Liquidation of Newstead to have minimal impact on REITs

Liquidation of Newstead to have minimal impact on REITs

Samantha Chiew
10/10/18, 11:07 am

SINGAPORE (Oct 10): CGS-CIMB Securities continues to rate Singapore REITs as “overweight” following media reports that home-grown electronics retailer Newstead Technologies is currently in liquidation.

The retailer that also operated DigitalStyle, Nubox and @ has stores located in Nex, Sim Lim Square, Suntec City, Marina Square, Bedok Mall, City Square Mall, Raffles City, Causeway Point, Jem, Tampines Mall, Waterway Point and Jurong Point.

The affected REITs from the closure of Newstead stores are Capitaland Mall Trust (CMT), Frasers Centrepoint Trust (FCT) and Suntec REIT (see figure 1).

The research house has as “hold” call on CMT with a target price of $2.21. Newstead’s Nubox occupies about 1,000 sf of floor space each in Raffles City (0.2% of total retail NLA), Tampines Mall (0.3% of total NLA) and Bedok Mall (0.4% of total NLA).

It has also reserved 15,000 sf of space in the upcoming Funan, which will represent 4.5% of the total NLA.

In a Tuesday report, analyst Eing Kar Mei says, “Due to the small floor space occupied in the existing malls, we believe DPU impact will be minimal. Although Newstead has taken up 4.5% of the total Funan retail space, Funan has yet to open and is receiving favourable lease queries. Hence, we believe CMT will be able to find a replacement if Newstead pulls out.”

CGS-CIMB recommends to “add” FCT at a target price of $2.49.

According to the analyst, FCT will see a minimal impact on the closure of Newstead’s Nubox in Causeway Point, which occupies 1,900 sf or 0.5% of the total NLA. The unit is also located at level 1, which makes it easier to find a replacement.

Suntec REIT will also see minimal impact, as the research house has an “add” call on the REIT with a target price of $2.08.

Newstead occupies about 0.4% of Suntec Mall’s NLA and is currently well-located at level 1 in the North Wing, which Eing believes that it would not be an issue to fill the vacated space in the future.

“In conclusion, the liquidation of Newstead could have a net negative impact on landlords; however, the impact on overall REITs’ earnings should not be substantial, “ says Eing.

Moreover, REITs typically hold two to three months’ rent as security deposit from tenants, which can be used as a buffer, as the REITs or Newstead look for new tenants.

As at 11.00am, units in CMT, FCT and Suntec REIT are trading at $2.15, $1.43 and $1.83, respectively.

Boustead Projects records 2% dip in 4Q earnings to $5.7 mil despite revenue surge

SINGAPORE (May 23): Real estate solutions specialist Boustead Projects posted a 2% drop in earnings to $5.7 million for the 4Q19 ended March, compared to restated earnings of $5.8 million for 4Q18. This brings full year earnings for FY19 to $30.6 million, some 5% higher than earnings of $29.2 million a year ago. The group recorded earnings per share (EPS) of 1.8 cents for 4Q19, the same as a year ago. For FY19, EPS rose to 9.8 cents, compared to 9.1 cents for FY18. The decline in 4Q earnings was mainly due to lower gross margins in design-and-build projects and depreciation incurred o....

Sunpower wins $8.7 mil contract from repeat customer

SINGAPORE (May 23): Sunpower Group, the environmental protection solutions specialist, has signed a RMB43.56 million ($8.7 million) contract with repeat customer Zhejiang Petrochemical Co. Sunpower will provide high-efficiency heat exchangers for one of China’s largest domestic atmospheric and vacuum pressure units with an annual capacity of 10 million tons, which is part of Phase 2 of Zhejiang Petrochemical’s refinery and chemical integration project. The project is part of China’s 13th Five-Year National Petroleum and Chemical Plan. Sunpower started its partnership with Zhengj....

Sanli posts 28% drop in FY19 earnings to $2.2 mil on lower revenue; declares 0.25 cent final dividend

SINGAPORE (May 23): Environmental engineering company Sanli Environmental saw its full year earnings fall 27.7% to $2.2 million for the FY19 ended March, from $3.1 million a year ago. Earnings per share (EPS) fell to 0.83 cents for FY19, compared to 1.19 cents for FY18. FY19 revenue slipped 5.6% to $71.4 million, from $75.6 million a year ago. The decline was mainly attributed to the decrease in contribution from the group’s Operations and Maintenance segment, which saw turnover decrease by 30.6% due to increased competition. Gross profit dropped to $9.8 million for FY19, some 10....