Cambridge Ind Trust Results Announcement

 

It?s all about debt

Proactive capital and risk management has allowed CIT to be in a stronger position than before. Given its robust balance sheet,we believe CIT is wellpositioned to make acquisitions when the opportunity arises while continuingto grow through AEIs.

3Q13 results were largely in line with our and consensus estimates. 3Q13 DPU accounted for 24% of our FY13 forecast, with 9M13 DPU meeting 72%. We tweak our model to account for the slightly weaker than expected results and roll over our valuations to FY15. In view of the strong balance sheet, we upgrade our rating from Neutral to Outperform with a higher DDM-based (discount rate: 8.3%) target price of S$0.79.

Proactive management

3Q13 DPU was up 3.9% yoy, mainly the result of additional rental income contribution from the four acquisitions completed earlier this year. During this quarter, portfolio occupancy remained high at 97%. Recently, CIT refinanced S$250m of debt facilities maturing in 1H14 and, in the process, lowered the trust?s borrowing cost to c.3.9%. During this process, S$81.3m from the proceeds from various divested properties, including 63 Hillview Avenue, was used to retire part of the S$208m term loan due in 1H14 while the remaining S$100m was refinanced to June 2016. By doing so, CIT?s gearing was reduced to a healthy 27.9% (vs. 35.8% in 2Q13) with no refinancing needs till 2015.

Capital efficiently used

By retiring some of its debt, we estimate CIT saves c.S$3.3m p.a. in terms of interest expenses. Interestingly, this is more yield-enhancing than owning 63 Hillview, which was only giving a yield of 2.3% vs. the all-in interest cost of c.4.0% CIT was paying. All-in interest cost post re-financing is reduced to 3.9%.

Upgrade to Outperform

Although the acquisition market remains challenging, we believe a strong balance sheet will allow CIT to be well positioned to make any acquisitions/AEIs when opportunity knocks. In addition, the long debt expiry profile, together with c.86% of debt under a fixed rate, will allow it to weather any hikes in interest rates.

 

CIMB

Cambridge Industrial Trust - It?s all about debt

Written By Stock Fanatic on Friday, November 1, 2013

Proactive capital and risk management has allowed CIT to be in a stronger position than before. Given its robust balance sheet, we believe CIT is well positioned to make acquisitions when the opportunity arises while continuing to grow through AEIs.

3Q13 results were largely in line with our and consensus estimates. 3Q13 DPU accounted for 24% of our FY13 forecast, with 9M13 DPU meeting 72%. We tweak our model to account for the slightly weaker than expected results and roll over our valuations to FY15. In view of the strong balance sheet, we upgrade our rating from Neutral to Outperform with a higher DDM-based (discount rate: 8.3%) target price of S$0.79.

Proactive management

3Q13 DPU was up 3.9% yoy, mainly the result of additional rental income contribution from the four acquisitions completed earlier this year. During this quarter, portfolio occupancy remained high at 97%. Recently, CIT refinanced S$250m of debt facilities maturing in 1H14 and, in the process, lowered the trust?s borrowing cost to c.3.9%. During this process, S$81.3m from the proceeds from various divested properties, including 63 Hillview Avenue, was used to retire part of the S$208m term loan due in 1H14 while the remaining S$100m was refinanced to June 2016. 

By doing so, CIT?s gearing was reduced to a healthy 27.9% (vs. 35.8% in 2Q13) with no refinancing needs till 2015.

Capital efficiently used

By retiring some of its debt, we estimate CIT saves c.S$3.3m p.a. in terms of interest expenses. Interestingly, this is more yieldenhancing than owning 63 Hillview, which was only giving a yield of 2.3% vs. the all-in interest cost of c.4.0% CIT was paying. All-in interest cost post re-financing is reduced to 3.9%.

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Upgrade to Outperform

Although the acquisition market remains challenging, we believe a strong balance sheet will allow CIT to be well positioned to make any acquisitions/AEIs when opportunity knocks. In addition, the long debt expiry profile, together with c.86% of debt under a fixed rate, will allow it to weather any hikes in interest rates. (Read Report)

Cambridge Industrial Trust - Underappreciated growth and potential internalisation of manager

Written By Stock Fanatic on Friday, September 20, 2013 | 9/20/2013

■ We expect Cambridge Industrial Trust (CREIT) to announce plans to redeploy its divestment proceeds next month.

■ DPU CAGR of 13% in 2013-15E will be driven by announced acquisitions, enhancement projects, positive rental reversions and interest cost savings from debt refinancing.

■ Other catalysts include the normalisation of EPU in 3Q13 or potential changes to the trust management fee or structure.

■ Reiterate Outperform rating CREIT offers 28% total return ? 20% potential upside to our PT and 7.6% 2013E DPU yield.

■ OUTPERFORM (unchanged)

Redeployment of divestment proceeds: CREIT‟ s 63 Hillview Avenue was sold for SGD 141mn, 28% above its book value and at a 2.3% NPI yield. The divestment will be completed by end- September and we expect CREIT to utilise the proceeds to fund acquisitions or redevelopment projects at c.7% NPI yield. 

2013-15E DPU growth of 28%, highest among SREITs: CREIT‟ s announced acquisitions, enhancement projects and positive rental reversions will contribute 15% DPU growth over the next two years. We expect a further 12% growth from SGD 80mn of assumed acquisitions (+7%) and potential interest cost savings (+5%) over the same period. These imply a 2014E DPU yield of 8.9% and a 2013-15E DPU CAGR of 13%.

Trading at 1.0x P/NAV and 21% discount to RNAV: CREIT has underperformed industrial REITs by 6% and is trading at a 21% discount to our RNAV estimate of SGD 0.85/unit. 

We see several catalysts for CREIT: 

(1) We expect EPU to normalise in 3Q13 after CREIT‟ s 1H13 performance fee had resulted in a 2Q13 EPU of S¢ 0.01

(2) CREIT is one of the few SREITs that do not have its trust manager as its largest unitholder, and unitholders could vote for a change in the management fee structure or the internalisation of the manager. This could potentially be 3-5% accretive to the EPU.

Share price performance over STI

Reiterate Outperform with a PT of SGD 0.81: CREIT offers a 7.6% 2013E DPU yield and is one of our top picks among SREITs. Our DDM-derived valuation uses a 3.25% risk-free rate, a 6.5% market risk premium, a beta of 0.85 and a terminal growth rate of 0.75%. Excluding our acquisition and refinancing assumptions, our fair value would be c.SGD 0.75/unit. (Read Report)

Source : Standard Chartered Equity Research