Tuesday, July 28, 2009

Cambridge Industrial Trust Hold Calls



Updated analyst reports from Phillip Capital and DBS.

Outlook:

DBS: Building up its coffers.
• 2Q09 results showed stable performance
• Private placement exercise leads to 10% dilution
• Impact on AEI activities only in the medium term
• Downgrade to HOLD, TP S$0.41 based on DCF.

Valuation:

DBS: Downgrade to HOLD. DPU is expected to be diluted by 7-9% in FY09-10F to 4.8 – 4.7 Scts. Our DCF based TP will be reduced to S$0.41, which is close to its closing price. As such, we downgrade to HOLD. Cambridge REIT currently offers a FY09-10F yield of 12%.

Phillips: Our revenue forecasts have assumed a portfolio vacancy of 3%. Portfolio performance in the last two quarters was lower than our assumptions. We thus revise our vacancy assumption to 1%, still slightly conservative compared to CIT actual occupancy rate. We have also revised down the management fee following the downward revaluation of the portfolio. We raise our DPU forecast from 4.73 cents to 4.93 cents. Fair value is raised marginally from $0.44 to $0.45. In view of the recent run-up in price, we lower our rating from Buy to Hold.

Investment tips:

There should be more better REITs although I haven't study enough. As usual take a pinch of salt with analyst reports.

Source:

Phillip Capital
DBS

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