Wednesday, 30 July 2014

Why Singaporeans should know more about LNG?

Which industries in Singapore offer the most lucrative jobs? This is probably one popular question most undergraduates or working adults are interested to know. After surveying many friends, most agree that in Singapore, the Banking & Finance sector is where the money are. The Oil & Gas Energy sector will probably settle for a tight second position. 

LNG shaping the future of Singapore?

Few months ago, I was talking to a friend and we concur that LNG industry may well be the future for Singapore and become one of the most lucrative paying industry. I was told by my friend that one of his peers, holding a law degree gave up a high-position “steel rice bowl” job in government sector to join a private LNG company as business development executive recently. 

I also remember last year during a chat with a long-time client, we agree that while Singapore is successful transforming ourselves into the global offshore oil and gas hub, the industry is lacking technical expertise among Singaporeans. In the past, our government overlooked the importance of oil and gas technical education, be it in school or in work. Today, many senior technical positions in the oil and gas industry are still filled by foreign expertise from Europe or America, although Singaporeans are generally savvier in commercial and project management.   

In fact, my client who has business association with Pavilion Energy, a Temasek portfolio company focused on global LNG supply chain, told me that Singapore is having ambitious and long term plans in developing Singapore into the global LNG hub. This time round, Singapore will also spend more effort focusing on education and upgrading our human resource expertise earlier to prepare for our long term plans in the LNG industry. 

Pavilion Energy was set up in April 2013 to tap growing LNG demand in Asia. Since then, the firm has invested US$1.3 billion for a 20 per cent stake in three gas blocks off Tanzania in East Africa. It's committed capital now has also been raised to US$6.9 billion from its initial start-up of US$1 billion.

Earlier in June this year, Pavilion Energy signed a US$7b deal with French oil company Total to increase its LNG supply portfolio by 40 per cent over an earlier 10-year deal with France's Total to 0.7 million tonnes of liquefied natural gas annually, with shipments starting in 2018. 

A month prior to the Total supply contract, Pavilion Energy and BW Group entered into an agreement to form a joint venture, BW Pavilion LNG Pte Ltd to acquire, manage and charter maritime LNG assets, including LNG carriers.  The JV is hitting the ground running with an existing LNG carrier, and will build two new ones at a South Korean shipyard, with each said to cost around US$250 million.

"As the Ukraine crisis reminds us, we should not depend on pipelines to access affordable gas. So this LNG shipping JV reinforces Pavilion's intention and determination to be a leading regional LNG player, and to bring reliable and competitive gas to Singapore." - Pavilion CEO Seah Moon Ming

What is LNG?

So what exactly is LNG? 

LNG is liquefied natural gas comprises mainly of methane (CH4), a clear, colourless, non-toxic liquid that forms when natural gas is cooled to -162ºC (-260ºF). This shrinks the volume of the gas 600 times occupying less space and easier to store and ship out, safely and efficiently using LNG carriers.

Natural gas is a major source of energy, but many towns and cities that need the energy are located far from the gas fields which make transporting of gas by pipeline costly and impractical.

In the LNG process, the gas is first extracted and transported to a processing plant called LNG train where it is purified and then cooled down in stages until it is liquefied. LNG is finally stored in storage tanks and can be loaded and shipped by LNG carrier. When LNG carrier reaches LNG Terminal, the imported liquid is then returned to gas at the regasification facilities. After that, it is then piped to homes, businesses and industries.


Why is LNG important to Singapore?

More than 90% of Singapore's electricity is currently generated from natural gas as fuel. They are supplied by four pipelines from Malaysia and Indonesia, according to the Energy Market Authority. About 20 percent of the country’s natural gas needs is from LNG, according Singapore LNG Corp (SLNG), which operates the Jurong Island LNG terminal. Singapore imports liquefied natural gas (LNG) from various countries across the world. In 2008, UK-based BG Group PLC won a contract to supply 3 million tons of LNG to Singapore annually over 10 years starting 2012.

