SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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As far back as he can remember, the twin touchstones of Paul Tham’s life have been wisdom and learning. 
Growing up, a familiar mantra was one expounded by the Book of Proverbs in the Bible – “Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding”. 
“My godfather taught me the importance of wisdom and understanding,” the CEO of the manager of SGX-listed Keppel REIT recalled. “Both are tied to two key skills – the willingness to learn, as well as the ability to learn continuously – and involve lots of hard work.” 
Driven by a passion to build and create, Tham began his career as a structural engineer in New York, after graduating with a Bachelor of Science degree in Civil &amp; Environmental Engineering from Cornell University. From for-profit buildings, he moved to non-profit work, which included the construction of school and church buildings. 
“I was picking up different skills every day,” recalled Tham, who also holds a Masters in Business Administration from Singapore Management University. 
“In one of the volunteer projects to build a school in upstate New York, we ended up doing most of the construction work ourselves – driving forklifts and operating small excavators. That was one of the most satisfying projects I was involved in.” 
His next stop – Bain &amp; Company. In his role as management consultant, Tham worked with multinational companies in Asia Pacific on a wide range of functions, including financial performance management and growth strategies. There, he experienced a steep learning curve. 
“Management consulting teaches you to learn continuously. You’re working on new projects, reading research reports, and asking questions all the time. You have to work hard to pick up knowledge on new industries and markets constantly,” he added. 
“And the fastest way to learn is to tap on the expertise and experience of others. The advantage is immediate – you gain wisdom from someone else’s experience and learning, which you can then apply to your own life and work.” 
In 2014, Tham joined Keppel Corporation’s Group Strategy &amp; Development unit, where he played a key role in the formation of Keppel Capital, eventually becoming Keppel Capital’s Chief Financial Officer. The 38-year-old was appointed Deputy Chief Executive Officer of the manager of Keppel REIT in 2018, and assumed his current appointment as CEO a year later. Portfolio Optimisation 
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts across the region. It has the objective of generating stable income and long-term growth for unitholders by owning and investing in a portfolio of quality income-producing commercial real estate and real estate-related assets in Singapore and pan-Asia. 
The REIT has assets under management of approximately S$8 billion in Singapore, the key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul in South Korea. 
Keppel REIT is sponsored by Keppel Land Ltd, and managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital – Asia’s premier asset manager with a diversified, global portfolio in real estate, infrastructure and data centre properties. 
During his two years in Keppel REIT, Tham has implemented key strategies to put the REIT on a steady growth trajectory. 
The first is portfolio optimisation, which allows the REIT to achieve long-term sustainable returns for its unitholders. This includes capturing value through the divestment of lower yielding assets, which in turn increases the manager’s financial flexibility to fund growth through reinvestments, continue its unit buyback programme, distribute capital gains, or pare down debt. 
“Portfolio optimisation for us is really to improve income resilience and portfolio yield. Over the last two years, we’ve divested about S$1.1 billion worth of assets,” Tham said, pointing to the paring of a 20% stake in Ocean Financial Centre in December 2018, the purchase of Seoul’s T Tower in May 2019 – marking the REIT’s first foray into South Korea – and the sale of Bugis Junction Towers last November. 
“The focus is to enhance DPU, and if you look at our recent results, it seems to be working, with Keppel REIT seeing the first year-on-year increase in DPU in 2019 after five years of decline,” he noted, referring to distributions per unit, a metric closely watched by unitholders. 
For the year ended 31 December 2019, Keppel REIT’s DPU edged higher to 5.58 Singapore cents from 5.56 cents the previous year. Between 2013 and 2018, its DPU had registered year-on-year declines. 
The second prong of Tham’s strategy involves boosting the REIT’s capital efficiency by managing both debt and equity. In mid-2018, Keppel REIT became the first REIT in Singapore to run a DPU-accretive, unit buyback program. As at end-2019, the REIT had purchased and cancelled 95.3 million units. 
“We’ve seen the benefits in our first-half 2020 financial results, where distributable income was largely similar, but DPU rose due to a smaller unit base.” 
The REIT has also reduced its overall cost of debt. “We’ve restructured some of our loans, launched convertible bonds, all in an effort to push down borrowing cost,” he added. 
As at 30 June 2020, all the REIT’s 2020 loans have been refinanced. All-in interest rate was also lower at 2.48% per annum versus 2.86% for the same period last year, while aggregate leverage was 36.3%, with a weighted average term to maturity of 3.6 years. Interest cover stood at 3.5 times, with 79% of its borrowings pegged to fixed rates. Resilient and Stable 
Looking ahead, Keppel REIT will remain a Singapore-centric REIT, Tham said. About 80% of its assets under management (AUM) is in Singapore’s prime Central Business District (CBD). 
“There will be a shift over time as we raise our overseas exposure, such as in Australia and South Korea, but it will be marginal, for example, lifting it to 25%, or even 30%, from 20%.” 
