Challenger Limited · ASX:CGF
Challenger — Challenger Kenedix Japan Trust — FY2007 Earnings Presentation
34 slides from Challenger's earnings presentation, Aug 15, 2007
Slide 1: Challenger Kenedix Japan Trust 2007 Annual results and acquisition of Seiyu Miyagino
Challenger Kenedix Japan Trust 2007 Annual results and acquisition of Seiyu Miyagino Brett McCarthy – Fund Manager 15 August 2007
Slide 2: Important notice
Important notice Information contained in this publication is current as at 15 August 2007 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”). Thi
Slide 3: Highlights
Highlights • Solid financial performance – Distributable income $2.7 million – up 29% on PDS – DPU 1.42cpu – in line with PDS forecast • Transaction activity boosting future distributions – Acquisition of interests in two new properties for ¥3.7 billion – Average property yield 5.3% – Kenedix relati
Slide 4: Financial results
Financial results
Slide 5: Financial performance
Financial performance • Profit from operating activities $3.0 million – up 26.6% over PDS • Key drivers of outperformance include higher than expected NPI (+6.8%), lower than expected borrowing costs (4.4%) and early implementation of capital hedge Actual PDS Forecast Variance Period to 30 Jun 07 Pe
Slide 6: Distribution to unitholders
Distribution to unitholders • Distributable income $2.7 million – up 29% over PDS forecast • DPU of 1.42cpu in line with PDS forecast Actual PDS Forecast Variance Period to 30 Jun 07 Period to 30 Jun 07 % $000 $000 Net profit attributable to unitholders 34,234 11,831 189.4 Adjusted for: Fair value m
Slide 7: Funding capacity
Funding capacity • Debt to total assets increasing to 52.5% post balance date due to two debt funded acquisitions – Target gearing range of 50-60% • Acquisition capacity in excess of $150 million – Second instalment of $75 million ($0.50 per unit) due Feb 2008 30 Jun 07 15 Aug 07* Borrowing (¥ billi
Slide 8: Net tangible assets
Net tangible assets • NTA of $1.44 per unit vs PDS forecast of $1.46 per unit • $0.17 fall due to A$ appreciation offset by $0.15 gain from foreign exchange and interest rate hedges NTA vs PDS forecast 1.70 1.60 $ 1.50 1.40 0.17 0.15 1.30 1.20 1.46 1.44 1.10 1.00 PDS forecast Loss on Gain on Jun-07
Slide 9: Impact of currency movements
Impact of currency movements AUD/JPY since listing • AUD/JPY has appreciated considerably since listing 110 • No immediate distribution exposure: 105 distributions 100% hedged for next five years AUDJPY FX rate 100 and 90% hedged for years six and seven 95 90 • Equity capital 40% hedged: gain on cap
Slide 10: Portfolio update
Portfolio update
Slide 11: Portfolio overview
Portfolio overview 15 Aug 07* 30 Apr 07^ Total portfolio value (¥m) 46,277 42,571 No. of properties 14 12 Net lettable area (sqm) 111,888 96,077 Occupancy (%) 100 100 WALE (by income) (yrs) 16.0 16.9 Weighted average cap rate (%) # 4.9 4.9 Weighting to largest asset (%) 22 23 * Following acquisition
Slide 12: Tenant diversification
Tenant diversification Tenant type diversification (by income*) Top 10 tenants (by income*) 9% Tenant % portfolio 37% 10% income Central Sports Co 18.6 Izumiya 12.7 Life Corp 11.0 18% P&D Consulting 10.1 UNIQLO 9.0 13% Valor Co 8.3 8% 5% DeoDeo Corporation 6.2 Clothing Commercial Property Manager K.
