Monday, November 09, 2015

Perennial Real Estate Holdings - Growing contributions from rental income

5QFY15 earnings driven by recurrent income base 
●  Previous corresponding results are not comparable as PREH completed its RTO in Oct 2014. For 5QFY15, PREH’s revenue of S$22.9m came from rental income from CHIJMES, TripleOne Somerset, Perennial Jihua Mall, Perennial Qingyang Mall and associates AXA Tower, Capitol Singapore and Shenyang Summit. There was a small contribution from fee-based management income too. 

Singapore retail assets have obtained higher pre-leasing rates
●  Singapore assets generated c.65% of topline with China making up another 31%. CHIJMES continued to trade well with 88% of its space committed, of which 77% is already operational. The Capitol Piazza is over 80% pre-leased and most of the tenants have commenced operations including a number of new concept and new to Singapore fashion and F&B names. This should provide steady income to PREH. 

China malls stabilising
●  In China, H&M has opened its store at Shenyang Longemont Shopping Mall. Perennial Jihua and Qingyang malls have seen occupancy reaching 99.7% and 98.6% respectively. We expect the latter to perform better with the greater catchment pool from the partial opening of three office blocks nearby. 

Sale of office space could provide another earnings driver
●  This steady recurrent income base is expected to be lifted by the planned sale of strata office space at TripleOne Somerset and AXA Tower. Both properties have received planning permits and are awaiting other development approvals for its planned AEIs, scheduled to start in 1Q16. Show suites for the strata offices are also being set up. This would provide another income source for the group. 

Maintain Add
●  We leave our FY15-16 estimates unchanged and maintain our Add call with an RNAV-based target price of S$1.39. A potential catalyst is the monetisation of its strata office space in Singapore.

Tuesday, November 03, 2015

Singapore Post Ltd - Gaining traction in ecommerce logistics

2QFY16 results highlights 
●  2QFY16 core net profit of S$37.5m was down 6.8% qoq and 4.8% yoy. This was due to: 1) loss of hybrid mail revenue given the sale of DataPost in 2QFY16 and Novation Solutions in 1QFY16, 2) lower rental income at Singapore Post Centre (SPC) with the closure for redevelopment, and 3) lower margins as operating expenses (+4.4% qoq excluding M&A fees) grew faster than revenue (+3.4% qoq). 

Postage rate hike partially offsets loss in hybrid mail contributions
●  Mail revenue fell 6.9% qoq and 5.6% yoy to S$116.5m on lower hybrid mail contributions. Excluding hybrid mail, overall revenue for the mail segment would have fallen by a smaller 3.4% qoq and grown 1.1% yoy, partially helped by the postage rate hike. Excluding one-off gains from the sale of Novation Solutions in 1Q (S$8.4m) and DataPost in 2Q (S$24.9m), mail operating profit fell 10.1% qoq but grew 2.5% yoy. 

Logistics M&A bearing fruit
●  Logistics revenue rose 11.4% qoq and 43.3% yoy to S$156.1m, largely driven by the acquisition of an 80% interest in Rotterdam Harbor Holding B.V. by Famous Holdings during the quarter. As a result, logistics operating profit improved 10.6% qoq and 26.2% yoy to S$7.4m. Logistics operating margin stayed flat at 4.7% in 2Q which was notable given the larger mix of lower-margin freight forwarding contributions. 

Growing ecommerce contributions
●  In 1HFY16, ecommerce accounted for 29.0% of group revenue. This compares with 28.0% in FY15 and 26.9% in 1HFY15. On a yoy basis, total ecommerce revenue grew 29% in 1HFY16 to S$150.1m, led by logistics (S$66.1m, +90% yoy) due to M&A activities. This was followed by Retail & eCommerce (S$15.9m, +33% yoy) on higher contributions from front-end services at SP eCommerce. eCommerce mail revenue fell 2% yoy to S$68.1m, likely due to lower transshipment volumes.   

Lower net cash
●  SPOST ended 2Q with S$87.8m in net cash, down from S$329.0m in 1Q. This was due to: 1) construction of the eCommerce Logistics Hub, 2) acquisition of Toh Guan building, 3) redevelopment of SPC, 4) dividends, and 5) M&A. As of Sep, SPOST had commitments of S$305.5m not provided for, as well as S$258.5m for the acquisitions of Jagged Peak and TradeGlobal. This can be partially funded by the S$229.4m in net proceeds from issuance of shares and sale of 34% stake in Quantium to Alibaba.