“Singapore is trying to take advantage of its geography and stature as Asia’s oil-trading center to also become a leader in LNG. Asia has overtaken Europe as the world’s biggest gas importer, accounting for 46 percent of global trade, according to the International Energy Agency, which cites Singapore as best-placed to be the hub for liquefied natural gas” – PM Lee

Southeast Asia’s gas demand will rise 184 billion cubic meters by 2018, up about 19 percent from 2014 levels, compared with 11 percent growth in global consumption, the Paris-based IEA estimated in its medium-term gas report in June last year. China’s needs will also increase by 56 percent to 294 billion in the same period. As at end 2012, Asia accounted for 71 percent of global LNG demand.

Singapore first LNG receiving Terminal

In 25 February this year, Singapore witnessed the opening ceremony of its first LNG Terminal in Jurong Island, seven years after the decision to build the facility with an S$1.7b budget. The 40 hectare terminal with three LNG storage tanks, two jetties and regasification infrastructure will be owned and operate by SLNG.  

With the new terminal, Singapore has capacity to handle 6 million metric tonnes per anum (mmtpa), which is three times as much as what Singapore currently consumes. A fourth LNG tank is scheduled for completion by the end of 2017 and will increase the Terminal's capacity to at least 9 mmtpa. The current LNG terminal can accommodate as many as 7 tanks with a total capacity of 15 mmtpa.

Source: Singapore LNG Corporation Pte Ltd (SLNG)

Plans for second LNG Terminal

Singapore also plans to build a second LNG receiving terminal. The second facility will likely have the same maximum capacity as the first, and could possibly be built on a floating facility offshore. The second terminal is for long-term planning and estimate to be operational only from 2025 to 2030.

With the current terminal, it is more than enough to meet our country gas capacity. The reason for opening the second terminal is likely to take advantage of our geography and stature as Asia’s oil-trading centre to also become a regional leader in LNG.

“We are preparing for the possibility that our demand for natural gas may one day be met entirely by LNG,” PM Lee said.

The second terminal may be used for reloading and ship bunkering rather than just for imports, said Leigh Bolton, managing director of Holmwood Consulting Ltd., who has 20 years of experience in natural gas and LNG.

Keppel and Semb Marine ramping up LNG contracts

Elsewhere, Keppel has early this month announced a US$735m contract to convert the “Hilli” LNG tanker into a Floating Liquefied Natural Gas (FLNG) vessel for Norway Golar LNG. The contract comes with an option of converting two additional vessels.

Earlier June this year, Sembmarine announced it had acquired 12% stake in Norwegian LNG terminal and platform maker Gravifloat for US$4m, with a right to increase its stake up to 20%. 

On the same day, it also announced that it had secured a long-term contract from GasLog LNG services to provide ship repair, refurbishment, upgrading and other marine services for the latter’s fleet of 20 LNG carriers. This means Sembmarine can anticipate refitting of three to five GasLog LNG carriers each year.

FLNG Shell Prelude

FLNG refers to water-based LNG operations employing technologies designed to enable the development of offshore natural gas resources. The FLNG market is relatively new but a very important development within the LNG market. There are no FLNG facilities currently exist. The world first FLNG vessel – Shell Prelude FLNG is ordered by Royal Dutch Shell in 2012, currently under construction at South Korea’s Samsung Heavy Industries. When completed in 2017, the vessel will theoretically produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets.

Shell Prelude FLNG measure around 500m in length (~4 soccer fields length), weighting over 600,000 tonnes (~6x weight of largest aircraft carrier) and expected to produce at least 5.3 mmtpa of liquids including 3.6 mmtpa of LNG – enough to satisfy the natural gas needs of  city size and population of Hong Kong. The vessel will be bound for the Prelude gas field, about 200km off Australia Northwest coast.

Rolf’s View

It is no doubt that LNG will be one of the most important industries shaping Singapore future economical outlook. 

If an opportunity arises, I definitely hope to a part of the LNG working industry one day, if not, probably my children will fulfil my aspiration if they possess passion in the industry. 

Before you start thinking of switching industry to the LNG sector, please first understand what is LNG from the Shell video below. :) 

Tuesday, 29 July 2014

Keppel and Sembcorp Marine Hit by Slow Orders - Chinese Competition

It's Hari Raya public holiday yesterday and I decide to take additonal few days break from work to spend time with my family. This morning, I read an interesting offshore & marine article about and decide to share it here for those who may be interested. Below please find what I extracted and summarized from Rigzone. 

