Written by Financial Daily
Friday, 27 May 2011 12:06
PETALING JAYA: KNM Group Bhd yesterday won the bid for a US$71.63 million (RM217.8 million) contract for the development of a documentation and equipment supply facility “booster compressor station” at the Khauzak site in the Republic of Uzbekistan.
The job was secured from Lukoil Uzbekistan Operating Co for a duration of 24 months from the date of commencement of contract and subject to contract signing.
KNM also announced that it recorded a lower net profit of RM19 million for 1QFY11 ended March 31, versus RM40.3 million previously. This was due to a lower tax writeback during the quarter.
Nonetheless, revenue for 1Q rose 10.6% y-o-y to RM413 million while operating profit also increased to RM16.8 million from RM11.3 million a year ago. The group attributed the better operating performance to higher revenue recognised and better margins.
Monday, May 30, 2011
Genting heads for Miami
KUALA LUMPUR: Tan Sri Lim Kok Thay, head of the Genting group is on a roll. Emboldened by Resorts World Sentosa’s (RWS, by Genting Singapore plc) raving success in Singapore in spite of the presence of Sheldon Adelson’s Marina Bay Sands in the tiny city state, Lim is taking another battle against the US casino magnate halfway across the world to sunny Miami, Florida.
Last week, Lim’s Genting Malaysia Bhd bagged for US$236 million (RM713 million) a 13.9-acre tract of waterfront land in northern downtown Miami to be used for a mixed development that would include hotels, restaurants, residences, retail shops and a convention centre. But there’s little doubt his people will do all they can to also get a gaming licence there. Lim isn’t alone.
Genting group, Wynn Resorts and Adelson’s Las Vegas Sands Corp this year hired a stable of lobbyists to push through a bill that would give them the chance to bid for a licence to operate an exclusive casino resort in any of the five cities in Florida — Miami, Jacksonville, Tallahassee, Tampa and Orlando — where Walt Disney World is located — according to a write-up posted on The Miami Herald’s website. [The land Genting Malaysia bought includes the building which houses The Miami Herald Media Company.]
The lobbying began since the Seminole Tribe of Florida won exclusive rights to offer slot machines as well as other casino favourites like black jack and baccarat within tribal areas two years ago. Giants of the casino world have reportedly been lobbying for a chance to set up shop in one of the US’ most popular tourist destinations, The Miami Herald said. The existing revenue-sharing model where the tribe pays the state at least US$150 million a year through 2015 will stop if additional gambling were to be authorised by the state, the write-up read.
To win, lobbyists will need to prove the economic good to the state and its people far exceeds the potential social impact from a possible rise in negative activities associated with gaming. In his 30-page letter vetoing a US$400,000 study on the feasibility of bringing casino resorts to Florida, Governor Rick Scott did say he thought it “important to have a full consideration of the positive economic impact, the costs that may result from this policy, and the impact on current gaming in [the] state” — leaving the door open for the casino lobbyists.
Singapore’s success story in transforming itself into an attractive business and leisure destination with the two casino resorts may just boost the hand of these lobbyists. The city-state’s casino gamble had thus far paid off handsomely with record high tourist arrivals that helped fuel Singapore’s enviable 14.7% GDP growth last year and is expected to continue aiding growth this year. PricewaterhouseCoppers had estimated Singapore’s gaming market at S$2.8 billion (RM6.9 billion) last year. Fuller state coffers from gaming-related receipts allowed for a 20% tax rebate on all residents’ taxable income last year and other benefits for citizens ahead of its watershed elections earlier this month.
Even without a casino licence just yet, Genting Malaysia sees the Miami land acquisition as “an integral step” in its pursuit of expanding internationally in the leisure, hospitality and entertainment industry. “The envisioned Resorts World Miami represents Genting Malaysia’s second venture in the US, after Resorts World New York at the historic Aqueduct Racetrack in New York City,” Genting said in a statement last Friday.
Scheduled for opening by end-2011, some three months ahead of schedule, Resorts World New York — the first casino in the Big Apple — will reportedly have 4,525 video lottery terminals, a seven-outlet food court, the 360° bar, entertainment space as well as grab-and-go food outlets in its initial phase. A sky bridge connecting a train station to the casino entrance, initially scheduled to complete in spring 2012, has been fast-tracked to complete by the end of this year.