And an overseas footprint has boosted resilience. “Investing in assets across Australia and South Korea enhances our ability to deliver sustainable returns over time through changing property cycles in these different markets,” he said. 
Australian leases, which tend to stretch five to 10 years versus Singapore’s three to five years, also provide added support. “These longer leases with annual rental escalations offer more stability, and increase the REIT’s ability to grow DPU, even if one market is experiencing a downcycle,” he added. 
Meanwhile, the coronavirus outbreak has created headwinds and offered meaningful lessons, Tham noted. 
“COVID-19 has been challenging for retail and hospitality assets, but for an office landlord like us with a small retail component, there’s been minimal impact,” he said. “Nonetheless, there’s a fair amount of uncertainty due to the global recession and rising geopolitical tensions, so our main focus is proactive engagement with our tenants.” 
At one end of the spectrum, technology-related tenants are still expanding, with their growth fuelled by digitalisation trends that accelerated in the wake of the pandemic. At the other end, hospitality and travel-related businesses are struggling. 
“From a leasing standpoint, we try to accommodate their requirements as much as possible – making sure additional space is available for those who need it, and being flexible on lease negotiations with others to retain tenants in our buildings.” 
As at 30 June 2020, Keppel REIT’s tenant support measures stood at an estimated S$12.5 million. These include the full pass-through of property tax rebates and cash grants from the Singapore government. It has also allowed S$1.6 million of rents to be deferred. 
Its portfolio performance remains bolstered by a high committed occupancy rate of 98.6%, as well as long weighted average lease expiry of about 4.6 years and 6.5 years for the overall portfolio and top 10 tenants respectively. For the first six months of 2020, the REIT had a tenant retention rate of 71%. Focus on Future-Proofing 
Looking ahead, future-proofing the REIT’s commercial spaces is key, Tham said. 
“We need to ensure our buildings have the best-in-class infrastructure, such as improving indoor air quality with advanced filtration systems, boosting standards of cleanliness, and using technology to reduce manpower requirements and human interactions,” he added. 
This can be seen from its robot – RoboGuard – that patrols the premises of Ocean Financial Centre to enforce safe-distancing measures. 
“We’re also harnessing technology and automation for other key areas, such as lifts, turnstiles and toilets, and exploring the use of contactless doors within our buildings.” 
Longer term, how tenants use their office space will also evolve, and Keppel REIT needs to stay ahead of such emerging trends, Tham said. 
“Physical offices will remain a necessity, although the form and functions of the office will evolve. Many firms will likely incorporate work-from-home protocols in their future planning. And employees and tenants will want more flexibility from their office space going forward,” he added. 
“Some companies may need less space, but many functions will still require space for social interaction, client engagements and collaborations, especially if you’re a customer-facing business or in the creative industry.” 
There may also be a reversal of densification. “Space for each employee may be increased to incorporate social distancing within an office layout, reversing the trend of higher density over the last two decades,” he added. 
The resulting impact on office demand, therefore, will likely be a measured one, as tenants re-assess their needs along with the terms of their existing leases, which are typically three to five years long. 
“It will become more important to have the ‘right’ office space. If companies reduce their footprint, they will be able to pay more for Grade A premium space, and demand top-notch infrastructure – buildings that are well-networked, well-located, with high hygiene standards,” Tham pointed out. 
In tandem with these considerations, the repositioning of assets has emerged, and will continue to gain momentum. “At the end of the day, owning the right assets will be instrumental to landlords surviving, and thriving,” he added. 
There’s also the potential for supply deferment, as ongoing new projects may be delayed by social distancing restrictions at construction sites. “If demand for commercial buildings moves down slightly, but at the same time, supply moves down as well, net-net, the sector could remain relatively stable over time.” 
Despite the evolving industry, Tham sleeps like a log. “Having three young kids at home means I can fall asleep in a heartbeat – nothing keeps me awake!” laughed the father of two boys and a girl, aged 10 months to nine years. 
“But seriously, to be able to stay worry-free, all the credit goes to my team – they’re doing a really great job,” he said. “Over the years, I have learnt more from them than they from me.” Keppel REIT 
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts pan‐Asia. Keppel REIT’s objective is to generate stable income and long‐term growth for unitholders by owning and investing in a portfolio of quality income‐producing commercial real estate and real estate‐related assets in Singapore and pan‐Asia. The REIT has assets under management of approximately S$8 billion in Singapore, key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul, South Korea. Keppel REIT is sponsored by Keppel Land Ltd, one of Asia's leading property companies. It is managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital Holdings Pte Ltd. Keppel Capital is a premier asset manager in Asia with a diversified portfolio in real estate, infrastructure and data centre properties in key global markets.

 
The company website is: <a href="www.keppelreit.com">www.keppelreit.com</a>. 
Click <a href="https://www.sgx.com/securities/equities/K71U">here</a> for the company's StockFacts page. 
