly traded, but action today even scarcer at just 249,000 units; suggests last week’s high of $0.750 unlikely tested near term.
Sabana REIT (M1GU.SG) +0.5% at $0.975 on light volume, still struggling to make headway since dismal debut last Friday, with units consistently closing below $1.05 IPO price every session.
Sale of units in open market by substantial shareholder Moore Capital Management not helping sentiment, with fund trimming stake to 6.38% vs 7.80% yesterday.
Shari’ah-compliant REIT’s main draw remains its yield, now higher after recent price pullback at 8.9% based on yesterday’s closing price vs 8.2% based on IPO price.
Still, Kim Eng Securities analyst Anni Kum says challenges lie ahead for Sabana, with acquisition prospects tough given keen competition for industrial properties in Singapore, unattractive pipeline of assets from sponsor Freight Links (F01.SG); “two out of the three properties of Freight Links...are old and require redevelopment or additional investments.” Orderbook quotes suggest price unlikely to clear $1.00.