Back in Singapore, work has been accelerated to ensure Phase 2 of RWS is back on track for completion by year-end, Lim told reporters last Friday. With the opening of new attractions, starting with the maritime museum in 3Q, RWS was also confident of attracting over 16 million visitors this year, up from last year’s 15 million, Lim reportedly said. Other attractions under phase 2 of RWS include an oceanarium and a water theme park.
To be sure, RWS’ non-casino attraction Universal Studios Singapore — which is next to its casino — was already bringing people like former American Idol judge Paula Abdul to the city state for the first time in two decades. She was among celebrities like Asian superstars Jet Li, Maggie Cheung and Vicki Zhao to walk the red carpet at Universal Studios Singapore’s grand opening last Friday evening along with some 1,600 guests.
Not everything that the Genting group has touched has turned to gold, though. Its five casinos in London and 38 others in the UK, for instance, have yet to be a big money spinner, though efforts have been underway over the last year to revamp the operations there. Still, the Genting Highlands hilltop casino resort in Malaysia (under Genting Malaysia), built by Lim’s father, the late Tan Sri Lim Goh Tong, continues to remain strong despite the opening of Genting Singapore’s RWS and Adelson’s Sands in Singapore since early 2010.
As Genting group’s cash pile from the Malaysia and Singapore casinos grows, some investors think it should return more cash to shareholders instead of putting money in unrelated pursuits or lofty projects that may take some time to pay off. Some analysts are hopeful of higher dividends but aren’t betting on that happening anytime soon though. After all, if it is the likes of Adelson that Lim’s genting Group is girding itself up for battle with in Miami, it would need all the ammunition it can get.
Last week, Lim’s Genting Malaysia Bhd bagged for US$236 million (RM713 million) a 13.9-acre tract of waterfront land in northern downtown Miami to be used for a mixed development that would include hotels, restaurants, residences, retail shops and a convention centre. But there’s little doubt his people will do all they can to also get a gaming licence there. Lim isn’t alone.
Genting group, Wynn Resorts and Adelson’s Las Vegas Sands Corp this year hired a stable of lobbyists to push through a bill that would give them the chance to bid for a licence to operate an exclusive casino resort in any of the five cities in Florida — Miami, Jacksonville, Tallahassee, Tampa and Orlando — where Walt Disney World is located — according to a write-up posted on The Miami Herald’s website. [The land Genting Malaysia bought includes the building which houses The Miami Herald Media Company.]
The lobbying began since the Seminole Tribe of Florida won exclusive rights to offer slot machines as well as other casino favourites like black jack and baccarat within tribal areas two years ago. Giants of the casino world have reportedly been lobbying for a chance to set up shop in one of the US’ most popular tourist destinations, The Miami Herald said. The existing revenue-sharing model where the tribe pays the state at least US$150 million a year through 2015 will stop if additional gambling were to be authorised by the state, the write-up read.
To win, lobbyists will need to prove the economic good to the state and its people far exceeds the potential social impact from a possible rise in negative activities associated with gaming. In his 30-page letter vetoing a US$400,000 study on the feasibility of bringing casino resorts to Florida, Governor Rick Scott did say he thought it “important to have a full consideration of the positive economic impact, the costs that may result from this policy, and the impact on current gaming in [the] state” — leaving the door open for the casino lobbyists.
| Genting head for Miami |
Even without a casino licence just yet, Genting Malaysia sees the Miami land acquisition as “an integral step” in its pursuit of expanding internationally in the leisure, hospitality and entertainment industry. “The envisioned Resorts World Miami represents Genting Malaysia’s second venture in the US, after Resorts World New York at the historic Aqueduct Racetrack in New York City,” Genting said in a statement last Friday.
Scheduled for opening by end-2011, some three months ahead of schedule, Resorts World New York — the first casino in the Big Apple — will reportedly have 4,525 video lottery terminals, a seven-outlet food court, the 360° bar, entertainment space as well as grab-and-go food outlets in its initial phase. A sky bridge connecting a train station to the casino entrance, initially scheduled to complete in spring 2012, has been fast-tracked to complete by the end of this year.
