STI : 3,210.67
Price Target : 12-Month S$ 0.87
Maiden results beats forecast
• Maiden DPU of 0.76 Scts ahead of IPO forecast
• Steady growth in distributions in 2014, supported by organic drivers
• BUY, S$0.87 TP maintained
DPU of 0.76 Scts for period ended Sep 13. Soilbuild REIT (SBREIT) reported a good maiden set of results for the period ended 30 Sept13 (1.5 months) which was ahead of prospectus forecast, but in line with our expectations.
Gross revenues and net property income were 0.8% and 2.0% higher at S$8.2m and S$6.9m. The stronger performance was driven by higher take-ups and lease renewals at Eightrium@ Changi Business Trust and Tuas Connection. Leases that expired during the quarter were all renewed, with a positive reversionary rate of c7.9% over passing levels. Portfolio occupancy remained resilient at 99.8%. SBREIT also achieved lower all-in interest rate of 3.11% ( vs 3.28% in IPO forecast), resulting in a distributable income (DPU of 0.76 Scts) of S$6.1m (+3.1% vs forecast).
Minimal lease expiry in 2013; organic growth drivers. With all of expiring leases for 2013 already renewed (SBREIT renewed 2.2% of NLA during the quarter), SBREIT has nil leasing risk for the remainder of 2013. Looking ahead, with portfolio occupancy rates already near full (c.99.8% as of Sept’13) and expected to remain resilient, growth is likely to be driven by higher rental rates. SBREIT will be renewing close to 16% of portfolio NLA (majority coming from Eightrium and Tuas Connection) in 2014 and we expect reversions to remain positive. This is because of low passing rent levels that are up to c.10% below current market rent levels.
Low gearing of 29.4%; average debt maturity of 3.0 years. Gearing was steady at 29.4%, NAV at 0.80 Scts. With gearing below management’s long term target of c35%, we believe that acquisitions are likely to feature, albeit at a more selective stance. On that front, assuming a target gearing level of c35%, SBREIT could potentially acquire up to cS$75m worth of industrial properties.
Maintain BUY, TP S$0.87. Trading at 0.9x P/BV and offering attractive FY13-15 forward yields of c7.6%-8.5%, SBREIT offers one of the highest yields across the industrial REITs that we cover. Re-rating catalysts are (i) delivering better than expected reversions and (ii) accretive acquisitions.
Publish date: 01/11/13