Business for Singapore's two largest shipyards has been slow year to date, with the situation exacerbated by intense competition from China.

Optimism generated by record deliveries of newbuild jackups by Singapore shipyards in 2013 has faded somewhat amid slow orders and a sustained challenge from lower cost competitors in China so far this year.

China Maintain lead over Singapore – More Jackups and Semi-submersible

Source: Riglogix

Weaker Rig Demand, 30-50% less than last year

The weaker demand for new rigs was attributed to reduced capital expenditure (capex) for exploration and production by major international oil companies (IOC) such as Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell plc, as well as a projected rise in supply of drilling rigs in the near-term, Carmen Lee, head of research at Singapore’s OCBC Investment Research Pte Ltd. pointed out in an April 10 investor note

Jackup utilization rate fell to 81.1 percent in June, compared to 87.3 percent in January, while the level for semisubmersibles and drillships declined to 84.7 percent and 89.3 percent, respectively from 89.9 percent and 91.3 percent in the corresponding period.

Long term outlook still positive due to current Ageing fleet

Still, the current weakness in new rig demand is likely to have an impact only in the near-term as global requirement for new jackups is projected to increase amid an ageing fleet. At present, nearly half, or 216, of these rigs are over 30 years old and “customers [are] actively replacing lower-spec rigs,” Transocean Ltd. said in its June presentation to investors.

Industry watchers mostly agreed, with the existing slump in new rig orders seen as “only a temporary slowdown and not a downturn in the sector as commodity prices remain firm and long-term sector fundamentals remain sound,” Lee said.

Others believed that orders for new jackups will grow as there is “replacement demand for aged fleet and stricter safety requirements,” Singapore’s DBS Group Research Equity elaborated in a July 14 investor note.

High Rig Construction Cost discourage additional investments

Already, higher construction costs and shipyard/equipment provider constraints were cited as factors that discouraged additional investments in new jackups, Ensco plc mentioned in a March 25 company presentation. Below a chart showing the slowing in demand for Keppel and Sembcorp compared to last year. 

 Source: Riglogix

Singapore yards around US$15-30 million more expensive than Chinese

Orders from China yards
Last November, Viking Offshore & Marine Ltd. partnered Chan Kwan Bian ordered a GustoMSC designed jackup with China Merchant Heavy Industry (CMHI) for $180 million.

In May, Foresight Group’s Derwent Ocean Ltd. S.A. ordered a LeTourneau Super 116E Class design jackup from China’s Cosco Corp. unit Cosco (Dalian) Shipyard Co. Ltd. for $184 million

Singapore-listed KS Energy Ltd.’s indirect subsidiary KS Rig Invest Five Ltd also contracted China’s Shanghai Zhenhua Heavy Industry Co., Ltd. (ZPMC) to build a Friede & Goldman JU-2000E design jackup for $199 million.

Orders from Singapore yards
Keppel FELS received an order from Fecon International Corp. in February to build three KFELS B Class jackups for $650 million or around $216.67 million each.

Sembcorp Marine’s subsidiary PPL Shipyard secured a $214.3 million deal in the same month from Marco Polo Drilling (I) Pte Ltd. to construct a PPL Pacific Class 400 design jackup.

Despite Singapore yards higher cost, some clients are still willing to pay more. However, “The more orders China wins [in the rig construction market], the more credible they become [to the industry] … certain yards in China [already] command higher prices,” Religare’s Research Director Fernando told Rigzone.

Keppel and Sembcorp Strong Orderbooks Still

Despite strong competition from China, Keppel and Sembcorp Marine managed to secure record rig building contracts last year totaling over $7.88 billion (SGD 10 billion), according to 2014/2015 edition of the Singapore Shiprepairing, Shipbuilding & Offshore Industries Directory (SSSOID).

Keppel and Sembcorp to move up Value Chain – LNG Game Changer

The two major Singapore shipyards will undoubtedly attempt to boost their newbuild rig order books especially after a relatively lackluster performance in the year so far. However, the situation facing Keppel and Sembcorp Marine is currently exacerbated by fairly weak demand for offshore fabrication work, such as ship conversion and platform construction during the same period.

