Growth intact
Results in-line; growth was mainly driven by contribution from latest acquisition. DPU growth still expected.
Expectations tempered by weak visitor arrivals, FX volatility.
Maintain BUY with TP of SGD0.96 from SGD0.97.
What’s New
- 2Q’s results were in-line, revenue was SGD51.8m (+8.2% QoQ, +6.9% YoY), NPI was SGD41.3m (+6.3% QoQ, +5.5% YoY), DPU was 1.29cts (+2.4% QoQ, +3.3% YoY).
- The half-year forms 48%, 48.4%, and 49.3% of our full-year forecasts.
- Growth was mainly driven by 1.5mths contribution by latest acquisition, Myer Centre Adelaide.
- As Myer will contribute fully in the second half of the year, we expect our forecasts to be met.
- Aussie contributions soared: NPI was SGD6m (+53.2% YoY) due to Myer, partially offset by a weak AUD.
- Singapore assets Wisma and Ngee Ann contributed decently with NPI at SGD26.7m (+4.3% YoY).
- Considering poor visitor arrivals and a softening office market, occupancy was stable at 99.3% (1Q: 99.4%), and tenant sales stabilised (+3.5% QoQ, -6.7% YoY).
- Retail rental reversions were however, markedly lower at 3.9% (1Q: 13.3%), while office reversions were 4.5% (1Q: 6%).
- Malaysian properties’ NPI dipped 4.4% YoY to SGD6.7m, due to MYR depreciation.
- China remains competitive with NPI at SGD887k, but stabilising (+7% QoQ, -41.5% YoY).
- Japan’s NPI was stable at SGD883k (+7.7% QoQ) but down 11.3% YoY due to a weak JPY.
What’s Our View
- We continue to expect DPU growth to be powered by Myer, Ngee Ann’s rent review (Jun16), and Malaysian assets’ rent step-ups (Jun16).
- However, we temper our rent reversion expectations for Wisma from 12% to 6% and further adjust for AUD/MYR/JPY currency depreciation which reduces our FY15-17 DPU expectations marginally from 5.2-5.8cts to 5.1-5.7cts.
- Maintain BUY with TP SGD0.96 (DDM, CoE 8.5%, LTG 2%), with 6.0-6.7% forward yields comparing favourably to retail sector’s 5.5%.
(Joshua Tan)
Source: http://www.maybank-ke.com.sg/
