Singapore Corporate News - 24 Jan 2008

K-Reit plans rights issue; Q4 distributable income up 62.6%

K-REIT Asia, which yesterday posted a 62.6 per cent year-on-year jump in fourth-quarter distributable income to $6.9 million, is proposing a rights issue to raise gross proceeds of up to $700 million.

Net proceeds from the issue will be used to repay part of the $942 million bridging loan it took from Keppel Corp when it purchased a one-third stake in One Raffles Quay last year.

The issue price will be determined closer to the launch date and will be at a discount of up to 20 per cent to the then-prevailing trading price. On the stock market yesterday, K-Reit ended two cents higher at $1.50.

The trust, which owns prime office space in Singapore, plans to proceed with the rights issue 'as soon as practicable' instead of waiting until September when the bridging loan expires, K-Reit Asia Management Ltd's chief executive Tan Swee Yiow said yesterday.

The rights issue will be effectively fully underwritten. Keppel Land and Keppel Corp, which jointly own about 72 per cent of K-Reit, have undertaken to take up their respective provisional allocations of rights shares and to make excess applications for any rights units not subscribed for by minority shareholders. However, Mr Tan said the intention is to keep K-Reit listed, which would mean that it must have a free float of at least 10 per cent.

Asked about the impact that the sub-prime crisis will have on demand for Singapore office space given layoffs at international banks, major occupiers of prime CBD offices, Mr Tan acknowledged it will probably result in tenants becoming more cautious in their forward planning commitment of space.

K-Reit's 62.6 per cent rise in Q4 distributable income included a $2.8 million maiden contribution from One Raffles Quay. K-Reit completed the acquisition of its one-third stake in the prime office development in December last year. Also contributing to the improved Q4 performance was higher rental income arising from higher rental rates achieved for new and renewed leases.

Average gross monthly rental rates for the investment properties directly held by K-Reit rose from $3.80 per square foot (psf) in December 2006 to $4.65 psf in December 2007.

Net property income for the quarter ended Dec 31, 2007 was slightly over $7 million, up 13 per cent from the corresponding year-ago period. Gross rental income rose 19 per cent to $39.1 million last year.

K-Reit's unitholders will receive a distribution per unit (DPU) of 4.99 cents for 2007's July-December period.

The full-year payout amounts to 8.82 cents, reflecting a distribution yield of 5.88 per cent based on yesterday's closing price.

For the year ended Dec 31, 2007, distributable income increased 42.5 per cent to $21.8 million, while net property income rose 19.6 per cent to $28.3 million.

The $951.4 million acquisition of the One Raffles Quay stake, coupled with portfolio revaluation gains of $433 million, have enlarged K-Reit Asia's portfolio size by 210 per cent to $2.1 billion as at end-2007 from $677 million as at end-2006.

MapletreeLog defers its proposed rights issue

GLOBAL capital market volatility has forced Mapletree Logistics Trust (MapletreeLog) to defer its proposed rights issue aimed at raising up to $500 million to fund acquisitions.

The rights issue was announced late last month, but this was swiftly followed earlier this month by Moody's Investors Service placing the 'Baa1' rated real estate investment trust (Reit) on review for a possible downgrade because of its high gearing of over 50 per cent and the market conditions.

Speaking at a press conference yesterday, Chua Tiow Chye, CEO of Mapletree Logistics Trust Management (MLTM), the Reit's manager, said candidly that MapletreeLog's share price had been 'beaten down' since the rights issue was proposed. He added that it would not 'raise funds at any price'.

'We will revisit our fund-raising exercise when market conditions are more conducive,' MLTM said in a statement yesterday.

MapletreeLog yesterday reported distributable income of $19.7 million, a 68 per cent year-on-year rise, for the fourth quarter ended Dec 31, 2007.

MapletreeLog started FY2007 with 41 properties and ended the year with 70, a rise of 29. 'Of these 29 properties, nine were acquired during the fourth quarter, bringing the trust's portfolio size to 70, valued at about $2.4 billion,' said Mr Chua. The asset value as at Dec 31, 2006, was about $1.43 billion.

MapletreeLog's full-year 2007 distributable income came to $71.8 million, 78 per cent up year-on-year.

Available distribution per unit (DPU) for Q4 2007 was 1.78 cents, a 23 per cent year-on-year increase. On a full-year basis, DPU was 6.57 cents, 16 per cent higher than its forecast and 30 per cent up year-on-year.

As at Dec 31, 2007, five of its acquisitions pending completion amounted to $183 million, while gearing stood at 53.4 per cent, representing a total debt of about $1.3 billion.

MapletreeLog said that it is comfortable with a 40-45 per cent leverage in the long run, but its current leverage leaves it with an available debt capacity of $405 million to fund future acquisitions.