Still there were some notable contracts awarded to Singapore in the non-rig building segment. Keppel O&M secured a $735 million contract to convert an existing liquefied natural gas (LNG) carrier to a floating liquefaction vessel (FLNGV) for Golar LNG Ltd.

Keppel Shipyard also received an order from SOFEC Inc. to fabricate an external turret mooring system for a floating production, storage and offloading (FPSO) vessel that will operate in the Twenboa-Enyenra-Ntomme fields in Ghana.

However, Sembcorp Marine did not win any non-rig offshore projects this year unlike in 2013 when the company bagged a $725 million contract from Norway’s Det Norske Olijeselskap (DNO) to build an offshore platform integrated topside for the Ivar Aasen development in the North Sea.

Better prospects from NOCs

Business prospects for the two Singapore shipyards could improve in the second half of this year as national oil companies, unlike IOCs, are expected to maintain high E&P capex, which is estimated at just over 10 percent.

“Oil companies still require short- to medium-term production for cash flows, and as such demand for jackups remains strong … Coupled with the ongoing bifurcation towards premium assets, there are still pockets of opportunities for market leaders such as Keppel Corporation and Sembcorp Marine,” OCBC’s Lee said in an investor note early last month.

Overall prospects still bright

Looking ahead, Singapore’s offshore industry hopes to continue growing the sector, which has expanded steadily in the last three years. The rig building and ship repair/conversion segments each contributed approximately $7.66 billion (SGD 9.72 billion) and $3.73 billion (SGD 4.74 billion) in revenue last year.

Given that rig building remains a dominant part of Singapore’s offshore sector, the focus has been on improvement to the service offerings. Seen in this context, while “Singapore’s forte is in jackups and semisubmersibles, industry leaders have taken a cognizant view of the steady shift from semisubmersibles to drillship and have embarked on drillship construction,” the SSSOID report highlighted.

Keppel FELS has taken the first step with CAN DO – its first ever drillship built on speculation, while Sembcorp Marine’s subsidiary Jurong Shipyard is now constructing two Jurong Espadon III design drillships for Transocean Ltd.

Related Posts:

Saturday, 26 July 2014

Added - ARA Asset Management & Coca Cola Amatil

It has been a week of action for my stock investments. I divested Nam Cheong partially and Swissco entirely this week. See my earlier blog "Why I divested Nam Cheong and Swissco this week?With the available funds / profits, I added 8 lots of ARA Asset Management (ARA) and a further 1 lot of Coca Cola Amatil (CCA). For recommendation on CCA, please refer to my earlier blog “Golden Opportunity to own a part of Coca Cola Company – Coca Cola Amatil.” 

My fund chest is still partially filled and will continue to hunt for more great companies in the coming weeks. For now, I will focus on ARA Asset Management Ltd analysis and why I think that ARA fit the bill as one of the great companies. 

Company Brief

ARA Asset Management Limited (SGX: D1R) “ARA” is an investment holding company. It operates in four segments: 
  1. REITs, which include provision of fund management services to real estate investment trusts. 
  2. Private real estate funds, which include provision of fund management services to private real estate funds and specialist equity funds.
  3. Real estate management services, which include provision of property management services and convention and exhibition services.
  4. Investment holding, which include investing in a portfolio of listed securities in REITs and a real estate fund manager. 
You can also refer to my earlier blog John Lim - The Man Behind ARA Asset 
Management's Success” for more information on the company.

The above depicts ARA's business portfolio extracted from ARA Latest 1Q14 presentation results ending Mar 2014. It also includes a recent S$708.6 million acquisition of Macquarie Real Estate Korea Limited (renamed as ARA Korea Limited) in Apr 2014, a real estate management company based in Seoul. With the acquisition, ARA has two additional privately-held REITs in South Korea.

ARA is owned mainly by CEO and founder, John Lim holding 19% stake and his strategic investor partners namely SGX listed Straits Trading Company and Hong Kong Cheung Kong Investment Company Limited with 20% and 8% stake respectively. Among institutional investors, Matthews International Capital Management LLC has the biggest ownership of ARA with a 10% stake in the company.


