Pacific Andes Resource Development - Buy by OCBC (20 Nov 09)

Lafayette - a great enhancement in South Pacific. We visited Pacific Andes Resources Development's (PARD, formerly known as Pacific Andes Holdings) latest addition - China Fishery Group's (CFGL) key flagship factory vessel christened as the Lafayette. The 228-metre long Lafayette can freeze up to 1,500 tonnes of fish per day and will be deployed to the South Pacific before the end of this year. This vessel will play a strategic role as the group positions itself for future fishing opportunities in the South Pacific. With the addition of the Lafayette, this brings CFGL's total fleet tonnage to 85,000 tons in the South Pacific. This could potentially mean a future 20- 25% market share of the Chilean Jack Mackerel market as the group gears up to participate in more fishing activities in the region before the implementation of the quota system (which is likely to be based on historical catch volume and gross tonnage).

Chilean Jack Mackerel likely to see wider human consumption. This could provide substantial organic growth for the group, which will filter up to PARD. Currently, demand for Chilean Jack Mackerel is mainly in the West African countries, but management is of the view that there will be increasing human consumption of this fish, and this will enhance the value of this fish, which has grown from less than US$600 per ton in 2001 to about US$1000 per ton (CIF) currently. Presently, the Chilean Jack Mackerel is the seventh most harvested fish species.

Fish is still a popular source of protein. According to the FAO, global demand for seafood will exceed supply from 2001 to 2015. Supply is estimated at 172m tons versus demand of 183m tons by 2015. The consumption of fish per capita in China is also expected to rise, increasing from 25.6kg in 2003 to an estimated 34kg by 2030. With the global movement towards healthier food choices, we expect fish demand to remain healthy.

Still a BUY. The group has changed its financial year end to 28 Sep (for both PCRD and CFGL). With this change, the next set of results is due out on 27 Nov 2009 which will cover the six-month period till 28 Sep 2009. We have made some changes to reflect the change in year-end, but our forecasts remain fairly unchanged pending the release of its results next week. We are also maintaining our BUY rating and fair value estimate of S$0.31.

MacarthurCook Industrial REIT and Cambridge Industrial Trust Update

MacarthurCook Industrial REIT (MIREIT) recapitalization exercise took a twist with Cambridge Industrial Trust (CIT) taking a 9.76% stake in MIREIT.

�� 6 Nov 2009 – MIREIT announced a series of recapitalization measure
�� 10 Nov 2009 – MIREIT announced CIT has become a substantial shareholder with a 9.76% stake
�� 16 Nov 2009 – CIT announced it will be voting against the resolutions during MIREIT EGM to be held on 23 Nov 2009 and is proposing to replace the current MIREIT manager, then appoint CITM, the trust manager of CIT as the manager.

CIT rationale to vote against the resolutions stems from the inherent value it deems in MIREIT units and states that the proposed recapitalize exercise is “massively value destructive” to the NAV of $0.94 per unit. CIT has internally valued MIREIT at $0.479 per unit.

Possible Outcomes

Scenario 1: Unitholders vote in favour of resolutions during EGM MIREIT will proceed with the recapitalization exercise. The management of CIT mentions that they have the resources to subscribe for their pro-rata share of rights units. The total stake of 26 million units cost CIT $10.3 million which was funded from the private placement which raised $28 million. The subscription of the rights units will require a further $8.26 million.

Scenario 2: Unitholders vote against resolutions during EGM CIT will proceed to convene another EGM to replace the current REIT manager and appoint itself as the manager. In the event that this is the outcome, it leaves CIT with very little time to put together a refinancing package to address MIREIT pending debt maturity as well as funding needs. MIREIT debt comes due in Dec 2009. CIT has revealed little details about its plan, citing regulatory restrictions. We believe that CIT already has a refinance package on hand for it to suggest voting down the resolutions. Even if it does not, its deemed value of $0.479 per unit of MIREIT gives an indication of the residual value that unitholders can expect to receive in the event that CIT winds down the REIT.

Synopsis

On the overall, the surprise turn of events provided an alternative course of action for MIREIT unitholders. In a way, the move by CIT opens up the possibility that MIREIT unitholders will not be subjected to the heavy dilution. Either way the EGM turns out, the risk is more on the part of CIT unitholders rather than MIREIT unitholders. CIT management has not revealed much details of its plan and therefore MIREIT unitholders can only hope that they are in good hands should they vote against the resolutions. CIT unitholders on the other hand faces the same degree of dilution risk as existing MIREIT unitholders.

