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Sabana REITSabana REITOctober 2013
Disclaimer
Please note that the information is provided for you by way of information only. All the information, report and analysis were and should be taken as having been prepared for the purpose of general circulation and that none were made with regard to any specific investment objectives, financial situation and particular needs of any particular person who may receive the information, report or analysis (including yourself). Any recommendation or advice that maybe expressed in or inferred from such information, reports or analysis therefore does not take into account and may not be suitable for your investment objectives, financial situation and particular needs. You understand that you buy and/or sell and/or take any position in/or on the market, in any of the stocks, shares, products or instruments etc. based on your own decision(s). This is regardless of whether the information is analysed or not, regardless of the details or information related to price levels, support/resistance levels and any information based on technical or fundamental analysis. You understand and accept that nothing told or provided to you whether directly or indirectly is to be a basis for your decision(s) in relation to the market or your trades or transaction(s). Please see a registered trading representative or financial adviser for formal advise.
Contents
1. Company Profile
2. Industrial Analysis
3. Valuation
4. Debt and Risk
Company Profile
�World's first REIT under Shari'ah Compliant
�Currently 100% Occupancy Rate
�Looking at acquisition (508 Chai Chee Lane)
�S&P BBB- rating
�2Q13 yield 8.3% y-o-y, DPU 0.024
Source: Company
Industrial
Source: Company
Industrial
Source: Company
Industrial
Source: Company
Industrial
Source: Company
Lease Expiry Profile
Source: Company
� Pressure is still on for the four master lease expiring in Nov 2013, downward pressure on DPU if not renewed
Valuation
Year 2012A 2013E 2014E 2015E 2016E
Net Property Income ($’000)
76,937 87,324 92,882 94,740 96,635
Net financing costs ($’000)
-17,057 -17,897 -18,949 -20,212 -21,474
Operating Fees ($’000)
-9,199 -8,392 -8,804 -8,941 -9,081
Income available for distribution ($’000)
54,041 61,198 63,238 63,761 63,804
DPU (SGD Cents) 8.44 9.96 9.20 9.22 9.22
Fair Value $1.18
Forecasted Dividend Yield 8.07%
Cost of Equity 8.6%
Terminal Growth 1.0%
Peer Comparison
Company NameLast Price @ 11/10/13
Market Cap (S$ Mil)
Annualized Div. Yield
Gearing (%)
Price to Book Ratio
AIMS AMP CAPITAL INDUSTRIAL 1.50 789.9 6.67 27.3 0.86
ASCENDAS REAL ESTATE INV TRT 2.30 5522.0 6.17 27.0 1.17
CACHE LOGISTICS TRUST 1.19 918.7 7.54 24.4 1.21CAMBRIDGE INDUSTRIAL
TRUST 0.68 838.1 7.29 34.6 1.01MAPLETREE INDUSTRIAL
TRUST 1.36 2256.3 7.17 33.3 1.23MAPLETREE LOGISTICS
TRUST 1.08 2622.2 6.70 32.4 1.17SOILBUILD BUSINESS SPACE
REIT 0.74 594.6 7.89 30.1 0.93
SABANA SHARIAH COMP INDUSTRIAL REIT 1.11 765.6 8.15 35.6 1.02
Sector Average 1788.4 7.20 30.6 1.07
*Source: Data From Bloomberg and HSBC, Soilbuild dividend yield estimated
Sensitivity Analysis
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0%
% Change in Fair Value
All-In Financing Cost (%)
Sensitivity Analysis: Financing Cost
Sensitivity Analysis
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
% Change in Fair Value
Singapore Government 10-Year Bond Yields
Sensitivity Analysis: Risk-Free Rate
Debt Profile
Debt Debt Amount Maturities
Commodity Murabaha Facilities A, B
252.6 mil (refinanced by E,F )
2013
Commodity Murabaha Facilities C
100 mil 2014
Commodity Murabaha Facilities D
12 mil (Fully repaid)
2013
Commodity Murabaha Facilities E,F
252.6 mil 2015, 2017
Convertible Sukuk 80 mil @ 4.5% per annum
24 Sep 2017
Source: Company
Debt Analysis
Source: Company
As at 30 Sep 2013
Borrowings S$ 455.3 Mil
Outstanding term loans S$ 352.8 Mil
Outstanding Revolving Credit Facilities S$ 30.0 Mil
Convertible Sukuk due 2017 S$ 72.5 Mil
Aggregate Leverage 37.5%
Average all in financial Cost 4.0%
Weighted average debt tenor 2.1 years
Interest cover 5.0X
� No pressure on falling behind interest obligation but the short tenor of the debt tenor will increase financial cost given rising interest rate environment
Risk Analysis
�DPU Pressure� Changing from Master tenant to Mulit-tenant profile as well as a
flattish industrial rental outlook (increase supply) will put pressure on stability of its occupancy and distributable income
�High Debt Leverage � At around 35% and management is still indicative of further
acquisition means that there is still pressure for further dilutive rights issue
�Rising Financial Cost� Rising interest rate will affect cost of capital
Shari’ah compliant
Source: Company
Appendix: Valuation
Table 1: 2013 Q4 Revenue Estimate
Base line (Q2 Revenue) S$ 21.6 mn
Lease renewal loss at 93% occupancy2 (0.1)
Additional revenue from new property3 1.2
Net 22.7
2 Four properties subject to lease renewal. Assume 93% occupancy, effectively impacting Q4 performance.3 Chai Chee property revenue at S$1.925/ psf
Revenue 2013 Q3 – S$21.6 mn (flat with Q2)2013 Q4 – S$22.7 mn (see table 1 on the right)FY2014 – S$92.9 mn (see table 2 on the right)FY2015 – S$94.7 mn (revenue growth of 2%)FY2016 – S$96.6 mn (revenue growth of 2%)
Operating expenses
Assume constant % of Revenue
Interest rate
Assume +0.3% year on year
DPU/ Dividend Yield %1
FY2013 – 8.96 cents/ 8.1%FY2014 – 9.20 cents/ 8.4%FY2015 – 9.22 cents/ 8.4%FY2016 – 9.17 cents/ 8.4%
1 At price of S$1.075
Table 2: 2014 Q1-4 Revenue Estimate
Base line (Q2 Revenue) S$ 21.6 mn
Lease renewal loss at 93% occupancy2 (0.2)
Additional revenue from new property3 1.9
Net for each Quarter 23.2
Net for FY 92.9