  • Price S$1.72 ; Mkt Cap S$1.45B
  • PE 19.3 (base on FY13 EPS 89.1c) / PE 20.3 (base on annualized 1Q EPS of 21.1)
  • PB 5.2 (base on FY13 NAV of 32.84c) / PB 5.0  (base on 1Q14 NAV of 34.51c)
  • Dividend Yield is very stable at ~5c for past five years. This translate to 2.9% yield at current price of 1.72. 
As of End Mar 14,
  • ARA has healthy cash and equiv of S$47.6mil. 
  • No net Debt, since cash exceeds total liabilities of 38.7mil. 
  • Only debt is 4.8mil 
  • ROE 26.8% ; ROA 24.2%
Latest 1Q2014 Results, 
  • Total quarterly revenue increase by 18% to S$38.2mil yoy.
  • Net Profit rise 6% to S$17.8mil yoy.
  • Its recurrent management fees also increase by 11% yoy to S$29.7 mil. 
In the last 5 years,
  • Net Profit grows steadily from 36.7mil in 2008 to 74.3mil in 2013. 
  • AUM rise from 11.7b in 2008 to 25.5b in 2013.

“ARA is well-positioned to pursue further growth opportunities, as the combined partnership of Cheung Kong and Straits Trading, both well-reputed as premier business groups in Asia, will underpin our expanded business network reach in the Asia-Pacific region.” – John Lim CEO ARA.

Rolf’s View

At a PE of 19 and PB of 5, ARA does not come cheap. Nevertheless I felt that it is a fair price considering ARA stellar growth over the last ten years and its excellent business model. I was enticed by its CEO ability to grow the business year after year, even in times of crisis - SARs and GFC. Furthermore, ARA has a multi-revenue generating business model that collects steady multiple streams of income from REITs, Property and Fund managements. Backed by Lee Ka-Shing Cheung Kong Holdings and one of Singapore oldest companies, Straits Trading Company, I envisage more growth in years to come even albeit the rising interest rate environment. 

Afterall, ARA has already expanded its regional network to span 14 cities in the Asia-Pacific, across Singapore, Hong Kong, China, Malaysia, Australia and South Korea within a short 10 years or so.

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett

Friday, 25 July 2014

The Joys and Truths of Blogging

Hugs and Heartfelt Thanks to all my Readers

Time flies and it is almost 5 months since I started my "virgin" blog post on 1 Mar this year. I enjoyed every moments of blogging since, and somehow it already becomes a part of my life. One single biggest joy is the satisfaction received when your blog is being read by readers all over the world. The feeling is even better, when you received compliments and comments from readers. This definitely motivates, and I really hope to produce more quality articles as time passes. Then again, it does not mean that negative feedbacks or criticisms are not welcome, as I aim to improve myself continuously.

For now, I am extremely grateful and appreciative to all my readers. Even bigger applause, for those who dropped me a note, or commented on my articles before.

Surpassed 20,000 views in less than 5 months!

My blog views in the last two months have been absolutely fantastic for my standard – Average of close to 300 each day. This is impossible without the help of “Singapore Investment Bloggers”, to include Rolf Suey blog into this wonderful platform that provides an updated listing of all Investment Bloggers based in Singapore. I am also appreciative to other bloggers who include Rolf Suey in their blogrolls such as B from 3FsAK from ASSI and Singapore Stock Market News. Thank you so much! For now, I do not have too many blog exchanges, but I definitely welcome more blog exchanges from other bloggers, going forward. Start contacting me! 

It is all about Time and Effort

I must confess that blogging can be one of the most arduous tasks around. Blogging requires lots of time and effort and often entail hours of research, writing, edit and re-editing.  During many occasions, I can even exhaust almost days for detail and informative posts write-up!

For my novice standard, I humbly feel that the pre-requisite of writing a blog post, involves lots of reading from many sources to ensure the information published is as accurate as possible. Then I need to re-read the articles over and over again to extract only the most important and relevant information. The bits and pieces information will then need to be summarized to make it "comprehensive and yet not over lengthy!" - I know I tend to be longwinded, because I am worry that the readers may miss out important information. 