For the six months ended 30 June 2020 financial results, click <a href="https://links.sgx.com/FileOpen/Keppel%20REIT%202Q20%20Financial%20Results.ashx?App=Announcement&amp;FileID=624206">here</a>. 
 

About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="///C:/Users/tanje/Desktop/Working%20Files/kopi-C/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    KeppelREIT-CEO


As far back as he can remember, the twin touchstones of Paul Tham’s life have been wisdom and learning.  
Growing up, a familiar mantra was one expounded by the Book of Proverbs in the Bible – “Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding”.  
“My godfather taught me the importance of wisdom and understanding,” the CEO of the manager of SGX-listed Keppel REIT recalled. “Both are tied to two key skills – the willingness to learn, as well as the ability to learn continuously – and involve lots of hard work.”  
Driven by a passion to build and create, Tham began his career as a structural engineer in New York, after graduating with a Bachelor of Science degree in Civil &amp; Environmental Engineering from Cornell University. From for-profit buildings, he moved to non-profit work, which included the construction of school and church buildings.  
“I was picking up different skills every day,” recalled Tham, who also holds a Masters in Business Administration from Singapore Management University.  
“In one of the volunteer projects to build a school in upstate New York, we ended up doing most of the construction work ourselves – driving forklifts and operating small excavators. That was one of the most satisfying projects I was involved in.”  
His next stop – Bain &amp; Company. In his role as management consultant, Tham worked with multinational companies in Asia Pacific on a wide range of functions, including financial performance management and growth strategies. There, he experienced a steep learning curve.  
“Management consulting teaches you to learn continuously. You’re working on new projects, reading research reports, and asking questions all the time. You have to work hard to pick up knowledge on new industries and markets constantly,” he added.  
“And the fastest way to learn is to tap on the expertise and experience of others. The advantage is immediate – you gain wisdom from someone else’s experience and learning, which you can then apply to your own life and work.”  
In 2014, Tham joined Keppel Corporation’s Group Strategy &amp; Development unit, where he played a key role in the formation of Keppel Capital, eventually becoming Keppel Capital’s Chief Financial Officer. The 38-year-old was appointed Deputy Chief Executive Officer of the manager of Keppel REIT in 2018, and assumed his current appointment as CEO a year later.  Portfolio Optimisation  
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts across the region. It has the objective of generating stable income and long-term growth for unitholders by owning and investing in a portfolio of quality income-producing commercial real estate and real estate-related assets in Singapore and pan-Asia.  
The REIT has assets under management of approximately S$8 billion in Singapore, the key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul in South Korea.  
Keppel REIT is sponsored by Keppel Land Ltd, and managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital – Asia’s premier asset manager with a diversified, global portfolio in real estate, infrastructure and data centre properties.  
During his two years in Keppel REIT, Tham has implemented key strategies to put the REIT on a steady growth trajectory.  
The first is portfolio optimisation, which allows the REIT to achieve long-term sustainable returns for its unitholders. This includes capturing value through the divestment of lower yielding assets, which in turn increases the manager’s financial flexibility to fund growth through reinvestments, continue its unit buyback programme, distribute capital gains, or pare down debt.  
“Portfolio optimisation for us is really to improve income resilience and portfolio yield. Over the last two years, we’ve divested about S$1.1 billion worth of assets,” Tham said, pointing to the paring of a 20% stake in Ocean Financial Centre in December 2018, the purchase of Seoul’s T Tower in May 2019 – marking the REIT’s first foray into South Korea – and the sale of Bugis Junction Towers last November.  
“The focus is to enhance DPU, and if you look at our recent results, it seems to be working, with Keppel REIT seeing the first year-on-year increase in DPU in 2019 after five years of decline,” he noted, referring to distributions per unit, a metric closely watched by unitholders.  
For the year ended 31 December 2019, Keppel REIT’s DPU edged higher to 5.58 Singapore cents from 5.56 cents the previous year. Between 2013 and 2018, its DPU had registered year-on-year declines.  
The second prong of Tham’s strategy involves boosting the REIT’s capital efficiency by managing both debt and equity. In mid-2018, Keppel REIT became the first REIT in Singapore to run a DPU-accretive, unit buyback program. As at end-2019, the REIT had purchased and cancelled 95.3 million units.  
“We’ve seen the benefits in our first-half 2020 financial results, where distributable income was largely similar, but DPU rose due to a smaller unit base.”  
The REIT has also reduced its overall cost of debt. “We’ve restructured some of our loans, launched convertible bonds, all in an effort to push down borrowing cost,” he added.  
As at 30 June 2020, all the REIT’s 2020 loans have been refinanced. All-in interest rate was also lower at 2.48% per annum versus 2.86% for the same period last year, while aggregate leverage was 36.3%, with a weighted average term to maturity of 3.6 years. Interest cover stood at 3.5 times, with 79% of its borrowings pegged to fixed rates.  Resilient and Stable  
Looking ahead, Keppel REIT will remain a Singapore-centric REIT, Tham said. About 80% of its assets under management (AUM) is in Singapore’s prime Central Business District (CBD).  
