Three market talks summarized from The Edge this week (23/2/09) about REIT.

1. Mapletree Logistics Trust – could be privatized
2. MacarthurCook Industrial Reit – is looking for buyer & said has approached Ascendas Reit
3. Frasers Commercial Trust – Need to retire > $620 million debt in 2009, may unable to monetize its assets to pare down debt

Time to get REAL with REIT.

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The best scenario is DJ plunged in 3 digit scale and the price drop to $1.98 on opening-- > My most ideal entry price.

My chart shown that ST Eng is due for a rebound, but it shall go down lower to make a 'safe' entry level. However, since DJ is closed tonight and result is knocking the door, it is time to decide to set sail or not when East wind has not arrived yet.

Look at the chart you will know what I mean.

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By looking at the amount of posting about Capitaland, it is obvious that I have brought Capitaland. I will make payment to take delivery of the stock on Monday.

I don’t believe that the current valuation is the trough valuation, or so call bottom. However, I am happy to hold on to something by just paying fraction of it value.

As Lim (CFO of Capitaland) put it: This is a once-in-100-years chance. Historically, companies that made big leaps used a disrupted-market situation to do it. It's got to a point where we will be able to take a leap forward.

Since many people expecting property market to crash, I think this may be a good windows to buy and hold to quality property stock to wait for the market return to normal time.

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Nobody.

Hahalol concluded that SPC is matured for short at $2.75 on 8 February 2009 morning. However, Student of Davidau35 rebuted that SPC can hit $3.10 by coming week.

Since one week has past and SPC closed at $2.73 on Friday, we can concluded that the prediction by Student of Davidau35 is too far out by any standard. Nonetheless, a mere different of 2 cents may not make hahalol as clear winner.



Anyway, the bearish engulfing candlestick on 9 February 2009 is a clear sell signal for anyone who keen to collect the token in subsequent 3 days.

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Testing resistance at $2.77 and $2.78 for the last few days. Noticed the declining volume in consolidation stage. This probably due to the quiet market and dissipatation of impact of right issue lately.

Current volume still slightly above average. Not really a concern now.

Nonetheless, the subsequent days may see the price movement forming a 'flag'.



What is your view?

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The trend reversal is absolutely confirmed. The first check point at $2.80 is in sight. Expecting profit taking in coming session. Your view?

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This is a classical reversal sign and I just love it.

In V3GO methology, once the stock bounced back and cross above opening price (more still, last closing price), that present an entry signal. (Not V3Go student, by the way)

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Both issues offered at steep discounts; CapitaLand looking at acquisitions, CMT to pay off debt

By UMA SHANKARI

Singapore's biggest property developer CapitaLand and its listed retail trust CapitaMall Trust (CMT) yesterday announced two rights issues totalling some $3.07 billion.

CapitaLand said that it will raise $1.84 billion in a 1-for-2 rights issue to build up its war chest to $6 billion, from $4.2 billion now, as it remains on the lookout for acquisition opportunities in markets such as Singapore and China. The developer's fourth-quarter net profit slumped 88 per cent.

And CMT, Singapore's largest real estate investment trust which is 29.7 per cent owned by CapitaLand, will raise $1.23 billion in a 9-for-10 rights offer. It will use most of the proceeds to pay off $956.2 million of debt due this year.

Market rumour that CapitaLand was planning a rights issue first surfaced early last month, depressing the company's shares.

CapitaLand is the second major Singapore company to raise money through a rights issue in recent months. In late December, DBS Group said that it planned to raise about $4 billion to bulk up its capital base. Both CapitaLand and DBS count Singapore investment company Temasek Holdings as their largest shareholder.

'This year is turning out to be a race in raising funds through rights issues and has depressed CapitaLand's shares for a while,' Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co, told Bloomberg.

But while CapitaLand's rights issue was expected, CMT's announcement took some by surprise. Analysts were expecting it to just look for debt refinancing. Another one of CapitaLand's Reits, CapitaCommercial Trust, recently said that it had refinanced at attractive rates.

Another element that caught most analysts by surprise was the steep discounts at which the rights issues are being done.

CapitaLand's rights offer is priced at $1.30 a share, which represents a 45 per cent discount to its closing price of $2.36 a share last Friday, the last day that the stock was traded. The offer price is also at a 54 per cent discount to CapitaLand's post-rights issue net tangible asset (NTA) of $2.80 per share.

Likewise, CMT is making its rights offer at 82 cents a unit - 43.4 per cent lower than last Friday's closing price of $1.45 and also 50.3 per cent lower that CMT's expected net asset value per unit once the rights issue is completed.