Many of my posts will also include the final icing of Rolf's view. However Rolf’s views can be biased at times, so please bear with me and do not take it too seriously if you disagree. The intention is always, “to be positive and constructive in the spirit of sharing good information”.

Why Rolf Suey Blog

There are few reasons why I started the Rolf Suey blog. One reason is to “escape” my comfort zone arising from a routine mid-career crisis. Besides, I also realise the importance of promoting financial literacy and it makes me wonder why so little of financial knowledge is emphasized in our society today. This is when retirement seems so remotely far in Singapore today. Aside from “money” matters, this blog also advocates personal developments and share interesting investment news and knowledges. In particular, I am most interested in the Oil and Gas sector, of which I aim to share with my readers information to my best of knowledge. Finally Rolf Suey blog will be a library for my reader, me and most importantly, my children when they grow up.

“Rolf Suey” when the letter rearrange means “Yourself”

I sincerely hope all of us can truly find the “Real You - Mojo!” one day, and live life to the fullest happily. For those who already found the "Mojo", kudos to you! For those still finding, keep searching and do not give up! And for those who do not even bother to find, hope you can start soon, and its better late than never!

I shall end my post with a Big Thank You to all my readers, once again - From the always “long-winded” Rolf Suey.

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Wednesday, 23 July 2014

Why I divested Nam Cheong & Swissco this week?

Nam Cheong – Divested partially Nam Cheong after share price hit a high of 0.47-0.48 range few days ago. This is more than 45% swell since six months ago. Nam Cheong is one of my major shareholdings and one of my favourite stocks that I know really well. The hardest thing to do with a stock you are so familiar is “To sell it”. Yet, I believe one single most important lesson in successful investing is the ability to become emotional detach when the need arises. “If you love a stock, the stock will not love you back.”  

The primary reason of selling partial of Nam Cheong, is to take profits at my targeted price (quite irresistible in this case at >40% return) so as to fund acquisition of other potential stocks. The action is also my strategic attempt to mitigate risk via active diversification of my portfolio. In any case, I continue to be confident of Nam Cheong bright future and still hold a handful of its shares in my portfolio. More importantly I will have no regrets even if Nam Cheong share price continue to rise going forward!

Swissco – Divested Swissco completely at 0.495 earlier this week. If you also read my earlier post on Swissco “Swissco - Share Price Surge 20%, you will remember that I predicted that Swissco current price will be diluted below existing price, after the acquisition of S&E. Apparently EGM held had approved the acquisition yesterday. Swissco share price had since dipped from a high of 0.50 this week to current day 0.45. It also proved that my sell position at 0.495 is correct.

I started holding Swissco shares in 2011. In the last three years, I am so engrossed in work and totally ignored investment actions. It was only until earlier this year I sold off my 50 lots of Swissco that I bought at 0.32. Sell price was 0.38 and recorded 19% return with a profit of 2.9k. Later on, price dropped and I bought in 20 lots at 0.34. I then sold at 0.435 to register a 28% gain with profit of 1.8k. When price fall again, I bought another 20 lots at 0.405. Finally I sold off entire stake at 0.495 earlier this week. I profited another 1.6k at 22% return.

Total profits stand at 6.3k excluding dividends, is definitely very pleasing for me. But if I look back, if I were to keep my entire 50 lots at 0.32 initially until now and sell at 0.495, I will have profit 8k and incur less trading fees and less hassle of buying and selling! Sounds stupid of me and now you probably wonder why the “Smart Investor” does not trade!

Of course the whole intention of me buying and selling is to have a lower risk by holding on to lesser shareholding of 20 lots rather than 50 lots and also to have more cash at specific time to acquire potential stocks. My trading actions also arise when I feel that there is a mis-match in price levels.

I will talk more about what I buy with the available funds in my next post. 

Related Posts:

Nam Cheong - What you need to know before investing in it?

Nam Cheong Barging Forward - Accom Work Barge Orders & Shares buybacks.

