Wednesday, January 22, 2014

Cambridge Industrial Trust - Year of repositioning (CIMB)

Cambridge Industrial Trust -
Current S$0.70
Target S$0.80
Year of repositioning

CIT's 4Q13 revenue and NPI growth came in at -3.1% yoy and +1.8% yoy respectively. These results translate into 24% and 25% of our respective 4QFY13 estimates. Together with the previous 9M earnings, full-year revenue and DPU were in line with our expectations, meeting 98% and 99% of our respective FY13 estimates.

Given another proactive year ahead (in terms of managing and repositioning its portfolio) coupled with interest savings and a strong balance sheet, we maintain our Add call with an unchanged DDM-based target price (discount rate: 8.2%) of S$0.80.

A respectable set of results amid a tough year
Cambridge Industrial Trust (CIT) just announced its 4Q13 results with revenue and DPU being reported at S$23.3m (-3.1% yoy) and 1.25S¢ (+1.8% yoy) respectively. In FY13, gross revenue increased by 8.4% to S$96.5m while NPI rose to S$80.4m (+5.5%). During the said period, CIT completed four acquisitions totalling S$92.7m, commenced two AEIs totalling S$58.2m – both on track for completion in 4Q14 – and divested three non-core assets totalling S$45.4m. Occupancy for its portfolio remained high at c.97%.

Defensive balance sheet
During 4Q13, CIT entered into S$250m of interest-rate swaps to fixed interest rates, with all-in cost reduced to 3.6% per year (from 3.9%) and 83% of debt under a fixed rate for the next two years. Through this exercise, we expect CIT to save c.S$7m in interest over FY14. CIT has a healthy balance sheet currently, with a leverage ratio of 28.7% and no major refinancing due till Jun 2016.

Strong REIT but slight concern with change of CEO
In our view, through proactive management of both assets and capital, CIT has become a stronger REIT and is well positioned for any acquisition opportunities. In addition, with limited refinancing needs in 2015 (S$50m), CIT is well shielded from any potential rise in interest rates over the next two years. Looking ahead, we expect CIT to divest a further 2-3 non-core assets while, at the same time, completing two more acquisitions and two AEIs. However, the resignation of the CEO, Mr Chris Calvert (without a clearsuccessor), may put short-term pressure on the share price as the marketawaits further information. Maintain Add.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date:17/04/14

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