Starhill Global ( former McQ Prime )

[winston]

Not vested. From UOB-Kay Hian:-

Minor disruption from earthquake in central China

Minor disruption from earthquake in central China. MMP REIT owns Renhe Spring Department Store located in Chengdu, the capital city of Sichuan province. The mall experienced tremors and aftershocks during the recent earthquake. The building was successfully evacuated. Preliminary
assessment indicates no major damages for the new five-year-old building.

The company has engaged structural engineers to conduct a detailed inspection. The mall will be open for business once MMP REIT secures clearance from the local authorities. The earthquake is unlikely to have a material impact on financial performance in FY08 due to profit guarantee from Renhe Spring Group. Renhe Spring Departmental Store contributed 11% of total revenue in 1Q08.

Renhe Spring Department Store. The acquisition of Renhe Spring Department Store for Rmb350m, or S$70m, was completed in Aug 07. The mall houses premium foreign brands such as Burberry, Prada, Dunhill, Ermenegildo Zegna, Gucci and Hugo Boss. The property achieved sales of Rmb263m in 2006, an increase of 23%. The mall will be linked to Chengdu’s new subway system in 2010.

The vendor Renhe Spring Group provided a guaranteed net profit of Rmb26.4m p.a. for four years, equivalent to a net distribution yield of 7.5%.

Maintain BUY. MMP REIT provides FY08 distribution yield of 6.41%, an attractive spread of 4.06% over the 10-year Singapore government bond yield of 2.35%. Our target price is S$1.55 based on the two-stage dividend discount model (required rate of return: 7.85%, terminal growth: 2.5%).

[qxing78]

Watch for this one. M&A maybe coming. They had a strategic review, cos Macquarie wants to sell its stake.
Morgan Stanley keep buying.
Their properties are very Prime (Ngee Ann City and Wisma), easy to find buyers (my guess).
Now price drop to $1.02. Very tempting, but not vested yet. NAV $1.61.
Even if sell whole reit to private equity at $1.50, think Macquarie and minority shareholder will still be happy.

If you want to buy REITs for yield, this one is OK.
Even if no M&A, yield still more than 5%.
Also Orchard MRT link to Wisma opening soon.

Sorry, if I sound like selling 'koyok', but then since I cannot contribute on TA outlook like other sifus here, I just share some of my stock ideas.

[iam802]

Good one.

I like such gossips!

[ishak]

2Q 2008: Distributable income up 20.2%

• 2Q 2008 DPU of 1.78 cents achieved despite some disruption in Chengdu operations
• 2Q 2008 gross revenue exceeded 2Q 2007 by 27.8% due to higher rental rates from renewals, new leases and contributions from the properties in Japan and China acquired in 2007
• Singapore properties continue to demonstrate strong performance
• Review of Toshin master lease at Ngee Ann City yields increase of 19.75% in rents
• First Nike-owned and managed concept store in South-east Asia to open at Wisma Atria in December 2008

Q on Q Comparison

Gross Revenue: $30.2 (up 27.8%)
Net Property Income: $23.2 mil (up 29.2%)
Distributable Income: $17.2 mil (up 20.2%)
DPU: 1.78 cents (up 18.7%)

Singapore
According to a report by CB Richard Ellis (“CBRE”), the Singapore property investment sales market was quieter in 2Q 2008 compared to 1Q 2008. The office sector accounted for the majority of transactions in the second quarter making up 48.8% of total investment sales or $1.98 billion. Multinational corporations (MNCs) continued to be attracted to Singapore for its long-term prospects as a financial hub and popular business destination.

Office rents may be peaking as the rate of office rental increase in 1H 2008 slowed noticeably compared to 1H 2007. Prime rents rose ten cents in 2Q 2008 to average $16.10 psf/month. In all, prime rents increased 7.3% in 1H 2008 compared with 92.3% for the full-year 2007. Prime Grade A office rents averaged $18.80 psf/month in 2Q 2008, up from $18.65 psf pm last quarter. Prime Grade A office vacancy also remained very tight at 0.6%. No new development will be completed before 2H 2009.

