Aims Amp Capital eyes more business parks to boost growth: Update

Singapore’s Aims Amp Capital Industrial Reit (AA Reit) (AART.SI) said it plans to increase the share of business park assets in its portfolio through acquisitions in order to benefit from higher rental income.

The trust, part-owned by Australian institutional real estate fund manager AMP Capital Investors (AMPGCH.UL), also aims to grow its portfolio by about $200 million, its chief executive officer Nicholas McGrath told Reuters in an interview.
“We have an increasing bias towards business parks and high-tech space,” said McGrath, a trained lawyer who moved to Singapore six years ago.

“We think rentals are likely to grow faster than in industries where margins may be under pressure and therefore the ability to afford higher rentals is under pressure”.

In the last 15 months, AA Reit bought about $300 million worth of assets and sold its sole Japanese property for 1.49 billion yen in order to focus its business on Singapore.

Currently, it has 26 properties in the city-state worth about $832.9 million and hopes to see business park assets account about 20-30% of its portfolio in about 3 years, McGrath said. They make up about 18% of its portfolio now.

The trust hopes to acquire more industrial properties that cater to higher-end manufacturing or high-technology businesses, as Singapore seeks to move away from low cost manufacturing activities.

“Singapore’s government policy as a whole is to move up the value chain...It is not the low cost manufacturer of products that it once was. Our strategy is very much aligned with where the market is moving,” said McGrath.

He added that he expects demand for business parks to increase faster than that for manufacturing facilities, which currently account for about 22% of AA Reit’s total portfolio.

Although AA Reit is one of the smallest amongst its peers with a market capitalisation of US$358 million ($452 million), it had a high distribution yield of 9.5%. This compares with an average of about 7% for Singapore-listed real estate investment trusts.

AA Reit is also looking at redeveloping and enhancing several of its warehouses, logistic and manufacturing facilities as they currently have underutilized plot ratios.

This would help the reit to boost its gross floor area and rental income, McGrath said.

AA Reit is also exploring acquiring properties in China or Australia, where its sponsors AMP Capital and AIMS Financial Group already have a presence.

“Over the next several years, call it a 5-year plan, we can be a reit that is well-diversified, not only across different asset classes within the general moniker of industrial, but also well diversified geographically,” McGrath said.

However, the trust has no immediate plans to buy assets in overseas markets due to the relatively high interest rates and low yields in Chinese and Australian markets, McGrath said.

Completion of Sale of Asahi Ohmiya Warehouse, Tokyo Japan (the “Property”)

Further to the previous announcements made by AIMS AMP Capital Industrial REIT Management Limited (the “Manager”) as Manager of AIMS AMP Capital Industrial REIT (‘Trust”), the Manager wishes to announce that the sale of the Trust’s effective 99.2% interest of the Property has been completed today.

A joint inspection of the Property by the purchaser, the Trust’s Japan asset manager and an independent engineer indicated JPY6.9 million (SGD107,619.45)1 of repairs were required on the Property following the earthquake.

Accordingly, the sale price has effectively been reduced from JPY1.49 billion to JPY1.483 billion.
The net sales proceeds will be used to repay debt, reducing the aggregate leverage of the
Trust to approximately 32.0%.

CIT rights issue timeline

18 March 2011 at 5.00 p.m.:Rights Issue Books Closure

23 March 2011: Despatch of Offer Information Statement (together with the
application forms) to Eligible Unitholders

23 March 2011 from 9.00 a.m: Commencement of trading of Rights Entitlements

31 March 2011 at 5.00 p.m: Close of trading of Rights Entitlements

6 April 2011 at 5.00 p.m: Last date and time for acceptance of the Rights Entitlements
and payment for Rights Units

15 April 2011 by 9.00 a.m: Expected date for crediting of the Rights Units
Commencement of trading of the Rights Units on the SGX‐ST

JPMorgan reverses its cautious call On S-REITS

JPMorgan says it’s reversing its cautious call on the Singapore REIT sector. It notes S-REITs have modestly underperformed the STI year to date, trading at 6.2% FY11E yield and 0.99X P/B.

“With the likely postponement of a number of equity fundraisings and the interest rate hike expectations in the current macro environment, we believe S-REITs sector should provide better risk-adjusted return given the strong yield support and stable growth.”

It says capital structure is stable; “Interest cover for all the REITs under our coverage remains at above three times even if we assume a 20% decline in renewal rents and 100bps increase in borrowing cost for debt to be renewed in 2011.”