We currently have a Hold rating for CIT and a Sell rating for MIREIT.

Ascott REIT DPU 1.92 Cents (28 Oct 2009)

Below is the report by Ascott Residence Trust on their 3Q results. From the looks of it, QoQ, the revenue, gross profit and DPU has increased. Compared to 3Q 2008, the yield has actually dropped significantly.

Singapore, 28 October 2009 – Ascott Residence Trust (Ascott Reit) achieved a unitholders’ distribution1 of S$11.8 million and DPU of 1.92 cents for the quarter ended 30 September 2009. Ascott Reit’s annualised distribution yield is 6.7 percent2 based on the closing price of S$1.09 per unit on 27 October 2009.

Mr Lim Jit Poh, Ascott Residence Trust Management Limited’s (ARTML) Chairman, said: “The severe challenges posed by the global economic downturn to the hospitality industry have eased. Our 3Q operating performance has shown further signs of stabilisation in hospitality demand. While we remain cautious over the pace and extent of recovery, we are confident of the longer-term growth in the markets in which we operate.”

Mr Chong Kee Hiong, ARTML’s Chief Executive Officer, said, “Ascott Reit’s portfolio operating performance continued to improve in the third quarter of 2009. The better performance was led by revenue per available unit (RevPAU) growth in Japan, Singapore and China of 24 percent, 15 percent and 7 percent respectively in 3Q 2009 compared to 2Q 2009. To ride on the expected upturn in demand as the economy recovers, we have accelerated our asset enhancement initiatives for selected properties. We will also continue to seek yield accretive acquisitions.”

Read Related Articles:

1. Stock Picks - Kenneth Ng

2. Outperform by CIMB (Oct 09)

Stock Picks - Kenneth Ng

Mr Kenneth Ng is the head of CIMB-GK Research. In the recent Sunday Times, the following were his stock picks and reasons:

1. Sembcorp Industries. Utilities division will provide stable earnings growth. Will benefit from petrochemical industry in Singapore. Offshore & marine division will benefit in next few years.

2. Parkway Holdings. Position likely to be enhanced in Singapore with opening of its hospital in Novena.

3. Parkway Life Reit. Health care assets as one of the most stable asset class.

4. Ascott Reit. Well diversified within Asia.

5. DBS bank. Cheapest in valuation amongst the three Singapore banks.

6. Wilmar International. Proven management, forward looking with integrated exposure to manage prices and profits.

7, Genting Singapore. Will remain as one of Singapore's top five market cap stocks for the next few years.

8. Noble Group. Increased volumes and value-added processing capabilities from projects.

First REIT announces distribution

First REIT maintains stable 3Q 2009 distributable income at S$5.2 million
 DPU for the period at 1.90 cents per unit
 Annualised DPU of 7.62 Singapore cents translates to distribution yield of 10.7%
 Committed to maintaining a payout policy of 100% of distributable income for FY 2009


SINGAPORE – 22 October 2009 – Bowsprit Capital Corporation Limited ("Bowsprit"), the Manager of First Real Estate Investment Trust ("First REIT"), Singapore’s first healthcare real estate investment trust, today reported that its distributable income for the third quarter ended 30 September 2009 amounted to S$5.2 million which was similar to that achieved in the corresponding period last year.

Correspondingly, 3Q 2009 distribution per unit ("DPU") remained steady at 1.90 Singapore cents. Based on its closing price of S$0.715 on 20 October 2009 and the annualised DPU of 7.62 Singapore cents, First REIT registered a healthy distribution yield of 10.7% for the period.

Gross revenue and net property income also remained stable at S$7.6 million and S$7.5 million respectively as compared to the previous corresponding period.

Reflecting substantially lower market interest rates for fixed deposits, the Group’s interest income for 3Q 2009 decreased 85.4% to S$7,000, whilst trustee fees and finance costs grew by 11.1% and 28.5% respectively. Increase in finance costs was due to higher interest cost for the loan facility which was refinanced in June 2009.

Looking ahead

Improving stock markets and consumer demand are encouraging signs which point to a global economic recovery. With the general credit environment easing, a large part of the REIT sector in Singapore has been successful in their debt refinancing.