Back in Singapore, work has been accelerated to ensure Phase 2 of RWS is back on track for completion by year-end, Lim told reporters last Friday. With the opening of new attractions, starting with the maritime museum in 3Q, RWS was also confident of attracting over 16 million visitors this year, up from last year’s 15 million, Lim reportedly said. Other attractions under phase 2 of RWS include an oceanarium and a water theme park.
To be sure, RWS’ non-casino attraction Universal Studios Singapore — which is next to its casino — was already bringing people like former American Idol judge Paula Abdul to the city state for the first time in two decades. She was among celebrities like Asian superstars Jet Li, Maggie Cheung and Vicki Zhao to walk the red carpet at Universal Studios Singapore’s grand opening last Friday evening along with some 1,600 guests.
Not everything that the Genting group has touched has turned to gold, though. Its five casinos in London and 38 others in the UK, for instance, have yet to be a big money spinner, though efforts have been underway over the last year to revamp the operations there. Still, the Genting Highlands hilltop casino resort in Malaysia (under Genting Malaysia), built by Lim’s father, the late Tan Sri Lim Goh Tong, continues to remain strong despite the opening of Genting Singapore’s RWS and Adelson’s Sands in Singapore since early 2010.
As Genting group’s cash pile from the Malaysia and Singapore casinos grows, some investors think it should return more cash to shareholders instead of putting money in unrelated pursuits or lofty projects that may take some time to pay off. Some analysts are hopeful of higher dividends but aren’t betting on that happening anytime soon though. After all, if it is the likes of Adelson that Lim’s genting Group is girding itself up for battle with in Miami, it would need all the ammunition it can get.
Genting Bhd 1Q net profit surges 254% to RM824.17m from yr ago
Written by Joseph Chin of theedgemalaysia.com
Thursday, 26 May 2011 19:38
KUALA LUMPUR: GENTING BHD []’s net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses.
It said on Thursday, May 26 that revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen.
“The group’s profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10,” it said.
Genting Bhd said in the 1QFY10, the group’s profit before tax included some significant one-off items, namely a net impairment loss of RM1.303 billion and a net gain on dilution of RM436.3 million from the dilution of the company’s shareholding in Genting Singapore PLC when convertible bonds that were issued by Genting Singapore were fully converted into new ordinary shares of Genting Singapore.
“The adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was RM2.4 billion in 1QFY11 versus RM1.4 billion in 1QFY10, an increase of 74%,” it said.
It said the leisure and hospitality division remains the key revenue and earnings contributor to the group, with a significant increase in contribution in 1QFY11 from Resorts World Sentosa in Singapore.
RWS posted strong revenue growth and experienced good win percentage and gaming volume in 1QFY11, as well as saw steady growth in Universal Studios Singapore and the hotels.
Thursday, 26 May 2011 19:38
KUALA LUMPUR: GENTING BHD []’s net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses.
It said on Thursday, May 26 that revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen.
“The group’s profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10,” it said.
Genting Bhd said in the 1QFY10, the group’s profit before tax included some significant one-off items, namely a net impairment loss of RM1.303 billion and a net gain on dilution of RM436.3 million from the dilution of the company’s shareholding in Genting Singapore PLC when convertible bonds that were issued by Genting Singapore were fully converted into new ordinary shares of Genting Singapore.
“The adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was RM2.4 billion in 1QFY11 versus RM1.4 billion in 1QFY10, an increase of 74%,” it said.
It said the leisure and hospitality division remains the key revenue and earnings contributor to the group, with a significant increase in contribution in 1QFY11 from Resorts World Sentosa in Singapore.
RWS posted strong revenue growth and experienced good win percentage and gaming volume in 1QFY11, as well as saw steady growth in Universal Studios Singapore and the hotels.
KNM skids to RM2.15, lowest since mid-December
Written by Joseph Chin of theedgemalaysia.com
Friday, 27 May 2011 15:52
KUALA LUMPUR: KNM GROUP BHD [] came under selling pressure in late afternoon on Friday, May 27, with the shares falling to a low of RM2.15, the lowest since Dec 13, 2010.
At 3.38pm, it was down 38 sen to RM2.15 with 73.09 million shares done.
The FBM KLCI rose 6.33 points to 1,547.27. Turnover was 635.06 million shares done valued at RM1.09 billion. The broader market displayed signs of weakening further, with 467 losers to 251 gainers and 299 stocks unchanged.