The house’s top picks for the sector are CapitaMall Trust (C38U.SG) and Frasers Centrepoint Trust (J69U.SG), “a clear preference for the retail REITs.”

It adds, “our call is largely predicated on the fact that Singapore domestic economy, especially retail spending and tourism arrivals, will retain its existing growth rate despite the current macro environment.”

Combine value and yield strategy with S-REITS - CIMB

Amid the current volatile market, CIMB suggests combining a strategy of looking for value from oversold stocks and putting money into high-yield stocks.It notes, since the mega-earthquake and tsunami that hit Japan on March 11, “most SGX-listed stocks have taken a beating” with the STI Index down 3.6% since March 10 close. “which typically offer better dividend yields relative to the average stock,” and were not spared in the selloff. “Some REITs fell more than the STI over this period despite the lack of exposure to Japan. Stocks like Frasers Commercial Trust (ND8U.SG), down 7.3%, and Frasers Centrepoint Trust (J69U.SG), off 5.3%, are examples.

These stocks may be oversold, and as such, could present traders an opportunity for accumulation,” offering attractive CY11 yields of 7.8% and 6.0% respectively post the sell-down.

It adds, changes in travel plans may benefit tourism plays, like CDL Hospitality Trust (J85.SG), yielding 6.5%, which has fallen 4.4% since the quake.

S-REITs still a growth story - DBS Vickers

DBS Vickers says S-REITs’ 4Q10 results were “a continuation of the strong showing in 3Q10 with the sector reporting topline, net property income and distributable income growth of 10%, 13% and 11% respectively.”

It notes, hospitality REITs continued to outperform with strong organic growth, while acquisitions completed in 2010 lifted distributions for the remaining S-REITs.

“While retail and industrial S-REITs continue to deliver single digit growth, office REITs reported weaker results both on year and on quarter, as passing rents remained below the peak rents signed in 2007-2008. We expect this trend to continue in the coming quarters, only to reverse in 2012.”

The house adds, S-REITs are good inflation hedges given their ability to grow rental income above inflation. The house keeps its view that hospitality REITs will continue to exhibit the strongest earnings potential.

CDL Hospitality Trusts (J85.SG), rated buy with a $2.30 target, is its top pick, “to leverage on the robust growth from this sector.”

CDL Hospitality Trusts is +1.5% at $2.05.

OCBC overweight S-REITs; ready for rate hike

OCBC says any impending interest rates hike will add on to borrowing costs of S-REITs and affect distributable income for unitholders. “Any rate hike is likely to have a greater impact on S-REITs that 1) have a lower percentage of fixed rate borrowings, and 2) have a substantial amount of borrowings maturing near the interest rate hike period (likely 2H11-FY12).”

It says overall, “fundamentals for the majority of the S-REITs remain strong and any increase in interest rate will have some but not material impact on S-REITs’ financials, since most have already expected or are preparing for it.”

The house remains positive on the medium-term prospects of S-REITs and it is confident that most REIT managers will optimize their financial means to protect the trusts from further interest rate and refinancing risks. The house maintains an Overweight call on S-REITs.

Armstrong- Full year results

Armstrong Industrial Corporation Limited is a leading foam and rubber components manufacturer
specializing in noise, vibration & heat management for the automotive and electronics industries.

4Q2010 vs 4Q2009

• Gross Profit increased by 15.7% to S$15.4 million from S$13.3million with improved Gross Margin
  

• Net Profit attributable to shareholders maintained at S$6.2 million.
  

• Net profit margin declines 0.4% mainly due to JPY appreciation and USD depreciation against SGD.

FY2010 vs FY2009

• Record Revenue & Net Profit achieved

• Gross Profit increased by 40.5% to S$62.0 million from S$44.2 million

with Gross Margin improving from 25.4% to 27.5%

• Net Profit attributable to shareholders grew by 77.1% to S$24.9 million.
  

• Recommends final dividend of two Singapore cents to supplement interim dividend of two Singapore cents, a yield of 10.4% based on closing share price on 24 Feb 2011 of S$0.385.
  

New Toyo -Full year results

• 12 mth Revenue increased by 3.5% (Q4 increased by 4%).

• Gross profit dropped by 3% (Q4 dropped by 6%).

• Profit dropped by 12.2% (Q4 dropped by 34.2%)

• EPS(Group) increased from 3.53 cents to 3.91 cents (Profit drop yet EPS increased?)