Suntec REIT continue to Shine with 2Q Latest Results

Suntec announced 2Q results yesterday. I am more than happy with the results announced, particularly on the stable DPU despite the private placement in Mar 14 diluting shareholder base. Both Gross revenue and NPI continues to grow, benefiting from the completion of ongoing Asset Enhancement Initiatives (AEI). Suntec Reit is one of my biggest holdings, and seeing the positive results further enhance my confidence in the company. I continue to like Suntec potential growth going into FY15 and 16 with the due completion of final phases AEI on Suntec Mall and the scheduled completion of Sydney 177 Pacific Highway office development in 2016. There are also rumours that it may acquire Straits Trading Building and raise its stake in Suntec convention centre going forward. Estimated 4.9% dividend yield seems low due to the potentials in growing, but price is also at 10% discount to the book value. 

Let the “Fountain of Wealth” continues to flourish!

source: Suntec homepage
  • Distributable income to Unitholders 2QFY14 grew 11.3% to S$56.6 million.
  • DPU of 2.266 cts vs 2.249 cts yoy (0.8% increase).
  • Estimated FY14 DPU of 9.0 cts (annualized from 1H DPU of 4.495c)
  • Dividend yield 4.9% (last close price S$1.85) and 5.5% (at my cost)
  • P/E ~12.2 and P/B~0.89
Suntec benefits from completion of AEI
  • Gross revenue for 1Q14 increase 45.1% to S$68.1 million; 1H14 increase 38.8% to 134.1 million yoy
  • NPI for 1Q14 increase 64.9% to 46.1 million; 1H14 increase 53.3% to 89.9 million yoy. 
  • Increase in revenue and NPI due mainly to the opening of Suntec Singapore Convention & Exhibition Centre following the completion of its AEI initiatives in the second quarter of 2013.
  • Although gross revenue increase significantly, DPU rise was slight because of an enlarged unit capital following its S$350mil private placement in March this year to raise funds for debt repayment.
Strong Occupancy 
  • The occupancy rates for office portfolio stands at 99.4%; retail at 97.6%. 
  • For JV ORQ and MBFC properties, occupancy is 100%.
  • Balance of office and retail leases expiring in FY2014 stood at 5.6% and 6.3% respectively.
  • Leverage ratio as of end June is 35.3%.
  • All-in financing cost is 2.62% excluding one time write-off of unamortized transaction cost. Including write off, ave financing stands at 3.05%.
  • Weighted average term to expiry extended to 4.13 years. 
  • No re-financing in until FY16. 
  • Interest coverage ratio is at 4.3 times. 
  • Credit rating of  “Baa2″  indicates Suntec Reit has an acceptable ability to repay short-term obligations according to the ratings agency.
  • 2014 office portfolio performance continue to be positive.
  • DPU continue to be stable.
  • Suntec City Mall Phase 2 revenue recognition in coming quarters.
  • Phase 3 and 4 AEI upcoming and 2016 completion of Sydney 177 office building signals more growth.  
Results here

Related Posts:

Tuesday, 22 July 2014

Fraser Commercial Trust & Mapletree Logistics Trust - Latest Results!

Two of my REITs portfolio release results yesterday. 

They are Fraser Commercial Trust (FCOT) and Mapletree Logistics Trust (MLT)

In general, I am happy with both companies’ results, especially when DPUs continue to grow and both companies exhibit dividend yield of >6% which is acceptable for me. Strong occupancy and healthy WALE are pleasing to hear, backed by healthy leverage and strong debt management. I also like FCOT potential growth in earnings when Alex Technopark new rental rates kick in during FY15. MLT continual acquisition strategies also signal confidence into the future, backed by strong sponsor of Mapletree. 

See Results release summary as follows for both companies. 

