Ascott REIT DPU 1.92 Cents (28 Oct 2009)

Below is the report by Ascott Residence Trust on their 3Q results. From the looks of it, QoQ, the revenue, gross profit and DPU has increased. Compared to 3Q 2008, the yield has actually dropped significantly.

Singapore, 28 October 2009 – Ascott Residence Trust (Ascott Reit) achieved a unitholders’ distribution1 of S$11.8 million and DPU of 1.92 cents for the quarter ended 30 September 2009. Ascott Reit’s annualised distribution yield is 6.7 percent2 based on the closing price of S$1.09 per unit on 27 October 2009.

Mr Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) Chairman, said: “The severe challenges posed by the global economic downturn to the hospitality industry have eased. Our 3Q operating performance has shown further signs of stabilisation in hospitality demand. While we remain cautious over the pace and extent of recovery, we are confident of the longer-term growth in the markets in which we operate.”

Mr Chong Kee Hiong, ARTML’s Chief Executive Officer, said, “Ascott Reit’s portfolio operating performance continued to improve in the third quarter of 2009. The better performance was led by revenue per available unit (RevPAU) growth in Japan, Singapore and China of 24 percent, 15 percent and 7 percent respectively in 3Q 2009 compared to 2Q 2009. To ride on the expected upturn in demand as the economy recovers, we have accelerated our asset enhancement initiatives for selected properties. We will also continue to seek yield accretive acquisitions.”

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1. Stock Picks - Kenneth Ng

2. Outperform by CIMB (Oct 09)

Stock Picks - Kenneth Ng

Mr Kenneth Ng is the head of CIMB-GK Research. In the recent Sunday Times, the following were his stock picks and reasons:

1. Sembcorp Industries. Utilities division will provide stable earnings growth. Will benefit from petrochemical industry in Singapore. Offshore & marine division will benefit in next few years.

2. Parkway Holdings. Position likely to be enhanced in Singapore with opening of its hospital in Novena.

3. Parkway Life Reit. Health care assets as one of the most stable asset class.

4. Ascott Reit. Well diversified within Asia.

5. DBS bank. Cheapest in valuation amongst the three Singapore banks.

6. Wilmar International. Proven management, forward looking with integrated exposure to manage prices and profits.

7, Genting Singapore. Will remain as one of Singapore's top five market cap stocks for the next few years.

8. Noble Group. Increased volumes and value-added processing capabilities from projects.

First REIT announces distribution

First REIT maintains stable 3Q 2009 distributable income at S$5.2 million
 DPU for the period at 1.90 cents per unit
 Annualised DPU of 7.62 Singapore cents translates to distribution yield of 10.7%
 Committed to maintaining a payout policy of 100% of distributable income for FY 2009


SINGAPORE – 22 October 2009 – Bowsprit Capital Corporation Limited ("Bowsprit"), the Manager of First Real Estate Investment Trust ("First REIT"), Singapore’s first healthcare real estate investment trust, today reported that its distributable income for the third quarter ended 30 September 2009 amounted to S$5.2 million which was similar to that achieved in the corresponding period last year.

Correspondingly, 3Q 2009 distribution per unit ("DPU") remained steady at 1.90 Singapore cents. Based on its closing price of S$0.715 on 20 October 2009 and the annualised DPU of 7.62 Singapore cents, First REIT registered a healthy distribution yield of 10.7% for the period.

Gross revenue and net property income also remained stable at S$7.6 million and S$7.5 million respectively as compared to the previous corresponding period.

Reflecting substantially lower market interest rates for fixed deposits, the Group’s interest income for 3Q 2009 decreased 85.4% to S$7,000, whilst trustee fees and finance costs grew by 11.1% and 28.5% respectively. Increase in finance costs was due to higher interest cost for the loan facility which was refinanced in June 2009.

Looking ahead

Improving stock markets and consumer demand are encouraging signs which point to a global economic recovery. With the general credit environment easing, a large part of the REIT sector in Singapore has been successful in their debt refinancing.

The Government’s recent push to raise awareness and boost palliative care services should help to boost the demand for private nursing care.