• NAV (Group) dropped from 44.83 cents to 33.10 cents

• Interim dividend (0.97 cents) Final dividend (0.97cents)

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Comments:
It seems like the Q4 results is pretty disappointing and YOY profit has dipped more than 10%.
With the reduced dividend (previously 2cents in total), the yield of this company is about 8.1% only. I would certainly look at selling this stock soon.

Innotek- FY2010 Results

• Revenue 15.1% higher at S$415.9 million in FY10; 4Q’10 revenue increased 6.8% to S$99.0 million on higher sales of stamping components and Frame products
  

• Net profit for FY10 rose 134.1% to S$17.8 million from S$7.6 million in FY09,reflecting cost and operational improvements. FY10 EPS of 7.75 cents is 138.5% higher than 3.25 cents in FY09
  

• Proposes final dividend of 5.0 cents per share, unchanged for third year

• Financial position remains strong – Group net cash position of S$56.6 million as at 31 December; also holds 19.6 million treasury shares

SINGAPORE, 25 February 2011 –InnoTek Limited (“InnoTek” or “the Group”)
announced today that its net profit after tax for the financial year ended 31 December 2010 (“FY10”) rose 134.1% to S$17.8 million from S$7.6 million in FY09 on higher sales and continued cost and operational improvements.

For the third year in a row, the SGX Mainboard-listed company also declared a first and final dividend of 5.0 cents per share.

InnoTek’s net profit was achieved on revenue of S$415.9 million in FY10, 15.1% higher than S$361.4 million in FY09, as its wholly owned Mansfield Manufacturing Company Limited (“MSF”) recorded improved sales from stamping products due to stronger demand for TV components.

Revenue from the precision components and sub-assembly segment rose to S$375.4 million in FY10 from S$323.5 million in FY09. Apart from higher sales of TV components, frame sales from its Dutch subsidiary Exerion PrecisionTechnology Holding B.V. also rose to S$40.5 million in FY10 from S$37.9 million in FY09 due to higher demand for printing and medical equipment components.

MSF’s FY10 net profit was S$11.1 million higher than FY09 due to higher sales and re-classification of a factory building from property, plant and equipment to an investment property, resulting in lower depreciation and reversal of S$2.7 million impairment loss provided for in FY09. MSF also wrote-back a S$1.2 million provision after collecting doubtful debts provided for in FY09.

On the other hand, MSF’s FY09 bottom-line was affected by a one-time provision of S$2.0 million relating to employees’ severance and end-of-contract payments and provision of S$1.4 million of doubtful debts.

The Company reported a loss of S$2.5 million due to lower interest income in FY10 and a one-off reversal of tax provision in FY09 following tax exemption for certain overseas interest income remitted between 22 January 2009 and 21 January 2010. However, this was mitigated by S$0.6 million gain from disposal of an investment which had been fully provided for in FY07.

For the quarter ended 31 December 2010 (“4Q’10”) InnoTek’s net profit after tax increased 35.1% to S$4.0 million from S$3.0 million in 4Q’09, revenue also rose 6.8% to S$99.0 million from S$92.7 million.

Earnings per share rose to 7.75 cents in FY10 from 3.25 cents in FY09. Net asset backing per share as at 31 December 2010 stood at 85.4 cents compared to 85.8 cents as at 31 December 2009 following payment of dividend in May 2010 amounting to S$11.4 million and acquisition of treasury shares in FY10 amounting to S$4.8 million.

The Group’s financial position remains healthy, with net cash position of S$56.6 million or 24.9 cents per share, comprising cash and cash equivalents of S$89.5 million less total borrowings of S$32.9 million, as at 31 December 2010. To enhance shareholder value, InnoTek purchased a further 1.2 million treasury shares in 4Q’10, bringing the total treasury shares held to 19.6 million.

To reward shareholders, the Group has proposed a first and final one-tier tax exempt dividend of 5.0 cents per share, unchanged for three years in a row. The FY10 dividend represents 64% of net profit.

The directors expect Q1’11 demand for office automation and automotive components to sustain but demand for TV components to soften. As such, Q1’11performance is expected to be challenging.

“In the absence of any unforeseen circumstances, we expect the Group to remain profitable in FY11 as we continue to focus on cost management and improving efficiency to mitigate the impact of inflationary cost and the rising Chinese Yuan. Additionally, the Group is diversifying its products and customer base,” said InnoTek Group Managing Director Mr Yong Kok Hoon.
“In line with the Group’s long-term growth strategy, we will continue to actively pursue appropriate merger and acquisitions opportunities. We will maintain our cautious stance, focusing on earnings-accretive businesses, and stringently evaluate feasible investment proposals,” he added.