BUY S$0.51
Price Target : S$ 0.56
At a Glance
• Steady 2Q11 results
• New properties to underpin earnings growth in 3Q111
• Buy for high yields of 8.9-10.0%. TP of S$0.56 remains unchanged
Comment on Results
A steady 2Q11 results. Cambridge REIT (CREIT) reported a steady set of 2Q11 results with topline increasing 6.6% yoy to S$19.5m and a 4.9% increase in net property income to S$16.9m. The improved performance was largely due to contributions from acquired properties over the past 3 quarters, and rental escalation of certain properties. This more than offset the income vacuum from the divestment of certain assets. Portfolio occupancy remained high at 99% with low arrears of 0.5%. Operational performance on a qoq basis remained stable. While distribution income came in at S$12.3m (+14.0% yoy,+3.5%qoq), DPU of 1.036 Scts is 17% lower yoy owing to a larger unit base.
Portfolio divestment completed; new properties to contribute from 3Q11 onwards. The trust has completed divestment of the remaining 6 strata units at 48 Toh Guan Rd (Enterprise Hub) at 10.8% above valuation. In addition, the recent completion of 4&6 Clementi Loop and 60 Tuas South Street 1 will start to contribute meaningfully in the coming quarter.
Revaluation gains of S$47.8m at half-time. CREIT also reported revaluation gains of S$47.8m (on a like for like basis, after netting off its divestments and new properties acquired), bringing its total portfolio size to S$1.1bn. NAV inched up slightly to S$0.62. Gearing remained steady at 32.7%.
Recommendation
BUY for relatively higher yields of 8.9%-10.0% . CREIT remains attractive for its FY11-12F yield of over 8.9%, higher than S-REIT peers. Our FY11 DPU is adjusted slightly downwards due to later than expected completion of its acquisitions.
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