Thursday, February 6, 2014

Soilbuild REIT: Strong showing in 4Q13 (OCBC)

Soilbuild REIT:
Fair value S$0.85
add: 12m dividend forecast S$0.059
versus: Current price S$0.76
Strong showing in 4Q13

Soilbuild Business Space REIT’s (Soilbuild REIT) 4Q13 DPU tallied 1.51 S cents, slightly above our DPU projection. We note that the portfolio assets continued to exhibit resilience, thanks to its continued focus on lease management and quality assets. In addition, positive rental reversions of 7.9% were recorded upon lease renewals. Looking ahead, we understand that management will focus on early renewal negotiations for its 2014 lease expiries to ensure that retention rate remains high. As only ~17% of the portfolio NLA is up for renewal in this year, we expect Soilbuild REIT’s operational performance to remain stable. We maintain BUY on Soilbuild REIT with a higher fair value of S$0.85 (S$0.82 previously) after incorporating the better-than-expected results into our forecasts.


Better-than-expected 4Q13 results
Soilbuild Business Space REIT (Soilbuild REIT) turned in a firm set of 4Q13 results this morning. NPI came in at S$13.7m, 2.1% above its prospectus forecast due to higher carpark income and higher contribution from Eightrium and Tuas Connection. The growth was further boosted by lower finance expenses, thereby pushing the distributable income 3.5% above its prospectus forecast at S$12.2m. As such, DPU for the quarter tallied 1.51 S cents, representing a 3.4% increase over its prospectus forecast. This brings the DPU from the period from listing date (16 Aug 2013) to 31 Dec 2013 to 2.27 S cents, slightly above our DPU projection of 2.19 S cents (prospectus forecast: 2.199 S cents).

Continued resilience in portfolio assets
Soilbuild REIT’s portfolio assets continued to exhibit resilience, thanks to its continued focus on lease management and quality assets. We note that overall occupancy has crept up again to 99.9% from 99.8% amid 100% retention on expiring leases since listing and expansion by existing tenants. In addition, positive rental reversions of 7.9% were recorded upon lease renewals. Looking ahead, we understand that management will focus on early renewal negotiations for its 2014 lease expiries to ensure that retention rate remains high. As only ~17% of the portfolio NLA is up for renewal in this year, we expect Soilbuild REIT’s operational performance to remain stable.

Maintain BUY
On the capital management front, management has also increased its interest rate hedge to shield off any volatility on its funding costs. At present, 100% of its interest rate exposure is fixed, as opposed to 75% seen a quarter ago. All-in interest rate, on the other hand, maintained stable at 3.12% (3Q13: 3.11%), while aggregate leverage held steady at 29.3% (3Q13: 29.4%). We now incorporate the better-than-expected results into our forecasts. Accordingly, our fair value rises from S$0.82 to S$0.85. Maintain BUY on Soilbuild REIT.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 24/01/14

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