“There will be a shift over time as we raise our overseas exposure, such as in Australia and South Korea, but it will be marginal, for example, lifting it to 25%, or even 30%, from 20%.”  
And an overseas footprint has boosted resilience. “Investing in assets across Australia and South Korea enhances our ability to deliver sustainable returns over time through changing property cycles in these different markets,” he said.  
Australian leases, which tend to stretch five to 10 years versus Singapore’s three to five years, also provide added support. “These longer leases with annual rental escalations offer more stability, and increase the REIT’s ability to grow DPU, even if one market is experiencing a downcycle,” he added.  
Meanwhile, the coronavirus outbreak has created headwinds and offered meaningful lessons, Tham noted.  
“COVID-19 has been challenging for retail and hospitality assets, but for an office landlord like us with a small retail component, there’s been minimal impact,” he said. “Nonetheless, there’s a fair amount of uncertainty due to the global recession and rising geopolitical tensions, so our main focus is proactive engagement with our tenants.”  
At one end of the spectrum, technology-related tenants are still expanding, with their growth fuelled by digitalisation trends that accelerated in the wake of the pandemic. At the other end, hospitality and travel-related businesses are struggling.  
“From a leasing standpoint, we try to accommodate their requirements as much as possible – making sure additional space is available for those who need it, and being flexible on lease negotiations with others to retain tenants in our buildings.”  
As at 30 June 2020, Keppel REIT’s tenant support measures stood at an estimated S$12.5 million. These include the full pass-through of property tax rebates and cash grants from the Singapore government. It has also allowed S$1.6 million of rents to be deferred.  
Its portfolio performance remains bolstered by a high committed occupancy rate of 98.6%, as well as long weighted average lease expiry of about 4.6 years and 6.5 years for the overall portfolio and top 10 tenants respectively. For the first six months of 2020, the REIT had a tenant retention rate of 71%.  Focus on Future-Proofing   
Looking ahead, future-proofing the REIT’s commercial spaces is key, Tham said.  
“We need to ensure our buildings have the best-in-class infrastructure, such as improving indoor air quality with advanced filtration systems, boosting standards of cleanliness, and using technology to reduce manpower requirements and human interactions,” he added.  
This can be seen from its robot – RoboGuard – that patrols the premises of Ocean Financial Centre to enforce safe-distancing measures.  
“We’re also harnessing technology and automation for other key areas, such as lifts, turnstiles and toilets, and exploring the use of contactless doors within our buildings.”  
Longer term, how tenants use their office space will also evolve, and Keppel REIT needs to stay ahead of such emerging trends, Tham said.  
“Physical offices will remain a necessity, although the form and functions of the office will evolve. Many firms will likely incorporate work-from-home protocols in their future planning. And employees and tenants will want more flexibility from their office space going forward,” he added.  
“Some companies may need less space, but many functions will still require space for social interaction, client engagements and collaborations, especially if you’re a customer-facing business or in the creative industry.”  
There may also be a reversal of densification. “Space for each employee may be increased to incorporate social distancing within an office layout, reversing the trend of higher density over the last two decades,” he added.  
The resulting impact on office demand, therefore, will likely be a measured one, as tenants re-assess their needs along with the terms of their existing leases, which are typically three to five years long.  
“It will become more important to have the ‘right’ office space. If companies reduce their footprint, they will be able to pay more for Grade A premium space, and demand top-notch infrastructure – buildings that are well-networked, well-located, with high hygiene standards,” Tham pointed out.  
In tandem with these considerations, the repositioning of assets has emerged, and will continue to gain momentum. “At the end of the day, owning the right assets will be instrumental to landlords surviving, and thriving,” he added.  
There’s also the potential for supply deferment, as ongoing new projects may be delayed by social distancing restrictions at construction sites. “If demand for commercial buildings moves down slightly, but at the same time, supply moves down as well, net-net, the sector could remain relatively stable over time.”  
Despite the evolving industry, Tham sleeps like a log. “Having three young kids at home means I can fall asleep in a heartbeat – nothing keeps me awake!” laughed the father of two boys and a girl, aged 10 months to nine years.  
“But seriously, to be able to stay worry-free, all the credit goes to my team – they’re doing a really great job,” he said. “Over the years, I have learnt more from them than they from me.”   Keppel REIT  
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts pan‐Asia. Keppel REIT’s objective is to generate stable income and long‐term growth for unitholders by owning and investing in a portfolio of quality income‐producing commercial real estate and real estate‐related assets in Singapore and pan‐Asia. The REIT has assets under management of approximately S$8 billion in Singapore, key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul, South Korea. Keppel REIT is sponsored by Keppel Land Ltd, one of Asia's leading property companies. It is managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital Holdings Pte Ltd. Keppel Capital is a premier asset manager in Asia with a diversified portfolio in real estate, infrastructure and data centre properties in key global markets.