  • Distributable income to Unitholders 3QFY14 grew 2.9% to S$14.8 million. 
  • DPU of 2.19 cts same yoy. 
  • Est FY14 DPU of 8.6c 
  • Est Dividend yield 6.1% (last close price S$1.44) and 6.6% (at my cost).
  • P/E ~6.6 and P/B~0.92 
China Square shines while Australia Drags
  • YoY NPI gains of 10% for China Square Central and 7% for Market Street were offset by NPI declines at Caroline Chisholm Centre (-10%) and Central Park (-2%) respectively.
  • Lower NPI mainly due to the weaker AUD and slightly higher expenses for Caroline Chisholm Centre incurred for repair and maintenance works undertaken.
  • Despite the slightly lower NPI, savings in the CPPU distribution led to the higher distributable income in 3QFY14. 
Strong Occupancy & Healthy WALE
  • The occupancy rates in S’pore and Australia were 98.4% and 97.3%, respectively. China Square Central attained 100.0% committed occupancy and continues to benefit from the AEI completed in the prior year. 
  • The portfolio WALE of about 3.9 years continues to be anchored by the long WALE of Caroline Chisholm Centre of 11.0 years.
  • Demand for space in the properties was supported by tenants from diverse sectors.
Strong re-financing
  • Net cash flows from the Australian properties have been hedged to manage the impact of the weaker Australian dollar.
  • Interest coverage ratio is at 4.4 times and an all-in interest rate of 2.8% per annum.
  • Singapore properties continue to enjoy the uptrend in rentals, achieving positive rental reversions of between 10.7% to 11.5% for leases which commenced in 3QFY14. 
  • Australia Central Park achieved an 87.0% increase in rental reversion for a lease which commenced in 3QFY14, as the new lease replaced an expired long lease which was contracted more than 10 years ago.
  • Anticipate significant positive rental reversions of Alexandra Technopark in FY15, as underlying leases were renewed at $3.6psf average passing gross rents vs the master lease net rent of S$1.8psf.
FCOT 3Q14 Results here

  • Distributable income to Unitholders 1Q FY14/15 grew 6% to S$46.6 million.
  • DPU grow 6% to 1.90 cts vs 1.80 cts yoy.
  • Est FY14 DPU of 7.6c
  • Est Dividend yield 6.5% (last close price S$1.16) / 6.9% (at my cost).
  • P/E ~10.1 and P/B~1.20.
Strong Performance from New Properties / Positive Rental Reversions
  • MLT recorded higher gross revenue of S$81.0 million (7% incr).
  • NPI for 1Q FY14/15 increased by 6% to S$69.0 million
  • Primarily due to contributions from Mapletree Benoi Logistics Hub and one South Korea property acquired in 2Q FY13/14.
  • Positive rental reversions mainly in HK and S’pore, as well as higher revenue from four Japan properties which completed the installation of solar panels last year. 
Recent Acquisitions
  • Recent acquisitions of the Iskandar Malaysia property and Korean Daehwa Logistics Centre with both expected to contribute to MLT’s DPU in future quarters. 
  • Also commenced the redevelopment of 5B Toh Guan Road East.
  • MLT’s portfolio increased to 113 properties with a book value of S$4.3 billion. Of the 113 properties, 52 are in Singapore, 22 in Japan, 14 in Malaysia, 8 in Hong Kong, 7 in China, 9 in South Korea and 1 in Vietnam. 
Strong Occupancy & Healthy WALE
  • Portfolio occupancy rate at 97.6% in 1Q FY14/15. 
  • WALE ~4.7 years with 46% of the leases having expiry dates in FY17/18 and beyond. 
Strong re-financing / Risk management
  • Aggregate leverage at 33.4% up slightly from 33.3%. 
  • Ave duration of debt ~3.4 years and weighted ave interest at 2.0%.
  • 76% of total debt hedged to fixed rate due to additional interest rate swap, tenors of up to 7 years.
  • 88% of FY14/15 income is SGD hedged into / derived SGD to mitigate Forex risk.
  • Interest coverage ratio at 8.4 times.
  • Demand for logistics properties in MLT’s markets remains stable.
  • HK, CN, MY, JP: firm demand underpinned by growing domestic consumption and improving global economy, coupled with tight supply.
  • SG: leasing activities still healthy but customers have more choices with new developments coming onstream.
  • Expects short term pressure on occupancy rate and rising property expenses, with more conversion of single-user assets to Multi-Tenanted Building conversions coming through.
  • MLT will selectively pursue strategic acquisitions and unlock value via AEI, and recycle capital released from divestment of lower yielding assets into higher yielding assets
MLT 1Q FY14/15 Results here

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