DTZ reported that the retail property market remained stable in 2Q 2008 buoyed by positive consumer sentiment and the Great Singapore Sale. While turnover rents in 2Q 2008 rose, there was limited growth for fixed gross rents. First-storey monthly fixed gross rents remained largely unchanged quarter on quarter, hovering at an average of $42.40 psf for prime areas such as Orchard/Scotts Road, $33.70 psf in suburban areas and $27.10 psf in other city areas. DTZ expects the retail market to remain stable despite additional supply that will come on stream over the next few years. About 5.4 million sq ft of retail space is expected to be added to retail stock between 2H 2008 and 2012. Marina Bay Sands will account for the biggest chunk of that space, with 15 per cent or 800,000 sq ft, closely followed ION Orchard at 663,000 sq ft.

Singapore's retail sales for April - excluding vehicles - rose 7.7 per cent year on year. But total retail sales value dipped about 4 per cent to $2.77 billion, from March's $2.89 billion, with almost all sectors reporting less activity in April.

Japan
The Bank of Japan's quarterly tankan survey of business sentiment for 2Q 2008 indicated that business sentiment in Japan sank to a five-year low in June 2008. The survey findings are not as gloomy as feared as analysts had predicted an even steeper fall. Despite the worsening results in the quarterly survey, economists generally agree the central bank will not
raise its benchmark interest rate anytime soon as they appear to be balancing concerns of economic slowdown and inflation.

Japan's wholesale inflation rate rose to a 27-year high in June as companies raised prices to counter record oil and commodity costs. Costs are gaining faster than firms can raise prices, prompting businesses to predict the first profit decline in seven years. A growing view, however, is that Japan's economy is slowing but not at as rapid a pace as expected given the greater underlying strength of corporate Japan and the financial system. This has added weight to recent data suggesting that Japan is proving more resilient to a downturn and less vulnerable to financial system shocks than other leading economies.

According to a report released by Ministry of Land, Infrastructure and Transportation, Tokyo's office vacancies rose in June 2008 to the highest in two years in Japan as companies cut spending. The vacancy rates have been increasing since February 2008 and in June 2008 it increased to 3.49 percent from 3.29 percent in May. At the same time average office rents in the capital's five main business districts of Chiyoda, Chuo, Minato, Shinjuku and Shibuya rose to 22,868 yen per tsubo ($64.88 per square meter) in June, from 22,826 yen a month earlier showing a marginal increase of 0.2%.

In Tokyo 23 wards, the commercial land price continued to rise, albeit at a slower pace compared with six months ago. The land price index for six major cities (Tokyo, Yokohama, Nagoya, Kyoto, Osaka and Kobe) was up 1.7% HoH, but the rate of increase has slowed from plus 5.6% recorded six months earlier. In Tokyo 23 wards, price for commercial property
was up 1.4% HoH, still rising, albeit at a slower pace compared to an 8.3% HoH rise recorded six months earlier. According to JREI, this is underlined by a cap rate survey also released in May, which showed that the cap rates for office properties in Tokyo remained the same as six months ago apart from less competitive areas such as Kanda, Konan and Ueno, which saw cap rates increase by 10-20bps.

Chengdu, China
Chengdu area constitutes one of the largest economies in inland China and its rapid economic development has, in turn, made it one of the most popular foreign investment destinations in China. In 2007, Chengdu's economic output came to 332.4 billion yuan (S$66.23 billion), 15.3% higher than in 2006, and three percentage points higher than the national average. And in 2007, Chengdu's utilized foreign direct investment (FDI) reached US$1.14 billion, 50% higher than the year before and 3.7 times the national average.

An earthquake of 8.0 magnitude struck the Sichuan province on 12 May 2008. The infrastructure of Chengdu city was relatively unaffected. Presently, except for reduced tourism, most shopping areas remain bustling and there have been minimal signs of disruption. While some tenants in high-end department stores witnessed zero sales during the first week following the earthquake, by the third week following the earthquake, local customers made a comeback across most of the retail sectors. A quick market survey conducted three week after the quake revealed that market activity was at least 70% of the norm. Prime retail has not been affected because the target customers of this market segment are financially more capable of withstanding such disasters. Office and retail rents are not expected to be affected in the long term as a result.

Chengdu is still viewed as a desirable place for investment as highlighted by announcements made soon after the earthquake by multinational companies, including IBM, Motorola and SK, who indicated that they would continue to expand operations in Chengdu.

Outlook for the next 12 months
The Singapore credit market remains tight, given the unprecedented amount of S$ property loans being raised and international banks’ reduced lending capacity as a result of the subprime crisis. This has resulted in increased debt costs for borrowers in the Singapore property market.