Bowsprit’s Chief Executive Officer, Dr Ronnie Tan, said "Our performance for the latest quarter continues to reinforce the stability of our Trust structure, which has cushioned us from the effects of the global financial crisis. In particular, we have seen stronger occupancy in our three Indonesians hospitals as more patients stayed back to seek medical care instead of travelling abroad. Continuing growth in this sector will provide an upside potential for First REIT as our Indonesian assets enjoy a variable rental growth component in addition to annual escalation.

In Singapore, demand for private nursing care continues to grow steadily with its aging population.

As First REIT faces no refinancing needs until 2012 and is well funded to meet anticipated growth, we expect the Trust’s performance to remain relatively stable and poised for improvement."

Balance sheet remains strong with a debt gearing of 15.6% which is significantly lower than the regulatory limit of 35%. This provides First REIT with headroom to pursue acquisition opportunities and carry out further asset enhancement works.

First REIT has received approval from the relevant authorities for comprehensive asset enhancement works for its Adam Road Hospital and is expected to commence work soon. Plans are also being proposed for extension works to Lentor Residence.

First REIT will continue its on-going review of the financial attractiveness of various projects in the pipeline, such as the Tech-Link healthcare logistics and distribution centre in Singapore which has received its temporary occupation permit on 2 September 2009.

Books Closure and Distribution Payment

First REIT’s Books Closure and Distribution Payment dates for 3Q 2009 payout of 1.90 Singapore cents are 2 November 2009 and 26 November 2009 respectively.

Stock Picks - Gabriel Yap

These are the following stock picks by Mr Gabriel Yap, senior dealing director at DMG & Partners Securities:

" Investors should set aside at least $50,000 if they want to invest in the stock market. Wait for a good pull back of 6 to 12 percent to build up your investment portfolio"

His stock picks include:

1. OCBC Bank. Banks normally outperform in the second stage of recovery.

2. DBS bank. Cheapest valuation

3. Bukit Sembawang. Property developer owns a great landbank in Seletar.

4. CapitaMall Trust. Great porfolio of assets with good location, good yield and borrowing levels.

5. Ascendas Reits. Potential for higher rents.

6. Frasers Centre Point Trust. Acquisition of Northpoint 2 and Yew Tee Point will properl growth.

7. Noble Group. Recent investment by China Investment Corp will open doors.

8. Midas Holdings. To benefit from China's booming rail industry

APL Logistics wins Supply Chain Excellence Award (16 Oct)

APL Logistics has received the award for ‘Outstanding Partner in Supply Chain Excellence' within the Technology Solutions and Service Provider category at the Supply Chain Excellence Awards 2009, held in Singapore.

The awards recognised the achievements of the top five logistics partners in the Asia Pacific region. Successful contenders were those providers that have proven their ability to deliver outstanding value to customer's operations and strengthened supply chains during the global economic downturn.

"In the last year we have worked increasingly closely with our customers to help them create end-to-end supply chains that have the flexibility to adapt to volatile market conditions. By doing so, we have been able to continue helping our global customers strengthen their presence in the Asia Pacific region and support the effectiveness of Asia’s increasingly diverse manufacturing locations," said Peter Knapp, Vice President, Contract Logistics, APL Logistics.

The judging panel, which was comprised of representatives from academic and commercial institutions across Asia, Europe and the US, selected all category winners based on their ability to help customers build resilient and flexible supply chains. Entrants also had to show evidence that demonstrated how they had created tangible cost savings or efficiencies for customers in the last year.

APL Logistics' industry leadership was acknowledged in several areas. This included its ability to help customers manage fluctuating inventory requirements and increasing cost pressures via its time-definite OceanGuaranteed® and APL Guaranteed® services. The environmental benefits of switching from air to ocean/truck transportation and 'big box' consolidation were also seen as an important part of this.

The business' focus on improving Asia's intermodal transportation connectivity, regionally and internationally also received recognition. A key element of this was APL Logistics' contribution to improving connectivity across India to support the country's economic growth aspirations via its IndiaLinx™ service, a joint venture with Hindustan Infrastructure Projects and Engineering (HIPE).

The awards were part of the SCM Logistics World Conference 2009.

YangZiJiang - Buy by DBS (13 Oct 09)

Sturdy earnings
• Expect Yangzijiang to beat consensus and our forecasts for 2H09 and 2010 on lower steel costs.
• Upgrade 2009-2010 net profits by 11%-17% as we cut steel costs by 10%-11%.
• Raise target price to S$1.36, implied a 40% upside; Reiterate BUY on superior execution.

