Inphyy Corner

CapitaCommercial Trust: Review for 2013

By Stanley Lim, CFA - January 25, 2014

CapitaCommercial Trust (SGX: C61U) is part of the commercial property investment arm of the largest property developer in South East Asia, CapitaLand (SGX: C31).

All of the real estate investment trust’s property assets are located in Singapore. Its portfolio contains of seven wholly-owned commercial properties around Singapore in addition to a car park and a 60% stake in Raffles City, a prominent piece of real estate that’s located right in the heart of the city of Singapore.

The REIT also has a 40% stake in the upcoming CapitaGreen tower, which is under construction. All told, CapitaCommercial Trust’s property portfolio is valued at S$6.96b (inclusive of the land valuation of the yet-to-be-completed CapitaGreen) as of 31 Dec 2013.

CapitaCommercial Trust also has a small exposure to properties in Malaysia through its 30% associate, the Quill Capita Trust, which is listed on the Kuala Lumpur Stock Exchange in Malaysia.

Performance

CapitaCommercial Trust’s full-year earnings were announced on Thursday. For the 12 months ended 31 Dec 2013, the trust was able to grow its gross revenue by 3% year-on-year to S$387m as most of its properties brought in higher revenue. Net property income, on the other hand, only managed to increase by 0.3% to S$297m from a year ago as there were higher property taxes and operating expenses.

Moving further down the income statement, the REIT’s distributable income came in at S$234m, some 2.5% higher than the corresponding figure in the previous year on the back of an increase in net property income, higher interest income from loans, and lower interest expenses.

All told, the trust was able to raise its annual distribution per unit by 1.2% from a year ago to 8.14 Singapore cents on the asusmption that there is no dilution coming from its convertible bonds outstanding.

The REIT’s occupancy rates for its properties across its portfolio for the fourth quarter of 2013 improved to 98.7% from 97.2% in the corresponding quarter a year ago.

Balance Sheet

Compared to a year ago, the trust has managed to improve its balance by reducing its gearing ratio from 30.1% to 29.3%. CapitaCommercial Trust has also managed to lower the cost of its debt from 3.1% to 2.6% and thus improve its interest coverage (essentially measuring how well an entity is able to handle its interest payments) from 4.4 times to 5.5 times.

As mentioned previously, it is worth noting that CapitaCommercial Trust has two issues of convertible bonds outstanding: S$190m worth of convertible bonds due in 2015 with a conversion price of S$1.2324 per unit; and S$175m worth of convertible bonds due in 2017 with a conversion price of S$1.6394 per unit.

If both sets of convertible bonds are fully converted, 261.1m new units of CapitaCommercial Trust would be created, representing a potential 9.1% dilution for existing unit holders.

Growth

CapitaCommercial Trust expects the high-end office market rental rates to be increasing for 2014. The trust has roughly 10% of its gross rental waiting for renewal and there might be a possibility of positive rental reversions (the adjustment of rental rates to reflect market conditions). The REIT also has room to lever itself up to a gearing ratio of 40% for future investment opportunities and on that front, the REIT’s manager commented that they “will continue with a disciplined approach” in the search for acqusitions.

Yield

CapitaCommercial is currently selling for S$1.44 per unit and valued at 0.8 times book value with a historical dividend yield of 5.7% based on its pay-out of 8.14 cents.


Courtesy of The Motley Fool

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ASL Marine Holdings to acquire Batam shipyard for $20 million

Helps expand shipbuilding, ship repair capabilities.

The Board of Directors of ASL Marine Holdings Ltd. announced that the company and its wholly-owned subsidiary, PT.

Sukses Shipyard Indonesia, have entered into a conditional sale and purchase agreement with Miclyn Express Offshore Limited (MEO) and its wholly-owned subsidiary, PT Loh & Loh Construction Indonesia, to acquire the property and fixed assets in respect of a shipyard in Batam for a $20.0 million cash consideration.

The shipyard operates on the land located at Jalan Brigjen Katamso Km.

19 Tanjung Uncang Batam, Indonesia, being adjacent to the Group’s existing shipyard in Batam. It is situated in a free trade zone with industrial areas designated specifically for shipyards with infrastructure such as roads, telecommunications, utilities and supporting services.

The Sale Assets comprise a site of 12.2 hectares with berthing / repair quays of 220 metres, 2 shiprepair slip / launch-ways and shipyard facilities (office building, fabrication shop, and machineries) which cater for shipbuilding, vessels repair, modification and mobilisation, as well as modular fabrication services.

ASL Marine commissioned KJPP, Sarwono, Indrastuti & Rekan (KJPP), a property valuer, to evaluate the “market value” of the sale assets, being the “estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

According to its valuation report dated 15 January 2014, and using the “value based market data approach and cost approach”, KJPP is of the opinion that the market value of the sale assets as at 20 December 2013 is Rp310.6 billion (equivalent to approximately S$33.0 million based on the exchange rate of S$1: Rp9,426).