'CapitaLand and CMT could be pricing the rights issues lower to entice their shareholders to take up their allotments in the current weak market,' said one analyst.

Both the developer and its trust are expected to be in a better position to grow once the rights issues are completed.

CapitaLand said that the 'pre-emptive' rights issue will provide it with 'greater financial capacity to pursue acquisitions and investment opportunities that may arise'.

'We will also be well-positioned for any mergers and acquisitions opportunities that might arise,' said CapitaLand chief executive Liew Mun Leong. 'We have a number of proposals on the table that we are studying but we are not ready to make any announcements yet.'

He identified Singapore, China and Japan as attractive markets for acquisitions, and also said that CapitaLand is on the lookout for distressed assets.

CMT, on the other hand, will use the bulk of the proceeds to repay borrowings due this year, which total $956.2 million. The balance will be used to pay for asset enhancement initiatives as well as for general corporate and working capital purposes.

DMG & Partners Securities analyst Brandon Lee said that the rights issue puts CMT 'in the clear when it comes to its debt' - which means that CMT will not have to compete with other property trusts for financing in the tight credit environment.

Lim Beng Chee, chief executive of CMT's manager, said that the trust chose to go with a rights issue rather than look for refinancing for its loans as it was looking at the 'longer-term'. The rights issue is expected to provide the trust with greater financial flexibility for future opportunities, such as asset enhancement works at Jurong Entertainment Centre and the newly-acquired The Atrium@Orchard, he said.

Analysts also said that the trust will be better positioned to make acquisitions after the rights issue as its gearing is expected to fall from 43.2 per cent to 29.1 per cent. This will make it easier for CMT to raise money in future. CapitaLand similarly said that its net gearing will be reduced from 0.47 times now to 0.28 times after the rights issue. But the developer's NTA per share will fall from $3.57 to $2.80.

CapitaLand has agreed to subscribe for up to 60 per cent of the total size of CMT's rights issue, including its rights entitlement based on its current 29.7 per cent stake. If CapitaLand takes up 60 per cent of the rights issue, its stake in CMT will climb to 44.1 per cent. The developer said that it will not use any proceeds from its own rights issue to buy any units in CMT's rights issue, and will instead use existing cash reserves.

CapitaLand also said that Temasek Holdings, which has a direct stake of 39.7 per cent in the company, will subscribe to all rights shares that it is entitled to.

Shares of both CapitaLand and CMT resume trading today.

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Full-year net profit halves to $1.26b after Q4 earnings plunge 88%
By KALPANA RASHIWALA

PROPERTY giant CapitaLand yesterday posted a score-card that was in eclipse, as even the bluest of bluechip players are being hit by the ongoing financial maelstrom.

The group's fourth quarter net earnings fell 88.4 per cent to $77.96 million, while full-year net profit slipped 54.3 per cent to $1.26 billion. Return on equity fell from 31.9 per cent in 2007 to 12.2 per cent last year.

However, CapitaLand Group president and CEO Liew Mun Leong was far from downcast over the poorer bottom line at a results briefing yesterday afternoon. Instead, he said: 'During this recessionary period, it is satisfying to be able to achieve more than a billion dollar profit after tax.'

He also pointed out that the full-year 2008 showing was the third consecutive year that the group has achieved net profit of above $1 billion.

Shareholders will receive a 1.5 cent per share special dividend in addition to a 5.5 cent per share first-and-final dividend, resulting in a total payout of seven cents for the year ended Dec 31, 2008, down from the 15-cent payout in the preceding year.

For Q4 ended Dec 31, 2008, earnings before interest and tax (Ebit) fell 77 per cent to $235 million. Revenue for the quarter also shrank 46.9 per cent to $703.7 million. A large part of the Ebit contraction was due to revaluation losses for the group's investment properties portfolio, plus the absence of writeback of provisions. The group booked a $103.9 million net revaluation loss for Q4 2008, as against a net revaluation gain of $470.1 million for Q4 2007 'as real estate property values came under pressure amidst the weakened economic conditions and gloomy outlook', CapitaLand said.

Full-year revenue declined 27.4 per cent to $2.8 billion. Total revenue under management (this covers revenue for all properties managed by the group, including revenue from associates, joint ventures and properties managed but not owned by CapitaLand) slipped about 16 per cent to $5.9 billion from 2007's $7 billion. For the full year, Ebit shrank 42.1 per cent to $2.2 billion, on the back of lower fair value gains from investment properties, lower development profits and the absence of writebacks of previous provisions.

Overseas Ebit contribution last year eased to $1.3 billion from nearly $1.5 billion for 2007. The drop was due mainly to lower contribution from Australia due to the provision for foreseeable losses on development projects and fair value losses on investment properties (against fair value gains in 2007), but this was partly mitigated by the recognition of negative goodwill.