While this leaves MapletreeLog with 'enough headroom' to fund these acquisitions, Richard Lai, deputy CEO of MLTM said that one of the options (for raising funds) open to MapletreeLog would be to sell some of its assets. While there were no plans to sell any buildings, Mr Lai said: 'We have people knocking on our doors.'

Looking forward, Mr Chua cited the 'internal logistics' sector in China and India as showing most potential.

But apart from those acquisitions already announced in Q4 - including three in China, four in Malaysia and two in Japan - Mr Chua was careful to add that given market conditions, MapletreeLog would be more 'selective' with respect to new acquisitions.

Instead, he said that 'yield optimisation', with a possible upside from rental reversions from 180,000 sq m, would be its driving strategy for 2008. Making reference to the volatile global market conditions, he added: 'It would be foolish to go for aggressive acquisitions.'

ART distributable income for Q4 up 54% to $12.8m

ASCOTT Residence Trust (ART), which owns serviced apartments, yesterday announced distributable income of $12.8 million for the fourth quarter, boosted by new acquisitions and strong operating performance.

The distribution for the three months ended Dec 31, 2007 is 16 per cent better than its forecast and 54 per cent up year-on-year.

Distribution per unit for the quarter was 2.12 cents, 16 per cent higher than projected and a rise of 28 per cent year-on-year.

The quarter's results brought full-year distributable income to $45.1 million, 12 per cent better than forecast.

Full-year distribution is 7.7 cents per unit, 9 per cent higher than projected. Revenue for the quarter came to $42.9 million, beating ART's projection by 10 per cent and 47 per cent higher year-on-year. Full- year revenue was $154.8 million, beating projection by 7 per cent.

Revenue was higher on new acquisitions and greater income stability through increased diversification, especially into rental housing which now makes up 22 per cent of its portfolio.

ART recognised a revaluation surplus of $136.9 million (net of tax and minority interest). The group's net asset value per unit as at Dec 31, 2007, was $1.60, up from $1.33 a year ago.

ART is a Pan-Asian serviced residence real estate investment trust managed by Ascott Residence Trust Management Limited (ARTML), a subsidiary of The Ascott Group.

It was launched in March 2006 with an initial portfolio of 12 properties across Asia. Upon the completion of its latest acquisition in Perth, its portfolio will expand to 37 properties in 11 cities, valued at $1.52 billion.

Lim Jit Poh, chairman of ARTML, said: 'We will continue to pursue organic and acquisition growth to deliver growing and stable income to unit-holders. We remain focused on achieving our target total asset portfolio of $2 billion by end-2008.'

The trust said that operating performance this year is expected to grow.

ART yesterday closed at $1.18, up one cent.

$11.3m Q3 distributable income for Ascendas India

ASCENDAS India Trust has reported a distributable income of $11.3 million for the third quarter ended Dec 31, 2007.

Net property income was $15.7 million - 57 per cent higher than the same quarter last year - while DPU was 1.50 Singapore cents over the period.

For the first nine months of the year, the trust reported a DPU of 4.45 cents - representing an annualised yield of 5 per cent over the IPO price of $1.18 per unit.

The trust attributed the strong showing to continued high portfolio occupancy of 99 per cent, rising average rental rate and constant focus on cost efficiency.

Net asset value as at end-December was $857.7 million or $1.14 per unit.

Said chief executive officer of the trustee-manager, Jonathan Yap: 'We are pleased to report the construction completion of two buildings - Vega at The V (Hyderabad) and Crest at International Tech Park Chennai - with a combined 1.1 million sq ft of space.

'The two buildings expanded the trust's portfolio by 31 per cent to 4.7 million sq ft and their combined occupancy is 91 per cent as at Jan 23, 2008.'

The trust said this provides a 'solid foundation to the forecast 22 per cent distributable income increase in the next financial year over the forecast for the current year, as disclosed in the listing prospectus'.

It added that works on additional development are also in progress.

For example, a master plan has been completed to develop 'the balance 2.7 million sq ft of space' in International Tech Park, Bangalore.

Plans are in place to make government approval submission for the first phase of the development.

In addition, the manager aims to add an additional level of growth through acquisition, 'be it through the two first rights of refusal it enjoys or from the market'.

It has a first right of refusal from Ascendas Land International and Ascendas India Development Trust to acquire substantially income-producing business space.

The former is Ascendas' main overseas investment vehicle and the latter is a private fund managed by Ascendas with a target investment value of $1 billion.

Looking ahead, the trust manager said the trust will continue to focus on growing the operating earnings of its assets, optimising its capital structure, and growing the portfolio.

Given the strong nine- month results, it is confident of at least meeting the 5.6 Singapore cents forecast for the current financial year.

