Challenger Limited · ASX:CGF
Challenger — Challenger Kenedix Japan Trust — H1 FY2008 Earnings Presentation
34 slides from Challenger's earnings presentation, Feb 14, 2008
Slide 1: Challenger Kenedix Japan Trust
Challenger Kenedix Japan Trust Results for half-year ended 31 December 2007, acquisition of Life Nagata and announcement of FY09 distribution guidance Brett McCarthy – Fund Manager 14 February 2008
Slide 2: Important notice
Important notice Information contained in this publication is current as at 14 February 2008 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger”), as Responsible Entity of the Challenger Kenedix Japan Trust (“Trust”). T
Slide 3: Highlights
Highlights • Solid financial performance – $9.5 million profit from operating activities – Revaluation uplift of 3.3% from six properties – Steady underlying cash flows from long-term leases • Secure financial position – Average debt duration 4.4 years – no refinancing risks (first expiry April 2012
Slide 4: Financial results
Financial results
Slide 5: Solid financial performance
Solid financial performance* • $9.5 million profit from operating activities – tracking ahead of expectations due to property acquisitions and operating cost savings • Distribution per unit 6.05 cents Half-year ended 31 December 2007 $ million Net property income 11.7 Other income 2.6 Total income 1
Slide 6: Secure financial position
Secure financial position • Total assets up $198 million – $75 million from second instalment – $91 million in acquisitions – $7.7 million from revaluation of six properties • Gearing (debt to total assets) 48.9% – Forecast to increase to approx 54% at 31 March 2008 on settlement of announced and pl
Slide 7: NTA $1.93 per unit
NTA $1.93 per unit NTA movement - cents per unit 0.09 0.09 0.04 0.02 0.05 • Key variables 0.50 1.93 – Call on second instalment $0.50 per 1.44 unit Jun-07 Second Gain on foreign Loss on Loss on Gain on Deferred tax Dec-07 instalment currency revaluation of revaluation of revaluation of expense – Gai
Slide 8: Property revaluations uplift of 3.3%
Property revaluations uplift of 3.3% • Six properties independently revalued - representing 53% of initial portfolio Independent valuation as at Valuation Valuation Property 31 Dec 07 IPO valuation uplift uplift (¥m) (¥m) (¥m) (%) Carino Chitosedai 10,550 10,000 550 5.5% Izumiya Hakubaicho 5,820 5,7
Slide 9: Borrowings
Borrowings • Total Yen loan facilities ¥56.3 billion ($574# million) • Borrowings ¥31.0 billion ($313# million); hedged 92% • Weighted average debt duration 4.4 years • No refinancing risk – first expiry April 2012 Forecast post As at settlement of 31 December 2007 acquisitions* Borrowings# (¥ billi
Slide 10: Portfolio update
Portfolio update
Slide 11: Portfolio overview
Portfolio overview 14 Feb 08* 30 Jun 07 Total portfolio value (¥m) 59,737 42,571 No. of properties 19 12 Net lettable area (sqm)** 276,184 96,077 Occupancy (%) 100 100 WALE# (by income) (yrs) 16.7 16.5 Weighted average cap rate (%) ## 4.8 4.9 Weighting to largest asset (%) 18 23 * Following expected
Slide 12: Geographic diversification
Geographic diversification Geographic diversification (by income*) 3.6% 15.8% 4.8% 40.4% 11.6% 6.9% 4.7% 10.6% 1.7% Tokyo Hiroshima Sendai Saitama Kyushu Kansai Hokkaido Chubu Hyogo 12 * Based on annualised FY08 forecast income
Slide 13: Tenant diversification enhanced
Tenant diversification enhanced • Increased focus on supermarket sector with stable, non-discretionary spending Tenant type diversification (by income*) Major tenants % portfolio (by income) income 7.0% (vs IPO) 7.9% Valor Co., Ltd 15% (9%) (supermarket) Central Sports Co., Ltd 15% (20%) 41.1% (fitn
Slide 14: Tenant case studies
Tenant case studies Tenant name Valor Co., Ltd Life Corp. Percent of portfolio 15% 12% Supermarket and General Supermarket and General Store type merchandise merchandise 167 supermarkets / 110 home No. of stores 197 stores centres TSE listed TSE First Section (9956) TSE First Section (8194) Market c
Slide 15: Lease expiry profile
Lease expiry profile • Portfolio WALE (by income) 16.7 years* 40% 34% Lease expiry profile (by income)* 30% 21% 20% 16% 10% 12% 5% 3% 3% 2% 2% 2% 0% Beyond FY16 FY20 FY23 FY24 FY15 FY17 FY18 FY19 FY21 FY22 FY25 FY26 FY14 FY27 FY08 FY09 FY10 FY11 FY12 FY13 * Assumes tenants do not terminate leases pr
Slide 16: Rent review profile
Rent review profile • Majority of leases have market rent reviews every 3 – 5 years Beyond 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Property FY Carino Chitosedai (Central Sports) Carino Chitosedai (UNIQLO) Carino Tok
Slide 17: Acquisition of an interest in Life Nagata (land lease)