While most of CapitaLand's strategic business units posted lower Ebit last year, two shining stars emerged. CapitaLand China Holdings achieved record earnings of $883.4 million, more than double the $403.4 million Ebit for 2007, thanks to divestment gains from the sale of Capital Tower Beijing and the Raffles City portfolio in China.

The group's funds management business was the other star performer. Total assets under management grew by $8.2 billion last year to $25.9 billion. CapitaLand Financial's full-year Ebit rose 29.6 per cent to $90.4 million. CapitaLand Group's fund management fees rose 53 per cent to $182 million. Property management fees increased 16 per cent to $231 million. As well, CapitaLand enjoyed a stable distribution of $131 million from its real estate investment trusts (Reits) last year, resulting in total income of over $500 million last year from its Reits and funds.

The group's finance costs rose 27.9 per cent last year to $516.3 million. It trimmed gross debt from $10.4 billion as at Sept 30, 2008, to $9.8 billion as at Dec 31, 2008. Net debt-to-equity ratio stood at 0.47 times as at end-2008, unchanged from the end-2007 figure. Interest cover ratio fell from 9.4 in 2007 to 5.0 in 2008, and interest service ratio declined from 6.2 to 3.9 over the same period.

The group's attributable share of debt for its 17 private equity funds was $580 million as at Dec 31, 2008.

CapitaLand Retail plans to open ION Orchard mall in mid-2009. In China, it has decided not to proceed with developing 12 malls signed under respective MOUs. It has also deferred the launch of its proposed Malaysia retail Reit.

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It has moved fast as it realises that markets now like deleveraged outfits
By SIOW LI SEN
Businesstimes.com

Slightly less than 12 months ago, CapitaLand boss Liew Mun Leong bragged about how the company still had access to the capital markets after selling $1.3 billion convertible bonds despite the credit crunch.


In a BT interview in March 2008, he said that the current credit crunch was making borrowing very difficult for real estate companies whose balance sheets were not too strong. 'If banks are now restricting their exposure to you in direct lending, and the capital market is now very cautious, then funding becomes a problem,' he said. 'For us, we are very well capitalised. Banks still trust us to do the normal borrowing.'

Yesterday Mr Liew seemed to be turning his back on banks and tapping shareholders for funds. CapitaLand announced a $3 billion rights issuance and 30-per cent owned CapitaMall Trust launched its $1.2 billion rights.

While it would be impossible to get that amount of funding from international banks, a blue chip like CapitaLand should be able to borrow from the local banks which are flush with liquidity. In addition, the company has $4.2 billion cash, so why raise equity at a hefty 45 per cent discount, especially when there are no specific acquisitions in mind, were some of the questions asked.

In normal times, you don't raise equity which is expensive and scarce, unless needed.

But these being far from normal times, bankers say CapitaLand is reading the market correctly - which is that investors want deleveraged companies given that no one knows just how long the downturn will last.

Investors now want companies to have fortress balance sheets, to paraphrase JP Morgan's chief executive Jamie Dimon, and CapitaLand wants to be so strong that no one questions it, regardless of how bad the recession gets, said one banker.

'The view is that in Europe and US where things went bad first, banks which raise funds from shareholders earlier did better,' said another.

'In Asia, the downturn is hitting only now, there is a limited pool of capital and it makes sense to go first,' he said.

After the rights issue, CapitaLand's net debt-to- equity ratio will improve to 0.28 from the current 0.47. CapitaMall Trust said its aggregate leverage will reduce to 29.1 per cent from 43.2 per cent assuming it repays borrowings with the rights proceeds.

CapitaLand's move is seen as tactical, strengthening its balance sheet, preparing for the downturn and ready for opportunities which will come.

Mr Liew may not feel much like thumping his chest but one admirer said: 'By being the first, he's listening to the market.'

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This is a chart for Straits Asia first drawn on 2 January 2009. One month after the up and down of market, the movement of price is pretty much within the expectation.




As the Edge rightfully pointed out that the stock is currently "'just isn't enough volume or interest in the counter to trigger a breakout", their view point is quite neutral as published in Hot Stocks column.

My inclination is to believe that the price shall retreat to support at $0.835 before meaningful bounce up.

Comment welcome!

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I bought at 0.485. I believe the stock is ripe for a breakout. Even if the stock is trap within the triangle again, the support is likely to push it back to resistant at 60cents.

Albeit the profit margin is smaller then previous rebound, but still a clean signal.

The toy gal is belong to Hahalol, don't get distracted!

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