Keppel Shipyard clinches $145m contract

KEPPEL Offshore and Marine unit Keppel Shipyard has won a $145 million contract for the integration and completion of a 'Bully' rig design drill-ship.

This is the second similar contract awarded to Keppel Shipyard by a company jointly owned by Frontier Drilling and Shell.

The first drill-ship contract was awarded last June for delivery by the fourth quarter 2009.

The hull for the second drill-ship will be built in China and is due to arrive at Keppel Shipyard in the first quarter of next year.

Delivery is expected by the second quarter of 2010.

'Bully' drill-ships are designed to conduct surface blow-out preventer (BOP) deepwater drilling operations in depths up to 12,000 feet and sub-sea BOP operations in depths up to 8,250 feet.

They will also be equipped with ice-class hulls and fitted with dynamic positioning capabilities.

The work to be done by Keppel Shipyard includes installation, integration and completion of the owner-supplied power generation, thrusters and drilling equipment packages on the new hull.

'Owners continue to see value and viability in using Keppel to carry out the complex integration and completion of drill-ships and FPSOs utilising hulls built elsewhere,' said Keppel Shipyard executive director Nelson Yeo.

'We thank Frontier and Shell for their trust and confidence in Keppel Shipyard in awarding us the integration and completion phase of their first and now their second newbuild drill-ship, the Bully 2.'

This type of drill-ship is gaining popularity as drilling depths increase and fields move further offshore. The demand for similar projects is expected to rise as the offshore and marine industry moves into new phases of development.

In addition to the 'Bully' drill-ship contracts with Frontier and Shell, Keppel Shipyard is also working on the refurbishment and upgrading of drill-ship Frontier Phoenix (ex-Peregrine II) for Frontier due for delivery in the third quarter.

The new contract is not expected to have a material impact on the net tangible assets or earnings per share of Keppel Corporation for the financial year ending Dec 31.

Parkway to buy out Shanghai partners

HOSPITAL operator Parkway Holdings could soon dip its toes deeper into the Shanghai healthcare market, as the group has agreed to take full control of the World Link group of companies.

Parkway, which already owns 60 per cent of World Link, has inked a deal to buy the rest of the group for a total of US$28 million. World Link runs a network of expatriate-focused clinics in Shanghai, where Parkway also manages the Shanghai Gleneagles International Medical, Dental and Surgical Centre.

The acquisition is to be carried out through Parkway's wholly owned subsidiary, Medical Resources International. Parkway said that it intends to fund the purchase through internal resources. As of Sept 30, it had cash and cash equivalents of more than S$220 million.

The transaction will be carried out in two steps. Parkway will first acquire an additional 10 per cent stake for US$7 million. This is because regulations in China limit foreign ownership in the healthcare sector to 70 per cent.

For the remaining 30 per cent interest, Parkway expects to exercise the call options granted by World Link vendors for US$21 million, upon getting the nod from the Chinese legal and government authorities.

'There's actually been quite a lot of talk that they will change (foreign ownership rules), I think, if bureaucracy is not getting in the way,' said Parkway senior vice-president for strategic planning and business development Choo Oi Yee. 'It may be six months, it may be two years, we're not sure. But there's certainly a will within many of the bodies that we see to encourage the change.'

Parkway had bought 60 per cent of World Link last May for US$42 million. According to Ms Choo, the move to take full control will allow the group to further synergise and integrate its Shanghai businesses.

Parkway said that the net tangible asset value of the 40 per cent equity stake in World Link amounts to S$7.6 million, based on World Link's audited 2006 financial statements.

Parkway, Singapore's biggest private healthcare player, runs the Mount Elizabeth, Gleneagles and East Shore hospitals here. It posted a net profit of S$271.3 million for the nine months ended September last year, boosted by the sale of real estate assets to Parkway Life Reit. Revenue slipped 7 per cent to S$637.1 million. The counter closed seven cents higher at S$3.47 yesterday.
S'pore listings of Indian Reits may be delayed

THEY should be perfect for choppy markets - low volatility securities in a mature stock market based on assets in a fast-growing Indian economy that many believe will weather the global storm.

But planned Singapore listings of real estate investment trusts, spun off by Indian developers, are being thwarted by the US subprime crisis, which has rocked stock markets and raised doubts about property investment, wherever it is.

DLF Ltd, India's most valuable property firm, Unitech and Indiabulls Real Estate have been talking to investment banks about listing Reits in Singapore, possibly as early as the first quarter.

But Australian-backed MacarthurCook Industrial Reit last week became the latest to delay a deal when it shelved a $200 million secondary offering in a Singapore market that has fallen by a fifth this year.

One banker, who asked not to be named, said his team has been advising Indian issuers to hold off on Singapore issuance plans because of volatile markets.

'The market is crap right now. I wouldn't advise anyone to come and list now,' the investment banker said.