Slide 13: Geographic diversification
Geographic diversification Geographic diversification (by income*) 9% 47% 14% 9% 13% 2% 6% Tokyo Hiroshima Sendai Saitama Kyushu Kansai Chubu 13 * Based on annualised FY08 forecast income
Slide 14: Lease expiry profile
Lease expiry profile • Portfolio WALE (by income) 16 years • Majority of leases have market rent reviews every 3 – 5 years Lease expiry profile (by income)* 50% 37.2% 40% 30% 21.0% 14.6% 20% 5.7% 4.8% 4.8% 10% 3.5% 3.6% 2.7% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0% FY07 FY
Slide 15: Acquisition of DeoDeo Kure
Acquisition of DeoDeo Kure Acquisition details Purchase price: ¥2.78 billion ($26.5 million*) Initial yield: 5.3% Settlement date: 2 August 2007 Property details Net lettable area: 13,021sqm Car parking: 248 Occupancy: 100% WALE: 9.8yrs Lease expiry date: April 2017 Lease type: Fixed term Tenant: De
Slide 16: Acquisition of Seiyu Miyagino
Acquisition of Seiyu Miyagino Acquisition details Purchase price: ¥0.88 billion ($8.4 million*) Initial yield: 5.4% Expected settlement date: 7 September 2007 Property details Net lettable area: 2,789sqm Car parking: 75 Occupancy: 100% WALE: 8.6yrs Lease expiry date: March 2016 Lease type: Standard
Slide 17: Platform and strategy
Platform and strategy
Slide 18: Execution of strategy
Execution of strategy • Settlement of Carino Chitosedai ahead of PDS schedule – Quality product developed by Kenedix • Acquired interests in two assets using existing debt capacity – DeoDeo Kure – Seiyu Miyagino • Kenedix currently has ¥20 billion ($190 million) of suitable assets under due diligenc
Slide 19: Acquisition pipeline
Acquisition pipeline • Current assets under review in excess of ¥20 billion ($190 million) • Mix of stabilised assets and development opportunities • Stable assets – Retail assets located across Japan – Long leases and steady income streams – Yield range 4.5 - 6.0% • Development opportunities – Stra
Slide 20: Supportive economic conditions
Supportive economic conditions • Positive Japanese economic environment – March quarter GDP growth 3.3% annualised – Unemployment 3.7% (nine-year low) – Yen weakness boosting exports (up 16% in June) – Japanese companies plan to increase capital spending by 11% this financial year* Japanese GDP grow
Slide 21: Kenedix update
Kenedix update • Challenger-Kenedix relationship strong and effective • Robust operating platform • Kenedix has ¥622 billion ($5.9 billion) in assets under management at 30 June 2007 – Increase of 14% since December 2006 • Kenedix has contracted developments of ¥157 billion ($1.5 billion) to be comp
Slide 22: Summary and outlook
Summary and outlook
Slide 23: Summary
Summary • Underlying portfolio performance and recent acquisitions provide basis for outperformance of 2008 and 2009 PDS forecasts • Management continuing to focus on active asset management • Kenedix has ¥20 billion ($190 million) of suitable assets under due diligence for which the proceeds from t
Slide 24: Questions
Questions
Slide 25: CKT contacts
CKT contacts Brett McCarthy Fund Manager Tel: 02 9994 7219 Email: [email protected] Susie McPherson Investor Relations Tel: 02 9994 7958 Email: [email protected] 25
Slide 26: Appendices
Appendices
Slide 27: Income statement
Income statement Actual PDS Forecast Variance Period to 30 Jun 07 Period to 30 Jun 07 % $000 $000 Net property income 3,097 2,900 6.8 Other income 1,202 700 71.7 Borrowing costs (516) (540) 4.4 Other expenses (751) (665) (12.9) Profit from operating activities 3,032 2,395 26.6 Net gain on revaluatio
Slide 28: Distribution statement
Distribution statement Actual PDS Forecast Variance Period to 30 Jun 07 Period to 30 Jun 07 % $000 $000 Net profit attributable to unitholders 34,234 11,831 189.4 Adjusted for: Fair value movement on investment properties (11,501) (12,400) (7.2) Fair value movement on derivatives (22,557) - - Deferr
Slide 29: Balance sheet
Balance sheet As at 30 June 2007 $000 Cash and cash equivalents 12,093 Trade and other receivables 7,459 Derivative financial instruments 23,676 Other assets 18,886 Investment properties 406,320 Total assets 468,434 Trade and other payables 8,451 Interest bearing liabilities 215,263 Other liabilitie
Slide 30: Borrowings
Borrowings 30 Jun 07 15 Aug 07* Borrowing (¥ billion) 22.7 26.6 Debt to total assets (%) 48.8 52.5 Hedged proportion (%) 91.4 90.8 Weighted average hedged interest rate (%) 2.0 2.0 Weighted average hedged term to expiry (yrs) 4.8 4.8 Floating interest rate (%) 1.3 1.3 Blended interest rate (%) 1.9 2
Slide 31: Foreign exchange hedging
Foreign exchange hedging 15 Aug 07 Policy Income hedging First five years: 100% of estimated 80-100% of estimated distributions distributions Year six and beyond: 90% of estimated Up to 90% of estimated distributions hedged in distributions hedged for years years six and seven six to ten Equity capi
Slide 32: Hedging profile – income
Hedging profile – income Settlement date Exchange rate August 2007 90.68 February 2008 88.66 August 2008 86.57 February 2009 84.23 August 2009 82.17 February 2010 80.09 August 2010 78.23 February 2011 76.34 August 2011 74.69 February 2012 73.00 August 2012 71.48 February 2013 70.09 August 2013 68.73
Slide 33: Hedging profile – equity capital
Hedging profile – equity capital Settlement AUD interest JPY interest AUD amount JPY amount date rate rate 15 Aug 2011 $27,000,000 ¥2,502,900,000 6.4% 1.2% 15 Aug 2012 $27,000,000 ¥2,502,900,000 6.4% 1.3% 15 Aug 2013 $27,000,000 ¥2,502,900,000 6.3% 1.4% 33
Slide 34: Slide 34
Challenger Kenedix Japan Trust — FY2007 Earnings Presentation on 6ix