RHB Research Institute said KNM 1Q earnings were significantly below expectations due to legacy contracts.
“We have downgraded our call on the stock to Underperform based on 12x target PER (down from 15x) on revised FY12 EPS of 19 sen,” it said.
In the 1Q, its earnings fell to RM19.01 million from RM40.33 million a year ago.
OSK Research said KNM’s 1QFY11 results were below consensus and its expectations, making up 8% and 9% of the FY11 forecasts respectively.
“Overall, although there was improvement in its overall business activities, these remained slow, resulting in the company making a minimal PBT of only RM6.3 million, which was quite close to the RM6.9 million generated in 4QFY10. Also, its performance this quarter was boosted by the utilisation of tax incentives from Borsig’s acquisition amounting to RM12.8 million (4QFY10 of RM14.0 million),” it said.
Written by Joseph Chin of theedgemalaysia.com Friday, 27 May 2011 09:11
KUALA LUMPUR: Shares of KNM GROUP BHD [] fell in early trade on Friday, May 27 after its first quarter earnings came in below expectations.
At 9.07am, it was down 20 sen to RM2.33 with 1.90 million shares done.
The FBM KLCI rose 6.13 points to 1,547.07. Turnover was 31.24 million shares valued at RM31.13 million. There were 99 gainers, 72 losers and 99 stocks unchanged.
ECM Libra Research said KNM’s 1QFY11 net profit came in significantly below house and consensus expectations. Profit of RM19.4m made up less than 10% of full year estimates.
“The reason for the poor showing is that the group is still going through their older orders, which were low margin orders secured over FY10 (excluding the turnkey projects). Management had earlier guided on softer results in 1H11 hence this comes as no surprise.
“On a positive note, revenue growth indicates increasing utilisation which we gauge should be at roughly 70% from 60% in FY10,” it said.
http://www.theedgemalaysia.com/business/187238-knm-falls-on-weak-1q-earnings.html
Friday, 27 May 2011 15:52
KUALA LUMPUR: KNM GROUP BHD [] came under selling pressure in late afternoon on Friday, May 27, with the shares falling to a low of RM2.15, the lowest since Dec 13, 2010.
At 3.38pm, it was down 38 sen to RM2.15 with 73.09 million shares done.
The FBM KLCI rose 6.33 points to 1,547.27. Turnover was 635.06 million shares done valued at RM1.09 billion. The broader market displayed signs of weakening further, with 467 losers to 251 gainers and 299 stocks unchanged.
RHB Research Institute said KNM 1Q earnings were significantly below expectations due to legacy contracts.
“We have downgraded our call on the stock to Underperform based on 12x target PER (down from 15x) on revised FY12 EPS of 19 sen,” it said.
In the 1Q, its earnings fell to RM19.01 million from RM40.33 million a year ago.
OSK Research said KNM’s 1QFY11 results were below consensus and its expectations, making up 8% and 9% of the FY11 forecasts respectively.
“Overall, although there was improvement in its overall business activities, these remained slow, resulting in the company making a minimal PBT of only RM6.3 million, which was quite close to the RM6.9 million generated in 4QFY10. Also, its performance this quarter was boosted by the utilisation of tax incentives from Borsig’s acquisition amounting to RM12.8 million (4QFY10 of RM14.0 million),” it said.
Written by Joseph Chin of theedgemalaysia.com Friday, 27 May 2011 09:11
KUALA LUMPUR: Shares of KNM GROUP BHD [] fell in early trade on Friday, May 27 after its first quarter earnings came in below expectations.
At 9.07am, it was down 20 sen to RM2.33 with 1.90 million shares done.
The FBM KLCI rose 6.13 points to 1,547.07. Turnover was 31.24 million shares valued at RM31.13 million. There were 99 gainers, 72 losers and 99 stocks unchanged.
ECM Libra Research said KNM’s 1QFY11 net profit came in significantly below house and consensus expectations. Profit of RM19.4m made up less than 10% of full year estimates.
“The reason for the poor showing is that the group is still going through their older orders, which were low margin orders secured over FY10 (excluding the turnkey projects). Management had earlier guided on softer results in 1H11 hence this comes as no surprise.