 
The company website is: www.keppelreit.com.  
Click here for the company's StockFacts page.  
For the six months ended 30 June 2020 financial results, click here.  
 

About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<div class="content-highlight">
This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.
Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week's relevant discussions in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a>
</div><h3>Macro Insights</h3>In <a href="https://www.smartkarma.com/insights/what-drives-rising-gold-prices" target="_blank" data-smartkarma-citation="insights:42091" rel="noopener">What Drives Rising Gold Prices?,</a> Strategist <a href="https://www.smartkarma.com/profiles/michael-j-howell" target="_blank" data-smartkarma-citation="accounts:2312" rel="noopener">Michael J. Howell</a> analyses driver drivers behind the rising gold price. In <a href="https://www.smartkarma.com/insights/political-pit-stop-aug-20-regime-jitters" target="_blank" data-smartkarma-citation="insights:41483" rel="noopener">Political Pit Stop (Aug'20): Regime Jitters,</a> out Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> revisits the political situation in Thailand and identifies potential pitfalls ahead. <h3>Equity Bottom-Up Insights</h3>In <a href="https://www.smartkarma.com/insights/bank-central-asia-bbca-ij-liability-protection" target="_blank" data-smartkarma-citation="insights:41598" rel="noopener">Bank Central Asia (BBCA IJ) - Liability Protection,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits Indonesia's biggest private bank following a conversation with management. In <a href="https://www.smartkarma.com/insights/kino-indonesia-kino-ij-sanitised-recovery" target="_blank" data-smartkarma-citation="insights:42045" rel="noopener">Kino Indonesia (KINO IJ) - Sanitised Recovery,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits one of Indonesia's less well-covered consumer players after a conversation with management and finds a promising outlook.<a href="https://www.smartkarma.com/entities/kino-indonesia" target="_blank" data-smartkarma-citation="entities:1083:1" rel="noopener"></a>In <a href="https://www.smartkarma.com/insights/procurri-us-ppp-saves-1h20-remains-cheap-at-0-4x-ev-sales-but-no-catalyst" target="_blank" data-smartkarma-citation="insights:42110" rel="noopener">Procurri: US PPP Saves 1H20; Remains Cheap at 0.4x EV/Sales but No Catalyst,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> revisits this IT Hardware player and continues to see the value.<a href="https://www.smartkarma.com/entities/procurri-corporation-limited" target="_blank" data-smartkarma-citation="entities:24110:1" rel="noopener"></a>In <a href="https://www.smartkarma.com/insights/airport-of-thailand-aot-travel-bubble-mof-and-certify-hub" target="_blank" data-smartkarma-citation="insights:42048" rel="noopener">Airport of Thailand (AoT): Travel Bubble, MoF, and Certify Hub,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/henry-soediarko" target="_blank" data-smartkarma-citation="accounts:1006" rel="noopener">Henry Soediarko</a> revisits Thailand's airport operator in light of the country's ever-changing tourism strategy.In <a href="https://www.smartkarma.com/insights/bts-and-bangkok-airways-utapao-brother-in-arms" target="_blank" data-smartkarma-citation="insights:40027" rel="noopener">BTS and Bangkok Airways, UTaPao Brother-In-Arms,</a> our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> comments on <a href="https://www.smartkarma.com/entities/bts-group-holdings-pcl" target="_blank" data-smartkarma-citation="entities:15943:1" rel="noopener">BTS Group Holdings (BTS TB)</a> and <a href="https://www.smartkarma.com/entities/bangkok-airways-co-ltd" target="_blank" data-smartkarma-citation="entities:457:1" rel="noopener">Bangkok Airways (BA TB)</a> after meetings with management. In <a href="https://www.smartkarma.com/insights/siam-commercial-bank-surprising-on-the-upside" target="_blank" data-smartkarma-citation="insights:42161" rel="noopener">Siam Commercial Bank: Surprising on the Upside,</a> banking specialist <a href="https://www.smartkarma.com/profiles/paul-hollingworth" target="_blank" data-smartkarma-citation="accounts:2554" rel="noopener">Paul Hollingworth</a> zeros in on this leading Thai bank.In <a href="https://www.smartkarma.com/insights/temasek-walks-away-from-keppel-deal" target="_blank" data-smartkarma-citation="insights:42047" rel="noopener">Temasek Walks Away from Keppel Deal,</a> events specialist <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> comments on the untimely end to this takeover by Temasek. In <a href="https://www.smartkarma.com/insights/keppel-temasek-pulls-the-partial-offer" target="_blank" data-smartkarma-citation="insights:42059" rel="noopener">Keppel: Temasek Pulls the Partial Offer,</a><a href="https://www.smartkarma.com/profiles/arun-george" target="_blank" data-smartkarma-citation="accounts:1680" rel="noopener">Arun George</a> also comments on Temasek's decision to pull out of this long-standing deal. In <a href="https://www.smartkarma.com/insights/sembcorp-industries-a-simple-story-which-looks-complicated" target="_blank" data-smartkarma-citation="insights:42134" rel="noopener">Sembcorp Industries - A Simple Story Which Looks Complicated,</a><a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> comments on this complicated capital raise. In <a href="https://www.smartkarma.com/insights/sembcorp-marine-rights-decided-and-virtual-ipo-set-still-avoid" target="_blank" data-smartkarma-citation="insights:42076" rel="noopener">Sembcorp Marine Rights Decided And "Virtual IPO" Set (Still Avoid),</a> events specialist attempts to decipher this extremely complicated restructuring. In <a href="https://www.smartkarma.com/insights/b-work-offers-price-upside-and-a-good-dividend-yield" target="_blank" data-smartkarma-citation="insights:42157" rel="noopener">B-WORK: Offers Price Upside and a Good Dividend Yield,</a><a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> initiates coverage on B-WORK with a BUY recommendation based on a target price of Bt12.80.In <a href="https://www.smartkarma.com/insights/advanc-2q20-performance-hindered-by-a-drop-in-arpu" target="_blank" data-smartkarma-citation="insights:42036" rel="noopener">ADVANC:  2Q20 Performance Hindered by a Drop in ARPU,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> report back on <a href="https://www.smartkarma.com/entities/advanced-info-service-pcl" target="_blank" data-smartkarma-citation="entities:947:1" rel="noopener">Advanced Info Service (ADVANC TB)</a> after recent results. In <a href="https://www.smartkarma.com/insights/cbg-trading-on-high-valuation-zone" target="_blank" data-smartkarma-citation="insights:42040" rel="noopener">CBG: Trading on High Valuation Zone,</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> maintain their BUY rating and rollover their target price to THB141 based on 35x FY21E PER (Previous TP is THB110), the average of the Thailand energy drink group. In <a href="https://www.smartkarma.com/insights/asian-2q20-earnings-reached-its-peak" target="_blank" data-smartkarma-citation="insights:42086" rel="noopener">ASIAN: 2Q20 Earnings Reached Its Peak</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> revisit <a href="https://www.smartkarma.com/entities/asian-sea-corp-pcl" target="_blank" data-smartkarma-citation="entities:19827:1" rel="noopener">Asian Seafoods Coldstorage (ASIAN TB)</a> and maintain their ‘SELL’ rating with a new target price at Bt10.3 (from Bt7.2).In <a href="https://www.smartkarma.com/insights/planb-expect-net-loss-in-2q20-to-be-bottom-of-this-year" target="_blank" data-smartkarma-citation="insights:42156" rel="noopener">PLANB: Expect Net Loss in 2Q20 to Be Bottom of This Year,</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> report back on <a href="https://www.smartkarma.com/entities/plan-b-media-pcl" target="_blank" data-smartkarma-citation="entities:24702:1" rel="noopener">Plan B Media (PLANB TB)</a> after a telephone call with management. <h3>Credit Insights</h3>In <a href="https://www.smartkarma.com/insights/aa-reit-s-bond-first-reit-perpetual-in-the-new-normal" target="_blank" data-smartkarma-citation="insights:42049" rel="noopener">AA REIT S$ Bond - First REIT Perpetual in the New Normal</a>, <a href="https://www.smartkarma.com/profiles/lakshmi-iyer-cfa" target="_blank" data-smartkarma-citation="accounts:9363" rel="noopener">Lakshmi Iyer, CFA</a> reports back after a new bond issue from <a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933:1" rel="noopener">AIMS APAC REIT (AAREIT SP).</a><a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933:1" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> issued a perpetual security on August 6th (5.65% SGD125mn deal).  She thinks the deal is interesting for several reasons (timing of the issue, spread on coupon reset, etc.). She does not expect the bond to tighten significantly as it is correctly priced with respect to the senior debt.


This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.
Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week's relevant discussions in ASEAN@Smartkarma
Macro InsightsIn What Drives Rising Gold Prices?, Strategist Michael J. Howell analyses driver drivers behind the rising gold price. In Political Pit Stop (Aug'20): Regime Jitters, out Thai guru Athaporn Arayasantiparb, CFA revisits the political situation in Thailand and identifies potential pitfalls ahead. Equity Bottom-Up InsightsIn Bank Central Asia (BBCA IJ) - Liability Protection, CrossASEAN Insight Provider Angus Mackintosh revisits Indonesia's biggest private bank following a conversation with management. In Kino Indonesia (KINO IJ) - Sanitised Recovery, CrossASEAN Insight Provider Angus Mackintosh revisits one of Indonesia's less well-covered consumer players after a conversation with management and finds a promising outlook.In Procurri: US PPP Saves 1H20; Remains Cheap at 0.4x EV/Sales but No Catalyst, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits this IT Hardware player and continues to see the value.In Airport of Thailand (AoT): Travel Bubble, MoF, and Certify Hub, CrossASEAN Insight Provider Henry Soediarko revisits Thailand's airport operator in light of the country's ever-changing tourism strategy.In BTS and Bangkok Airways, UTaPao Brother-In-Arms, our Thai guru Athaporn Arayasantiparb, CFA comments on BTS Group Holdings (BTS TB) and Bangkok Airways (BA TB) after meetings with management. In Siam Commercial Bank: Surprising on the Upside, banking specialist Paul Hollingworth zeros in on this leading Thai bank.In Temasek Walks Away from Keppel Deal, events specialist Travis Lundy comments on the untimely end to this takeover by Temasek. In Keppel: Temasek Pulls the Partial Offer,Arun George also comments on Temasek's decision to pull out of this long-standing deal. In Sembcorp Industries - A Simple Story Which Looks Complicated,Travis Lundy comments on this complicated capital raise. In Sembcorp Marine Rights Decided And "Virtual IPO" Set (Still Avoid), events specialist attempts to decipher this extremely complicated restructuring. In B-WORK: Offers Price Upside and a Good Dividend Yield,Dr Andrew Stotz, CFA initiates coverage on B-WORK with a BUY recommendation based on a target price of Bt12.80.In ADVANC:  2Q20 Performance Hindered by a Drop in ARPU, our friends at Country Group report back on Advanced Info Service (ADVANC TB) after recent results. In CBG: Trading on High Valuation Zone,Country Group maintain their BUY rating and rollover their target price to THB141 based on 35x FY21E PER (Previous TP is THB110), the average of the Thailand energy drink group. In ASIAN: 2Q20 Earnings Reached Its PeakCountry Group revisit Asian Seafoods Coldstorage (ASIAN TB) and maintain their ‘SELL’ rating with a new target price at Bt10.3 (from Bt7.2).In PLANB: Expect Net Loss in 2Q20 to Be Bottom of This Year,Country Group report back on Plan B Media (PLANB TB) after a telephone call with management. Credit InsightsIn AA REIT S$ Bond - First REIT Perpetual in the New Normal, Lakshmi Iyer, CFA reports back after a new bond issue from AIMS APAC REIT (AAREIT SP).AIMS APAC REIT (AAREIT SP) issued a perpetual security on August 6th (5.65% SGD125mn deal).  She thinks the deal is interesting for several reasons (timing of the issue, spread on coupon reset, etc.). She does not expect the bond to tighten significantly as it is correctly priced with respect to the senior debt.

The Week that Was in ASEAN@Smartkarma - Thai Politics, BCA's +ve Liabilities, and Singapore O&M

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Sembcorp, Keppel, Cathay Pacific, China Conch, BHP, Swire, Huya/Douyu

Travis Lundy

This morning at the <a href="https://www.smartkarma.com/entities/sembcorp-marine-ltd" target="_blank" data-smartkarma-citation="entities:11:1" rel="noopener">Sembcorp Marine (SMM SP)</a> Extraordinary General Meeting, SMM shareholders <a href="https://links.sgx.com/FileOpen/EGM%20announcement.ashx?App=Announcement&amp;FileID=626984" target="_blank" rel="noopener">voted to approve</a> both the Rights Offering and the Waiver for the SCI Distribution (because of the transfer of more than 30% of shares to Temasek because of the SCI Distribution, and possibly more than 50% of SMM shares owned because of Temasek's backstop of the Rights Shares not purchased by non-SCI shareholders). The <a href="https://www.smartkarma.com/entities/sembcorp-industries-ltd" target="_blank" data-smartkarma-citation="entities:1087:1" rel="noopener">Sembcorp Industries (SCI SP)</a> EGM <a href="https://links.sgx.com/FileOpen/Sembcorp-Results%20of%20the%20EGM%20on%2011%20August%202020.ashx?App=Announcement&amp;FileID=626983" target="_blank" rel="noopener">approved</a> the Distribution not long after it started 90 minutes later. <div class="content-highlight">
We're done. The new world order for Singapore O&amp;M starts today. 
I call this a "Virtual Rolling IPO" because Sembcorp Marine's Market Cap today is S$732mm. It was 60% higher the day after the announcement. 
This IPO has been "pricing" itself, and re-pricing itself, for more than two months - since shares in both SMM and SCI started trading again on 9 June 2020. 
The structure of the Sembcorp Marine rights offering looks OK optically, but there is a non-negligible possibility in my mind that it could look less OK in the coming days. 
Interestingly, the "Rolling IPO Pricing" goes on via the SCI shares and SMM shares continually for another month. 
