Fortune Reit

Fortune Reit: decent 3Q12 results. Revenue and net property income both up 23% yoy to HK$284.7m and HK$199.3m respectively, mainly due to the inclusion of 2 new properties (Belvedere Square and Provident Square) as well as the increase in unit rent of the property portfolio. Income available for distribution was HK$138.7m, +23% yoy. DPU was HK8.16cts, +22% yoy, representing the highest rate of growth in the Reit’s 9-yr history. Portfolio occupancy rates was 96.1% with passing rent at HK$31.62 psf. A 20.1% rental reversion was achieved for renewal leases for the period, among the highest level in years With the drawdown of loan facilities to fully finance the acq of 2 new properties in Feb ’12, the gearing ratio stands at 24.6% vs 18.8% at FY11. The leases that expire in 4Q12 account for 6.9% of Fortune’s portfolio. The Manager will continue to implement effective leasing and tenant repositioning strategies, as well as executing ongoing AEIs to drive revenue growth from Fortune’s retail properties. Expects asset performance to be inline with the mkt. The units trade at 0.7x P/B, vs the retail S-REITS avg of ~1.1x. Annualized 9M12 yield DPU is HK 23.98 cts , which translates to 5.3% yield on last close at HK$6.02. OCBC maintains Buy, raises TP to HK$6.63 from HK$6.49.