Lower steel costs. We re-examined our assumption for steel costs, the largest unhedged cost component (>20% of COGS) for shipbuilders. Based on recent price trend, steel costs in 2H09-1H10 will likely be lower than our expectation. Steel prices have hovered at low levels of RMB3000–4000/ton YTD and are not expected to pick up significantly in the near term, based on our industry checks.

Upgrade earnings. We have lowered our full year steel cost assumption from RMB4500-5000/ton to RMB4000-4500/ton in FY09-FY10 forecast periods. These have lifted our gross margins by 2ppt to 23.5% in FY09 and 22% in FY10, leading to upward revision in net profit forecasts for FY09 and FY10 by 11% and 17% respectively. The marginal declines in net profit forecasts in FY10- FY11 are due to cessation of tax holiday for new yard and margin normalisation.

Scope for consensus upgrades post 3Q results. On the back of favorable steel prices and on track delivery, Yangzijiang is expected to report a stellar 3Q09 results similar to 2Q09, when release on 3rd Nov. We project 3Q09 to record net profit of RMB550-600m on revenue of c. RMB2.4bn. With this, 9M09 bottomline could make up 80%-85% of consensus forecasts, which will likely call for a series of earnings upgrades by the streets.

Maintain BUY; Target price raised to S$1.36. Our target price is raised to S$1.36 following the earning revisions, still pegged to 11x FY10 EPS. This is in line with the average PE of regional peers. Superior execution track record. We continue to favor Yangzijiang for its solid execution and consistent earnings delivery. The shipbuilding track records of SGX-listed shipyards have generally been patchy, ranging from estimated losses to positive 23% gross margin. Yangzijiang has stood above its peers by achieving consistent and better 19-23% gross profit margin and 78% net profit CAGR in the 2004-08 periods; through its superior raw materials and forex hedging strategies and better order book quality.

Shipping Trusts - Underweight by OCBC (12 Oct 09)

3Q results preview. We expect FSL Trust and Pacific Shipping Trust to release 3Q09 results next week, with Rickmers Maritime following later in the season. We will be tracking: 1) performance of the trusts' charters; 2) balance sheet factors including loan-to-market-value levels and repayment schedules; and 3) how this translates to forward strategy and DPU guidance.

Maintain UNDERWEIGHT on the sector as we believe the unwinding of this leveraged play structure is still playing out. The shipping industry is still hurting and counterparty risk and aggressive leverage remains a key concern. FSL Trust [BUY, S$0.72 fair value] is our preferred pick for its diversified vessel portfolio.

FSL Trust (FSLT). In September, FSLT secured loan-to-value (LTV) covenant waivers and raised equity through a placement. As such, we expect 3Q results to be fairly uneventful relative to the other two trusts. FSLT is the only trust to have given clear guidance for 3Q09 payout: 1.5 US cents is guided for pre-placement unitholders (1.27 US cents already paid out). We expect the trust to meet its guidance. The placement proceeds are earmarked for acquisitions but it may be too soon to expect concrete news on this front.


Pacific Shipping Trust (PST). Rate renegotiation discussions with customer CSAV are now in their sixth month with no resolution achieved so far. 3Q09 revenue will likely outperform our expectations as we had priced in a rate cut from 2H09 onwards. Our view is that it is only a matter of time before some flavor of rate concession is granted. Meanwhile, PST's Board is reconsidering its payout strategy and has only said that 3Q09 payout will be no less than 70% of distributable income. This may be a significant quarter as the Board spells out its forward payout and growth strategy. PST has already outlined its ambitions to grow, but any serious attempt would require fresh equity, in our opinion.

Rickmers Maritime (RMT). RMT paid out 0.6 US cents DPU in 2Q09, and its circumstances are unchanged. We don't expect any immediate resolutions to its challenges including LTV covenant breach concerns, maturing loans, and an outstanding order book. We do not believe there is scope for DPU increase till these issues are resolved and believe it more prudent to not price in any payout. While fresh equity may be eventually necessary, loan covenant concerns create a chicken and egg situation. Like FSLT, RMT may need to secure (at least conditional) LTV waivers before it can attempt to raise equity.