The Manager expects the Group to continue to benefit from proactive strategies in the management of its assets, the continued strong demand for office space in Singapore and the recovery in sales at our Chengdu property following the disruption in operations caused by the Sichuan earthquake. To the extent that there is a significant slowdown in the regional economies, these buoyant markets may be adversely impacted.

MISC
Distribution Amount: 1.78 cents per unit
Notice of Books Closure Date: 30 July 2008
Ex-Date: 5 August 2008, 9.00 am
Books Closure Date: 7 August 2008, 5.00 pm
Distribution Payment Date: 29 August 2008
Price on 30 July 2008: $1.08
Gearing Ratio: 28.9%
Interest Cover: 4.8x
NAV Per Unit: $1.62

[ishak]

BUY S$1.08 STI : 2,925.50
Price Target : 12-Month S$ 1.39 (Prev S$1.61)
Reason for Report : 2Q08 Results
Potential Catalyst: Outcome of Strategic Reivew

Prime Orchard Landlord
Story: MP Reit announced their 2Q08 in line with expectations. Gross revenues grew 27.8% yoy to S$30.2m while NPI increased 29.2% yoy to S$23.1m. Distributable income came in 18.7% higher yoy at $33.3m, resulting in a DPU of 1.78 cts. Balance sheet remains strong with a gearing ratio of 28.9%as at 30 Jun 08 and interest cover of 4.8x. Interest costs remain relatively low at 2.76%. In the near term, MP
Reit is in the process of renewing c$220m of expiring debt.

Point: Performance was largely organic in nature arising from higher rental reversions and contributions from its overseas properties despite some disruptions at their Chengdu asset resulting from the earthquake. Moving forward, DPU growth is likely to grow even stronger with (i) rental reversions from another 13% of portfolio NLA up for renewal in FY08, 15% in FY09, (ii) impact of 19.75% increase in rent from Toshin lease, and (iii) AEI activities done on Ngee Ann City will start contributing in 2H08. Key data points to look out for in the near term will be the outcome of the strategic review which management of MP Reit has yet to conclude.

Relevance: Maintain BUY, TP adjusted to $1.39 from $1.61. We have adjusted our DCF valuation downwards to take into account a higher risk free rate of 3.9% and a lower terminal growth of 1%. At current price, MP Reit is trading at an attractive 0.7x P/BV, backed by quality assets and offers a FY08-09 DPU yield of 7.0% and 7.2% respectively.

[ishak]

Moody's downgrades MP Reit's ratings
BT, 08 Sep 2008

Moody's Investor Services has on Monday downgraded the corporate family and unsecured ratings of Macquarie Prime REIT (MP REIT) to Baa2 and Baa3 respectively. The outlook for the ratings is stable.

The credit rating agency said this concludes the rating review for downgrade which commenced on 26 February 2008 after MP REIT announced a comprehensive strategic review.

'The downgrade reflects overall weaker financial flexibility for the trust, which has resulted in its recent refinancing requiring a second ranking security being granted over its assets, due to the strategic review' says Kathleen Lee, Moody's Vice President and lead analyst for the trust.

'In addition, whilst the refinancing is welcome, it highlights the relatively limited access the trust has to bank / debt markets given the security and the fact the new loan is only for two years,' adds Lee.

As a result over 90 per cent of its debt is now maturing at the end of 2010 in a rather unusual lumpy maturity profile and with a large exposure to the currently shut CMBS market.

'The need for a second ranking security and the large amount of debt maturing at one time is highly unusual for an investment grade entity', commented Lee.

The rating downgrade was also in part driven by the ongoing strategic review which creates significant uncertainty surrounding the reit's future operating and strategic profile.

On the other hand, the rating continues to be supported by MP Reit's good quality asset profile, its ability to generate stable and recurring incomes and its sound financial metrics with TD/TA leverage at 28%, EBITDA/Interest at 4/0x and Debt/EBITDA at 8.3x. This operating profile and financial metrics remain solidly investment grade and counterbalance the weaknesses outlined.

The outlook is stable reflecting these strengths and the limited refinancing risk before 2010.

Upward pressure on the rating is unlikely in the next near term given the ongoing strategic review, the REIT's limited financial flexibility and the lumpy debt maturity profile.

