• Acquisition of Scorpio East Building for S$21.1m at initial 8% yield
• Positive acquisition with slight 2% accretion to DPU in FY11F, and terming out WALE.
• Rolling forward our numbers to FY11, TP is raised to S$0.54. Maintain HOLD.
Acquiring up to S$60m worth of properties to date. Cambridge REIT (“CIT”) announced the acquisition of Scorpio East Building, a recently completed light industrial building located in Paya Labar iPark, for S$21.1m (2% discount to valuation of S$21.5m). With this latest purchase, CIT will have acquired close to S$60m worth of properties to date. The Initial yield of the property is estimated to be c8.0% (based on Scorpio East’s annual rental of S$1.7-S$1.9m), which is in line with CIT current implied yield of 7.9%. The property will be leased back to the vendor for 5 years. The manager intends to fund the purchase through a combination of debt/equity.
Slight accretion to DPU and terming out the weighted average lease expiry (“WALE”) The manager has remained proactive in re-positioning its portfolio, replacing recent asset divestments with new asset purchases. Including this acquisition in our numbers, our FY11 DPU is raised by c2%. In addition, CIT will see its tenant expiry profile terming out further, reducing the concentration of expiry in FY13-14.
HOLD call maintained, TP adjusted to S$0.54. With our revised DPU estimates and rolling forward our numbers into FY11, our target price is raised to S$0.54. Maintain HOLD in view of limited upside. CIT currently offers FY10-11F yields of 9.1%.
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