In explaining the rationale for the acquisition, ASL Marine said that it "is in line with the overall strategy of the Group to strengthen and expand its shipbuilding and ship repair capability and capacity."

"In view of the water-front land and the close proximity of the Sale Assets to the Group’s existing premise in Batam, the proposed Acquisition will provide a good opportunity for the Group to expand its capacity and berthing space to support the growing demand for ship repair and upgrading of ships and other floating structures from the marine and offshore sector."

"The additional shipyard will also supplement the revenue stream of the Group, as well as strengthen its ability to serve customers in the South Asia region."

ASL Marine and its subsidiaries are engaged in the business of ship building, ship repair and conversion, ship-chartering, engineering and provision of other marine related services.

It also caters to customers which are mainly from Asia Pacific, South Asia, Europe, Australia and the Middle East. The Group currently owns and operates four (4) shipyards which are located in Singapore, Indonesia (Batam) and the People’s Republic of China (Guangdong).

Micro-Mechanics (Holdings) Ltd Boost Net Income By 39%

By Stanley Lim, CFA - January 27, 2014

Micro-Mechanics (SGX: 5DD), a manufacturer of high precision tools, parts and assemblies for the semiconductor, medical and aerospace industry, announced on 25 Jan 2014 a 39% year-on-year gain in quarterly net profit to S$1.4m for the second quarter of its current financial year.

The Group has a semiconductor tooling segment, serving clients in the assembly and testing of semiconductors. The segment achieved higher sales in China, Malaysia and the Philippines. Its Custom Machining & Assembly (“CMA”), which assists high-technology capital equipment manufacturers, is starting to show growth, thanks to increased sales and rising operational efficiency.

Performance

The company has been able to achieve its bottom-line growth from a 13% year-on-year growth in revenue to S$10.5m for the quarter. Combined with improving margins (Micro-Mechanics’ gross margin improved from 48.8% to 50.8%), and a tighter control over expenses, the company’s net profit was able to expand rapidly..

Looking at each segment for the six months ended 31 Dec 2013, the semiconductor tooling business has grown its revenue by 8.4% year-on-year to $ 18.1m. The CMA division grew even faster, boosting revenue from S$2.4m to S$3.45m. That is a growth rate of around 44%.

For the last four years, the company’s dividend has been averaging about 3 Singapore cents a year. Micro-Mechanics has announced its plans to distribute an interim dividend of 1.0 cent per share (one-tier tax exempt) on 18 February 2014 for the current financial year.

Micro-Mechanics ends the quarter with a strong balance sheet, having cash & cash equivalents of S$10.0 million and zero debt.

Outlook

In its report for the quarter, the company mentioned that the Semiconductor Industry Association predicted global chip sales for the semiconductor industry to increase 4.1% to US$316.6 billion in 2014, which can bode well for the company if the forecast turns out accurate and Micro-Mechanics does not lose market-share.

At its current price of S$0.54 per share, Micro-Mechanics is providing shareholders with a dividend yield of 5.5% based on its full-year pay-out for its last completed financial year.

Courtesy of The Motley Fool

SGX's earnings dampened by weaker securities market

Net profit forecast trimmed by 4%.

According to OSK, SGX’s 2QFY14 results were soft, primarily due to challenging conditions in the securities market. However, derivatives revenue was stable q-o-q, making up 32% of total revenue, similar to contribution from the securities market.

Here's more:

2QFY14 results slightly miss estimates. SGX’s 2QFY14 net profit of SGD75m (-2% y-o-y; -19% q-o-q) was slightly below our and consensus estimates, with 1HFY14 net profit of SGD167m (+11% y-o-y) accounting for 45-46% of our and consensus’ full-year net profit estimates respectively.

2QFY14 was a tough quarter for the securities market as average daily turnover (ADT) fell 17% y-o-y and 25% q-o-q to SGD1bn as a result of weaker participation from both retail and institutions.

Derivatives revenue now as large as securities revenue. Securities revenue fell 24% q-o-q and 13% y-o-y due to weaker ADT, but the y-o-y drop was partly cushioned by a higher average clearing fee of 3.2bps (2QFY13: 3bps; 1QFY14: 3.2bps) due to an increase in uncapped trades.

Turnover velocity was also weaker at 35% (2QFY13: 45%; 1QFY14: 47%). Derivatives revenue, however, inched up 2% q-o-q (+16% y-o-y) and, for the first time, matched securities revenue. Both securities and derivatives revenue now account for 32% of the group’s total revenue respectively.

Expenses broadly under control (+5% y-o-y; -3% q-o-q). Management continued to guide for FY14 operating expenses of between SGD320m-330m (FY13: SGD300m), while technology-related capital expenditure is expected to come in between SGD35m-40m.

Dividend. As expected, SGX declared an interim DPS of 4 cents (2QFY13: 4 cents).

Forecasts. We trim our FY14F-15F ADT projections by 7% annually, leading to a 4-5% reductions in our FY14F-15F net profit projections.

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