On the other hand, downward rating pressure could emerge if the strategic review results in asset sales narrowing the REITS operating profile or an increase in leverage.

Credit metrics that may evidence such pressure could include fixed-charge coverage (EBITDA/ interest) falling below 3.0x, debt to EBITDA exceeding 10.0x and total debt to assets exceeding 45% on a sustained basis. A change in the ownership of the manager or the relationship with Macquarie Bank might also be negative but would depend on who was replacing them.

MP REIT was listed on the main board of the Singapore Stock Exchange in September 2005. Its original portfolio consists of strata ownership of two parts of two landmark retail /office properties, Wisma Atria and Ngee Ann City, both on Orchard Road, Singapore's premier street for shopping and tourism. In 2007, MP expanded its geographical reach by adding 7 retail properties in Japan and another retail property in Chengdu (China) which raised the value of its portfolio from S$1.93 billion to S$2.21 billion as at end-2007.

[winston]

Not vested. From Financecaptain:-

Macquarie Prime REIT (MMP SP, UNDERPERFORM, TP S$0.76) - Credit Suisse

We are downgrading MPREIT to UNDERPERFORM from Neutral, as we cut our 2009-10E DPU by 0.5-2.1% and adjusted the cost of equity from 6.9% to 11.3%, and revise down our target price to S$0.76 from S$1.31 (-42.0%), post adjustments to exchange rates assumptions.

Apart from its office risks exposure (domestic and overseas), we believe the M&A premium that the market has factored in is unjustified given that the 26.2% stake in the REIT will not trigger a general offer, and benefits from the transfer of ownership of the manager to a potentially stronger sponsor should be viewed as a longerterm impact and not an immediate catalyst for the stock. In addition, we see potential selling pressure from its troubled stakeholder, AIG, who holds a 10.9% stake on MPREIT

[winston]

Not vested.

YTL buys 26% of Macquarie Prime Reit
By CHEW XIANG

Malaysia's YTL Corp Bhd on Tuesday bought Macquarie Bank's 26 per cent stake in Singapore-listed Macquarie Prime Reit for $202.6 million, a 49 per cent discount to the Reit's net asset value.

The deal, which works out to 82 cents per unit, is at a 17 per cent premium over its 30 day volume weighted average price and 52 per cent over its last traded price.

YTL also bought over Macquarie Bank's 50 per cent share in Prime Reit Management Holdings, the reit manager and with its stake in the Reit, will be able to control operations. The all-cash deal is valued at a total of $285 million.

[LenaHuat]

BT's quoted Yeoh as having said :-

I'm very confident Singapore will pull thru this little turbulence.......Even if they have a crisis they will always come out ahead of the curve"

Thanks, Francis Yeoh for your vote of confidence in Singapore. BTW, I shall it

[ucypmas]

I was looking at REITs for a while and is now thinking long and hard about this. So would like to share my thinking on this counter, and see what forumers think.

Very prime location and branded properties (the Singapore ones). Wisma underpass' reopening next year means that traffic in will recover somewhat. And now that there is a sponsor it could be good for the REIT's CV when it comes for refinancing next year. Even in a credit crunch I think quality stuffs always get financed, as the banks still need to make money somehow. Terms will be a bit more expensive than free money years, but its about time capital gets repriced to more appropriate levels, I think.

Here's the perverse part of my thinking. While the REIT will pull in 125mil this year in income, I actually think there is limited downside to their revenues even in the face of a retail downturn as the rentals in NAC and Wisma never did went up too much in 2006/07 due to NAC being leased mostly to Taka (owing to status as an anchor tenant), and Wisma's renewals were debilitated by the tunnel closure.

Operating cash (before debt service) will probably come in around 85 mil. Lets say by next year 2009 only half will make it to shareholders (for whatever reasons), at 42 mil the distribution per unit is 4.4cts (1.1cts per quarter) and at current prices, still about 9%. Latest distribution is at 1.78cts per quarter, which I think will get cut next year. However I see the REIT being able to generate sustainable cash flows of about 40-50mil for distribution, in the long run resulting in annual yields of about 8-9% purchased at today's price. If it works out it could be something useful for my SRS, where I can use its dividends for reinvesting.

Of course downside risks are a severe / massive / catastrophic retail recession and the income craters big time in the short term. And they do have a number of lemons in the portfolio from their previous acquisition.