“On a positive note, revenue growth indicates increasing utilisation which we gauge should be at roughly 70% from 60% in FY10,” it said.
http://www.theedgemalaysia.com/business/187238-knm-falls-on-weak-1q-earnings.html
Tuesday, May 24, 2011
Lower enrolment hurts Masterskill net profit
Wednesday May 25, 2011
PETALING JAYA: Nursing school operator Masterskill Education Group Bhd posted a 15.3% fall in net profit to RM22.58mil for the quarter ended March 31 compared with the same quarter a year ago due to lower enrolment of students and higher operating overheads.The company’s revenue was down 12.6% to RM73.68mil after the number of student intakes for the quarter under review was cut to one from two compared with the corresponding quarter.
Masterskill said in an announcement to the stock exchange yesterday that the second intake of the year was deferred to the second quarter due to the late announcement of SPM results.
It added that the higher overheads were mainly due to an increase in depreciation because of the company’s expansion, which was accompanied by an increase in staff costs to support growth and expansion.
Earlier last month Masterskill entered into a subscription agreement with the controlling shareholder of soon-to-be-listed PT Sejahteraraya Anugrahjaya Tbk, the owner of Mayapada Hospital, to acquire a 1.31% stake in the latter.
Besides the stake, the company together with its chief executive officer Datuk Seri Edmund Santhara also entered into an agreement to form Universitas Masterskill-Mayapada.
Masterskill also announced late last month that it had entered into an agreement with Australia’s Newcastle University to offer business programmes.
Masterskill closed five sen lower at RM2.12 yesterday. Since its listing in May last year, the counter has fallen 44.21%.
| CIMB Research keeps Buy on Masterskill, TP RM4.48 |  |  |
| Written by theedgemalaysia.com |
| Wednesday, 25 May 2011 08:36 |
| KUALA LUMPUR: CIMB Equities Research is keeping its Buy call on Masterskill Education Group Bhd and RM4.48 target price. It said on Wednesday, May 25 that although Masterskill’s annualised 1Q11 core net profit made up 76% of its full-year forecast and 77% of consensus, the results were largely in line as subsequent quarters should be stronger. “We were not surprised by the weaker showing at both the top and bottom lines as it arises from timing issues in student intake following the delayed announcement of school-leavers’ results. Although EBITDA margin shrank YoY, it was a respectable 41.2%, which is not too far from our full-year forecast of 43%. “We make no changes to our forecasts, BUY call and RM4.48 target price, still pegged to 13.1x CY12 P/E or a 10% discount to our target market P/E of 14.5x. Potential re-rating catalysts include (i) a continued recovery in investor sentiment, and (ii) preference for defensive plays, backed by Masterskill’s 8.2% dividend yield,” it said. |
Tuesday, May 17, 2011
Masterskill riding on the healthcare wave
Price Target date: 12/05/2011 | Source: RHB
| MEGB: | 5166 | Price Target | : | 3.74 | | | Price Call | : | BUY | ||
| Last Price | : | 2.23 | | | Upside/Downside | : |  +1.51 (67.71%) |
Masterskill Education Group Bhd
(May 12, RM2.22)
Initiating coverage with outperform call at RM2.27 with fair value of RM3.74: Masterskill has built its reputation in the provision of nursing and allied health education in Malaysia. It currently has 18,399 students enrolled in its diploma and degree programmes, expanding at a compound annual growth rate (CAGR) of 28.3% from 2004 to 2010.
Masterskill's growth in the next few years will be propelled by: (i) An increasing demand for nurses. The government is targeting a ratio of one registered nurse to 200 population by 2020 from the current ratio of 1:500. In 2008 (latest data available), there were 54,000 registered nurses, implying a deficit of 81,000 nurses (based on 27 million population).
With teaching facilities producing about 6,000 to 7,000 nurses per year, the shortage will mean that the demand for Masterskill's nursing courses will remain high for the foreseeable future;
(ii) New courses in the pipeline. Masterskill plans to introduce new programmes in the allied health and medical education disciplines. The group has lined up seven new programmes to be introduced in 2011, yielding high margins that will help to drive its margins moving forward; and
(iii) An increase in student enrolment. Masterskill has received approval to offer a Bachelor of Medicine and Surgery programme with a quota of 100 students at its Johor campus. In addition, it will be building a flagship campus (capacity of 20,000 students) in Bandar Baru Bangi. Phase 1 of the new campus is targeted for completion in 4QFY12 while Phase 2 is due to be ready in FY13.