Indian developers are keen to raise funds for expansion by selling buildings into property trusts, in which they would retain a controlling stake. The trusts should then become willing buyers of buildings as the developers roll out new projects.

The Indians have been watching the success of Singapore's Reit market, which has grown to almost US$19 billion.

India does not yet allow the securities, although regulators issued draft Reit guidelines last month and analysts expect next month's Budget to give some indication of when India will get its own Reit market.

DLF is looking to raise US$1.5 billion and has picked Goldman Sachs and Lehman Brothers, bankers have said.

Unitech wanted around US$600 million from listing an office trust and has mandated Deutsche Bank, JPMorgan, UBS and Morgan Stanley as book-runners, two people involved in the deal told Reuters.

The two developers had been looking to launch early 2008 IPOs, banking sources said, but the cost of equity has jumped as much as 30 per cent for some Singapore-listed Reits since July, said Mark Ebbinghaus, head of Asian real estate investment banking at UBS.

'Where we are at present, clearly the cost of equity for a number of Reits is under pressure, largely because of the flow of capital leaving Asia,' he said.

But deals could be pushed through because of the scarcity value of Indian property accessible to foreign investors.

'As long as the pricing is acceptable, we would see a variety of vehicles having some support levels in the Singapore business trust environment,' Mr Ebbinghaus said. 'But the timing remains uncertain.'

Reits, which pay most of their rent as dividends, have caught on across Asia in the past five years, with investors liking the bond-like steady income with the prospect of growth if rents and property values rise.

But although Reits are usually regarded as defensive plays, trusts across the world suffered in the second half of last year as the US sub-prime crisis unfolded and hit commercial property markets in the United States and Europe.

The only Indian Reit, Singapore-listed Ascendas India Trust, closed at 99 cents yesterday, well below its IPO price of $1.18.

Singapore's Reit index has fallen 21 per cent since the start of the year through Monday, in line with a 20 per cent slide by the benchmark Straits Times Index .

Because of the market downturn, at least US$800 million worth of IPOs in Singapore and several million dollars worth of secondary share offerings were delayed in the October-December period.

Cosco units win contracts worth US$422m

COSCO Corporation (Singapore) Ltd has won conversion and tanker building contracts totalling US$422 million.

The shiprepair and marine engineering and shipping group won the contracts through 51 per cent-owned Cosco Shipyard Group (CSG).

The tanker building contract was awarded by a Norwegian customer to CSG's subsidiary, Cosco Nantong Shipyard, for two shuttle tankers at a total value of US$171.6 million. The shuttle tankers are expected to be delivered in 2010 and 2011.

The contract carries the options for customers to buy two more shuttle tankers from Cosco Nantong Shipyard.

The 18 conversion contracts valued at US$250 million were secured by CSG recently through its subsidiaries, Cosco Nantong Shipyard, Cosco Dalian Shipyard, Cosco Zhoushan Shipyard and Cosco Guangzhou Shipyard. The contracts were awarded by global customers from America, China, Greece, Hong Kong, India and Korea.

Said Ji Hai Sheng, vice-chairman and president of the group: 'Our group has been very focused on moving up the value chain and showcasing our capabilities in high-value marine engineering and shipbuilding work. These new contracts we secured are further testaments of our success in this regard.'

Cosco is continuing with its capacity and capability expansion initiatives as 'we aggressively expand our high-value project order book', he added.

The contracts are expected to have a positive impact on the net tangible assets (NTA) and earnings per share (EPS) of the company for the year ending December 2008.

Sino-Env wins 181m yuan China contracts

SINO-ENVIRONMENT Technology Group said it has secured desulpharisation contracts in China worth 181 million yuan (S$35.9 million). The first contract, worth about 63 million yuan, is for the Huatai Group. Construction, to begin in the second quarter of 2008, will be completed in about 12 months. The second contract, for Fujian Putian Power Plant, is worth about 118 million yuan. Construction is expected to start in the third quarter of 2008 and will be completed in about 15 months.

Robinson names ANZ its financial adviser

SINGAPORE retailer Robinson & Co said yesterday it has appointed Australia and New Zealand Banking Group (ANZ) as independent financial adviser on the buyout offer from Dubai-based Al-Futtaim Group. ALF Global, wholly owned by Al-Futtaim, on Sunday offered to buy all shares in Robinson at $6.25 a share, valuing the firm at $537.1 million. The firm operates the Robinsons, John Little and Marks & Spencer stores in Singapore and Malaysia. -- Reuters

Shanghai Turbo plans property investment

SHANGHAI Turbo Enterprises plans to venture into property investment in commercial assets in China, Macau and Taiwan. It has set up a new subsidiary, Rosace, in Hong Kong to do so. It is looking at partnering other firms to co-invest in some projects.