The Government’s recent push to raise awareness and boost palliative care services should help to boost the demand for private nursing care.

Bowsprit’s Chief Executive Officer, Dr Ronnie Tan, said "Our performance for the latest quarter continues to reinforce the stability of our Trust structure, which has cushioned us from the effects of the global financial crisis. In particular, we have seen stronger occupancy in our three Indonesians hospitals as more patients stayed back to seek medical care instead of travelling abroad. Continuing growth in this sector will provide an upside potential for First REIT as our Indonesian assets enjoy a variable rental growth component in addition to annual escalation.

In Singapore, demand for private nursing care continues to grow steadily with its aging population.

As First REIT faces no refinancing needs until 2012 and is well funded to meet anticipated growth, we expect the Trust’s performance to remain relatively stable and poised for improvement."

Balance sheet remains strong with a debt gearing of 15.6% which is significantly lower than the regulatory limit of 35%. This provides First REIT with headroom to pursue acquisition opportunities and carry out further asset enhancement works.

First REIT has received approval from the relevant authorities for comprehensive asset enhancement works for its Adam Road Hospital and is expected to commence work soon. Plans are also being proposed for extension works to Lentor Residence.

First REIT will continue its on-going review of the financial attractiveness of various projects in the pipeline, such as the Tech-Link healthcare logistics and distribution centre in Singapore which has received its temporary occupation permit on 2 September 2009.

Books Closure and Distribution Payment

First REIT’s Books Closure and Distribution Payment dates for 3Q 2009 payout of 1.90 Singapore cents are 2 November 2009 and 26 November 2009 respectively.

Stock Picks - Gabriel Yap

These are the following stock picks by Mr Gabriel Yap, senior dealing director at DMG & Partners Securities:

" Investors should set aside at least $50,000 if they want to invest in the stock market. Wait for a good pull back of 6 to 12 percent to build up your investment portfolio"

His stock picks include:

1. OCBC Bank. Banks normally outperform in the second stage of recovery.

2. DBS bank. Cheapest valuation

3. Bukit Sembawang. Property developer owns a great landbank in Seletar.

4. CapitaMall Trust. Great porfolio of assets with good location, good yield and borrowing levels.

5. Ascendas Reits. Potential for higher rents.

6. Frasers Centre Point Trust. Acquisition of Northpoint 2 and Yew Tee Point will properl growth.

7. Noble Group. Recent investment by China Investment Corp will open doors.

8. Midas Holdings. To benefit from China's booming rail industry

APL Logistics wins Supply Chain Excellence Award (16 Oct)

APL Logistics has received the award for ‘Outstanding Partner in Supply Chain Excellence' within the Technology Solutions and Service Provider category at the Supply Chain Excellence Awards 2009, held in Singapore.

The awards recognised the achievements of the top five logistics partners in the Asia Pacific region. Successful contenders were those providers that have proven their ability to deliver outstanding value to customer's operations and strengthened supply chains during the global economic downturn.

"In the last year we have worked increasingly closely with our customers to help them create end-to-end supply chains that have the flexibility to adapt to volatile market conditions. By doing so, we have been able to continue helping our global customers strengthen their presence in the Asia Pacific region and support the effectiveness of Asia’s increasingly diverse manufacturing locations," said Peter Knapp, Vice President, Contract Logistics, APL Logistics.

The judging panel, which was comprised of representatives from academic and commercial institutions across Asia, Europe and the US, selected all category winners based on their ability to help customers build resilient and flexible supply chains. Entrants also had to show evidence that demonstrated how they had created tangible cost savings or efficiencies for customers in the last year.

APL Logistics' industry leadership was acknowledged in several areas. This included its ability to help customers manage fluctuating inventory requirements and increasing cost pressures via its time-definite OceanGuaranteed® and APL Guaranteed® services. The environmental benefits of switching from air to ocean/truck transportation and 'big box' consolidation were also seen as an important part of this.

The business' focus on improving Asia's intermodal transportation connectivity, regionally and internationally also received recognition. A key element of this was APL Logistics' contribution to improving connectivity across India to support the country's economic growth aspirations via its IndiaLinx™ service, a joint venture with Hindustan Infrastructure Projects and Engineering (HIPE).

The awards were part of the SCM Logistics World Conference 2009.