Risks include: (i) changes in the requirements set by governing bodies; (ii) a change in policy by the government; and (iii) high foreign shareholding (approximately 56%).
We project FY10/13 revenue CAGR of 13.4%, driven primarily by the increase in student enrolment as well as a gradual increase in fees. Our FY10/13 net profit CAGR, however, is expected to grow 14.7% as a result of improved operating leverage on the back of facility integration and economies of scale.
We believe Masterskill's price-earnings ratios are attractive, trading at 7.6 times FY11, compared with peers HELP International Corp Bhd and SEG International Bhd, that trade at FY11 PERs of 15.6 times and 14.3 times. This is unjustified given its relatively larger market cap size and'' higher margins.
Concerns over the availability of National Higher Education Fund (PTPTN) loans are also overplayed in our opinion. Our fair value for the stock is RM3.74, based on target FY11 PER of 12.5 times, 15% discount to the sector average FY11 PER of 15 times. We initiate coverage with an 'outperform' call on the stock. ' RHB Research, May 12
This article appeared in The Edge Financial Daily, May 13, 2011.
Wednesday, May 11, 2011
No surprises from two largest REIT
Written by Insider Asia
Wednesday, 11 May 2011 11:25
Underscoring their defensive characteristics, earnings results for 1Q2011 for the two largest real estate investment trusts (REIT) on the local bourse were broadly in line with market expectations. No major surprises.
CMMT cmpletes first post-listing acquisition
CapitaMalls Malaysia Trust (CMMT) — the second largest REIT on the local bourse by market capitalisation — has just completed its first property acquisition since its debut on Bursa Malaysia in July 2010. The purchase of Gurney Plaza Extension was finalised at end-March 2011 — and its contributions will be reflected in the current quarter’s results and beyond.
To recap, the new acquisition is a nine-storey retail extension block adjoining the Gurney Plaza mall in Penang with a RM215 million price tag and added almost 140,000 sq ft of net lettable area (NLA) to CMMT’s portfolio of assets under management. That is equivalent to an area expansion of roughly 7.5% and raised its total NLA to just over two million sq ft.
To part finance the acquisition, some 144.9 million new units were issued — at RM1.06 per unit — enlarging the total units in circulation to 1,494.9 million. At the prevailing unit price of RM1.16, CMMT has a market capitalisation of more than RM1.73 billion. The REIT has a relatively large free float of about 58%.
As of end-March, CMMT has investment properties valued at a combined RM2.37 billion and total assets of almost RM2.5 billion. Its book value stood at RM1.03 per unit.
CMMT’s 1Q11 earnings results were broadly in line with expectations. Revenue totalled some RM52.7 million while net profit was reported at RM31.4 million, including fair value gain of RM5.7 million for the revaluation of Gurney Plaza Extension. Revenue contribution was more or less evenly distributed among the three properties in its portfolio, Gurney Plaza, Sungei Wang Plaza and The Mines.
As mentioned above, earnings in the upcoming quarters will be boosted by the latest acquisition — as well as better rental rates. Lease renewals in 1Q11 for all three properties saw upward rental revisions, averaging some 7.6%. Meanwhile, occupancy rates stayed high across the board, at an average of about 98.7% in 1Q11.
CMMT is on track to meeting its forecast income distribution of 7.46 sen per unit for the current year. As stated in the prospectus, the trust intends to distribute all of its income this year and at least 90% of income going forward. The first distribution of 1.74 sen per unit has already been made just prior to the completion of acquisition of Gurney Plaza Extension and the issuance of the new units.
Assuming total income distribution of 7.46 sen per unit, investors will earn a yield of 6.4% at the current price. That is a fairly attractive return given its low-risk profile and it is well above prevailing bank deposit rates.
Sunway REIT yield estimated at 6.1%
Similarly, Sunway REIT is confident of hitting its earnings forecast for the current financial year ending June 2011. At the unit price of RM1.10, it is currently the largest listed real estate investment trust on the local bourse, with a market capitalisation of more than RM2.95 billion. Its free float is estimated at roughly 62%, which gives investors pretty good liquidity.
