Monday, July 29, 2013

Cambridge Industrial Trust: Resilient portfolio, safe earnings (DBSV)

Cambridge Industrial Trust,
HOLD S$0.74 ,
Resilient portfolio, safe earnings
Price Target : 12-Month S$ 0.78

•2Q13 in line with expectations
•Portfolio remains resilient; earnings growth to be led by opportunistic acquisitions or development projects
•HOLD maintained, TP S$0.78

Highlights
2Q13 results in line. Cambridge REIT (CREIT) reported a 14% and 13% y-o-y rise in revenues and net property income to S$24.6m and S$20.8m, respectively. The better performances were largely due to the contribution from acquisitions and development projects, rental escalations, offset by loss of income from divestments. Portfolio occupancy remained high at c.98% with a weighted lease expiry of 3.2 years. Distributable income rose by 8% y-o-y to S$15.3m (which was largely a distribution of capital as the Manager was entitled to a performance fee of S$13.9m after a voluntary 50% waiver). DPU was 1.24Scts (+5% y-o-y). CREIT also reported net revaluation gains of S$31.9m, 3% higher compared to Dec 12 values.


Our View
Developments/asset enhancements to underpin earnings growth. CREIT’s organic growth performance is likely to remain stable. The Manager has leased close to 500,000 sqft of space in 1H13 with positive uplifts of 5-10%. CREIT has a weighted average lease expiry of 2.4 years. There is a further c4.0% of its income up for renewal for the rest of 2013, implying that earnings are likely to be fairly stable. The Manager continues to execute on development projects, with an aim in optimising the value of its portfolio. One such strategy is to maximize available GFA in selected properties - 3 Pioneer Sector 3 and 21B Senoko Loop  - where CREIT will raise the plot ratios of these properties to 1.3x and 2.4x respectively, adding close to 384k additional GFA to the portfolio.

Recommendation
HOLD maintained, TP S$0.78. While the impact is not expected to be substantial, we remain positive on the ability of CREIT to extract value within its portfolio, which is likely to imply further growth in rentals and capital values for the properties, and thus having a positive impact on unit holders’ distributions. Maintain HOLD and TP S$0.78, given limited upside. .



Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 25/07/13

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