Acquisition of an interest in Life Nagata (land lease) Acquisition details • Purchase price: ¥2.06 billion ($21.0 million*) • Initial yield: 5.4% • Settlement: February 08 Property details • Net lettable area: 5,781sqm • Car parking: 103 • Occupancy: 100% • WALE#: 19.3 yrs • Lease expiry date: Febru
Slide 18: Strategy and outlook
Strategy and outlook
Slide 19: Successful execution of fund strategy
Successful execution of fund strategy • Utilising Kenedix expertise to grow and strengthen the portfolio – Seven acquisitions announced since 30 June 2007 – Strong investment characteristics; average initial yield of 5.2% – Identified savings on property management costs • Enhancing unitholder retur
Slide 20: Impact of potential slowing in economic conditions
Impact of potential slowing in economic conditions • Economic commentary is cautious – Some indicators pointing to slowing economy – Real GDP growth in CY08 expected to be positive (albeit slow) – Private consumption growth expected positive • CKT’s focus on non-discretionary portfolio provides a de
Slide 21: Distribution guidance
Distribution guidance Distribution guidance FY08 and FY09 17.2 13.6 12.19 11.64 cents per unit IPO forecast Guidance as at 14 Feb 08 FY08 FY09 Notes to guidance • FY08 guidance assumes settlement of all announced acquisitions, plus one additional acquisition prior to 31 March 2008 • FY09 guidance as
Slide 22: Summary
Summary • Well-positioned properties, with long-term leases to well-regarded tenants supplying non-discretionary goods to local consumers • Seven properties added to the portfolio since listing in 2007 on average initial yield of 5.2% • Revaluation uplift of 3.3% from six properties • No refinancing
Slide 23: Questions
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Slide 24: CKT contacts
CKT contacts Brett McCarthy Fund Manager Tel: 02 9994 7219 Email: [email protected] Luke Keighery Investor Relations Tel: 02 9994 7633 Email: [email protected] 24
Slide 25: Appendices
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Slide 26: Income statement
Income statement Actual Actual Half year ended Half year ended 31 Dec 2007 31 Dec 2007* $m ¥m Net property income 11.72 1,172.53 Interest income – Master TK 0.13 12.90 Interest income - Trust 0.12 - Interest income on cross-currency swaps 2.07 - Gain on foreign currency contracts 0.12 - Other income
Slide 27: Income statement (continued)
Income statement (continued) Actual Actual Half year ended Half year ended 31 Dec 2007 31 Dec 2007* $m ¥m Net operating profit after withholding tax 8.27 728.37 Gains/(losses) from fair value movements of properties 7.74 757.07 Gains/(losses) from fair value movements of interest rate derivatives (5
Slide 28: Distribution statement
Distribution statement Actual* Half year ended 31 Dec 2007 $m Net profit/(loss) after tax attributable to unitholders (5.17) Adjusted for: Fair value movements on investment properties (7.74) Fair value movements of interest rate derivatives 5.61 Fair value movements on other derivatives 13.38 Defer
Slide 29: Balance sheet
Balance sheet As at As at CKT consolidated balance sheet 31 December 2007 30 June 2007 $m $m Assets Cash and cash equivalents 29.2 12.1 Trade and other receivables 76.7 7.5 Derivatives and financial instruments 5.2 23.7 Other assets 0.7 1.0 Investment properties 532.4 406.3 Tenant deposits held by T
Slide 30: Balance sheet
Balance sheet Master TK Balance Sheet 31 Dec 2007 30 Jun 2007 ¥ (m) ¥ (m) Assets Cash and cash equivalents 2,571.4 935.2 Trade and other receivables 154.8 773.4 Derivatives and financial instruments (331.1) 222.3 Other assets 11.5 113.8 Investment properties 52,238.3 42,571.4 Other financial assets
Slide 31: Hedging profile – income
Hedging profile* – income Settlement date Exchange rate Policy February 2008 88.72 August 2008 87.64 First five years: February 2009 85.27 80-100% of estimated distributions August 2009 83.06 Years six and seven: February 2010 80.85 August 2010 78.84 up to 90% of estimated distributions hedged in ye
Slide 32: Hedging profile – equity capital
Hedging profile* – equity capital AUD amount JPY amount Settlement date Net interest rate $ million ¥ million December 2010 $3.1 ¥301.0 6.4% February 2011 $6.2 ¥562.3 6.3% August 2011 $27.0 ¥2,502.9 5.2% December 2011 $3.1 ¥301.0 6.2% February 2012 $6.7 ¥618.3 6.1% August 2012 $27.0 ¥2,502.9 5.0% De
Slide 33: Portfolio summary
Portfolio summary Property* Location Net lettable Occupancy at Weighted Independent Valuation Book value Cap rate area sqm 31 Dec 2007 average lease valuation ¥m date 31 Dec (by area) % expiry# (by ($m) 2007 $m income yrs) Carino Chitosedai Setagaya, Tokyo 9,925 100% 15.0 ¥10,550 31 Dec 07 107,553 4
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