The trust reported revenue and income available for distribution totalling RM240.1 million and RM133.2 million in the first nine months of FY11, respectively, including surplus cash from 50% of manager’s fees paid in units. Net assets per unit stood at 97 sen as at end-March 2011.
Its retail assets fared slightly better than forecast on the back of continued growth in mall visitorship, near full occupancy and upward revision in rental rates. The flagship Sunway Pyramid Shopping Mall, which contributed to more than 61% of total net property income, has an average occupancy of 98.5% for 9MFY11. It achieved a 16.5% (for a three-year term) growth in rental for leases renewed so far this financial year, which accounted for nearly 69% of the mall’s total NLA.
On the other hand, contributions from the hospitality arm, including the Sunway Resort Hotel & Spa and Pyramid Tower Hotel, were below expectations in the latest 3QFY11. This was attributed to lower tourist arrivals due, in part, to cancellations from Japanese corporates following the earthquake and resulting tsunami disasters in the country. Nonetheless, earnings for the nine-month period remain on track to meeting management’s forecast for the year.
Elsewhere, earnings from office properties were resilient. Occupancy at Sunway Tower averaged a high 97% in the financial year to date while the Menara Sunway is fully occupied.
For the full year, total income distribution is estimated at 6.74 sen per unit, which will earn investors a yield of 6.1% at the prevailing price of RM1.10.
The trust intends to distribute to unit holders 100% of net earnings in the first two years of listing and a minimum of 90% annual profits thereafter.
Some RM87.4 million of the available income for distribution, or about 3.26 sen per unit, has already been paid. Sunway REIT will trade ex-entitlement for the third round of distribution, of 1.7 sen per unit, on 16th May.
As with CMMT, Sunway REIT too has just completed its first acquisition post-listing. The purchase of Putra Place for RM514 million was finalised in April 2011, after its winning bid at a public auction. The acquisition will boost the combined value of its investment properties to over RM4.2 billion. (Note that there is currently a legal dispute involving the purchase with Metroplex, but the trust believes that the former’s claims are unlikely to be successful).
The newly acquired property comprises The Mall (an 8-level shopping complex), 100 Putra Place (office tower), and 5-star hotel, The Legend, including its serviced apartments, penthouses and parking bays.
With strong sponsors, we expect both REITs will continue to expand their portfolios of assets going forward.
Sunway REIT has been granted a right of first refusal on Sunway City’s properties. The latter is the single largest unit holder in the trust and is one of the largest property developers in the country.
Meanwhile, CMMT has a right of first refusal for CapitaMalls Asia’s retail properties in Malaysia. The latter is its biggest stakeholder and a subsidiary of Singapore-listed CapitaLand. It is also a leading integrated shopping mall owner, developer and manager in the region, with some 91 retail properties worth a collective S$23.7 billion (RM57.5 billion) in Singapore, China, Japan, Malaysia and India.
Wednesday, 11 May 2011 11:25
Underscoring their defensive characteristics, earnings results for 1Q2011 for the two largest real estate investment trusts (REIT) on the local bourse were broadly in line with market expectations. No major surprises.
CMMT cmpletes first post-listing acquisition
CapitaMalls Malaysia Trust (CMMT) — the second largest REIT on the local bourse by market capitalisation — has just completed its first property acquisition since its debut on Bursa Malaysia in July 2010. The purchase of Gurney Plaza Extension was finalised at end-March 2011 — and its contributions will be reflected in the current quarter’s results and beyond.
To recap, the new acquisition is a nine-storey retail extension block adjoining the Gurney Plaza mall in Penang with a RM215 million price tag and added almost 140,000 sq ft of net lettable area (NLA) to CMMT’s portfolio of assets under management. That is equivalent to an area expansion of roughly 7.5% and raised its total NLA to just over two million sq ft.
To part finance the acquisition, some 144.9 million new units were issued — at RM1.06 per unit — enlarging the total units in circulation to 1,494.9 million. At the prevailing unit price of RM1.16, CMMT has a market capitalisation of more than RM1.73 billion. The REIT has a relatively large free float of about 58%.
As of end-March, CMMT has investment properties valued at a combined RM2.37 billion and total assets of almost RM2.5 billion. Its book value stood at RM1.03 per unit.
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As mentioned above, earnings in the upcoming quarters will be boosted by the latest acquisition — as well as better rental rates. Lease renewals in 1Q11 for all three properties saw upward rental revisions, averaging some 7.6%. Meanwhile, occupancy rates stayed high across the board, at an average of about 98.7% in 1Q11.
CMMT is on track to meeting its forecast income distribution of 7.46 sen per unit for the current year. As stated in the prospectus, the trust intends to distribute all of its income this year and at least 90% of income going forward. The first distribution of 1.74 sen per unit has already been made just prior to the completion of acquisition of Gurney Plaza Extension and the issuance of the new units.
Assuming total income distribution of 7.46 sen per unit, investors will earn a yield of 6.4% at the current price. That is a fairly attractive return given its low-risk profile and it is well above prevailing bank deposit rates.
Sunway REIT yield estimated at 6.1%
Similarly, Sunway REIT is confident of hitting its earnings forecast for the current financial year ending June 2011. At the unit price of RM1.10, it is currently the largest listed real estate investment trust on the local bourse, with a market capitalisation of more than RM2.95 billion. Its free float is estimated at roughly 62%, which gives investors pretty good liquidity.
The trust reported revenue and income available for distribution totalling RM240.1 million and RM133.2 million in the first nine months of FY11, respectively, including surplus cash from 50% of manager’s fees paid in units. Net assets per unit stood at 97 sen as at end-March 2011.
Its retail assets fared slightly better than forecast on the back of continued growth in mall visitorship, near full occupancy and upward revision in rental rates. The flagship Sunway Pyramid Shopping Mall, which contributed to more than 61% of total net property income, has an average occupancy of 98.5% for 9MFY11. It achieved a 16.5% (for a three-year term) growth in rental for leases renewed so far this financial year, which accounted for nearly 69% of the mall’s total NLA.
On the other hand, contributions from the hospitality arm, including the Sunway Resort Hotel & Spa and Pyramid Tower Hotel, were below expectations in the latest 3QFY11. This was attributed to lower tourist arrivals due, in part, to cancellations from Japanese corporates following the earthquake and resulting tsunami disasters in the country. Nonetheless, earnings for the nine-month period remain on track to meeting management’s forecast for the year.
Elsewhere, earnings from office properties were resilient. Occupancy at Sunway Tower averaged a high 97% in the financial year to date while the Menara Sunway is fully occupied.
For the full year, total income distribution is estimated at 6.74 sen per unit, which will earn investors a yield of 6.1% at the prevailing price of RM1.10.
The trust intends to distribute to unit holders 100% of net earnings in the first two years of listing and a minimum of 90% annual profits thereafter.
Some RM87.4 million of the available income for distribution, or about 3.26 sen per unit, has already been paid. Sunway REIT will trade ex-entitlement for the third round of distribution, of 1.7 sen per unit, on 16th May.
As with CMMT, Sunway REIT too has just completed its first acquisition post-listing. The purchase of Putra Place for RM514 million was finalised in April 2011, after its winning bid at a public auction. The acquisition will boost the combined value of its investment properties to over RM4.2 billion. (Note that there is currently a legal dispute involving the purchase with Metroplex, but the trust believes that the former’s claims are unlikely to be successful).
The newly acquired property comprises The Mall (an 8-level shopping complex), 100 Putra Place (office tower), and 5-star hotel, The Legend, including its serviced apartments, penthouses and parking bays.
With strong sponsors, we expect both REITs will continue to expand their portfolios of assets going forward.
Sunway REIT has been granted a right of first refusal on Sunway City’s properties. The latter is the single largest unit holder in the trust and is one of the largest property developers in the country.
Meanwhile, CMMT has a right of first refusal for CapitaMalls Asia’s retail properties in Malaysia. The latter is its biggest stakeholder and a subsidiary of Singapore-listed CapitaLand. It is also a leading integrated shopping mall owner, developer and manager in the region, with some 91 retail properties worth a collective S$23.7 billion (RM57.5 billion) in Singapore, China, Japan, Malaysia and India.
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| One of three properties in CapitaMalls Malaysia Trust's portfolio, Sungei Wang is a popular shopping destination. | Sunway Pyramid Shopping Mall contributes over 60% of Sunway REIT's total net property income. |
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