</div>Sembcorp Marine shares will trade WITH rights today and tomorrow and will trade EX-rights on 13 August. SMM Rights themselves are expected to trade from the 19 August 2020 through the 27 August. Decision and Payment will be due 2 Sep and the Rights shares will Weirdly, the new world of what seemed to be almost inevitable consolidation between Sembcorp Marine and <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a>'s Keppel O&amp;M business may have been put on hold as Temasek yesterday walked away from its Pre-Conditional Partial Offer (as discussed in <a href="https://www.smartkarma.com/insights/temasek-walks-away-from-keppel-deal" target="_blank" data-smartkarma-citation="insights:42047" rel="noopener">Temasek Walks Away from Keppel Deal</a>).More below.<hr>Prior insights in the series are: <a href="https://www.smartkarma.com/insights/sembcorp-marine-and-sci-a-gloriously-messy-recap-and-de-merger-big-win-for-sci" target="_blank" data-smartkarma-citation="insights:40153" rel="noopener">SembCorp Marine and SCI - A Gloriously Messy Recap and De-Merger - Big Win for SCI</a>  <a href="https://www.smartkarma.com/insights/sembcorp-marine-rights-offer-cast-away" target="_blank" data-smartkarma-citation="insights:40164" rel="noopener">Sembcorp Marine Rights Offer - Cast Away</a>  <a href="https://www.smartkarma.com/insights/thinking-about-sembcorp-industries-future-be-bigly-bullish" target="_blank" data-smartkarma-citation="insights:40809" rel="noopener">Thinking About Sembcorp Industries' Future - Be Bigly Bullish</a>  <a href="https://www.smartkarma.com/insights/sembcorp-restructuring-details-timing-announced-the-arithmetic-is-compelling" target="_blank" data-smartkarma-citation="insights:41504" rel="noopener">Sembcorp Restructuring Details &amp; Timing Announced - The Arithmetic Is Compelling</a>

This morning at the Sembcorp Marine (SMM SP) Extraordinary General Meeting, SMM shareholders voted to approve both the Rights Offering and the Waiver for the SCI Distribution (because of the transfer of more than 30% of shares to Temasek because of the SCI Distribution, and possibly more than 50% of SMM shares owned because of Temasek's backstop of the Rights Shares not purchased by non-SCI shareholders). The Sembcorp Industries (SCI SP) EGM approved the Distribution not long after it started 90 minutes later. 
We're done. The new world order for Singapore O&amp;M starts today. 
I call this a "Virtual Rolling IPO" because Sembcorp Marine's Market Cap today is S$732mm. It was 60% higher the day after the announcement. 
This IPO has been "pricing" itself, and re-pricing itself, for more than two months - since shares in both SMM and SCI started trading again on 9 June 2020. 
The structure of the Sembcorp Marine rights offering looks OK optically, but there is a non-negligible possibility in my mind that it could look less OK in the coming days. 
Interestingly, the "Rolling IPO Pricing" goes on via the SCI shares and SMM shares continually for another month. 
Sembcorp Marine shares will trade WITH rights today and tomorrow and will trade EX-rights on 13 August. SMM Rights themselves are expected to trade from the 19 August 2020 through the 27 August. Decision and Payment will be due 2 Sep and the Rights shares will Weirdly, the new world of what seemed to be almost inevitable consolidation between Sembcorp Marine and Keppel Corp (KEP SP)'s Keppel O&amp;M business may have been put on hold as Temasek yesterday walked away from its Pre-Conditional Partial Offer (as discussed in Temasek Walks Away from Keppel Deal).More below.Prior insights in the series are: SembCorp Marine and SCI - A Gloriously Messy Recap and De-Merger - Big Win for SCI  Sembcorp Marine Rights Offer - Cast Away  Thinking About Sembcorp Industries' Future - Be Bigly Bullish  Sembcorp Restructuring Details &amp; Timing Announced - The Arithmetic Is Compelling 

Sembcorp Marine Rights Decided And "Virtual IPO" Set (Still Avoid)

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a> is a diversified conglomerate with its core businesses in property investments and development, offshore &amp; marine (O&amp;M), and infrastructure-based activities. On Monday, Temasek announced that it has invoked the MAC pre-condition and will not proceed with the partial offer. As a reminder on 21 October 2019, Temasek tabled a voluntary pre-conditional cash partial offer to buy an additional 30.6% stake at S$7.35 per share. <div class="content-highlight">We labelled this insight bearish as in the near-term, the share price will be under pressure from the negative sentiment resulting from Temasek’s aborted partial offer and weak trading conditions of the O&amp;M division. As the dust settles after the market digests the news, investors with a longer-term view should look for an entry point at the sub-S$5.00 per share level. </div>

Keppel Corp (KEP SP) is a diversified conglomerate with its core businesses in property investments and development, offshore &amp; marine (O&amp;M), and infrastructure-based activities. On Monday, Temasek announced that it has invoked the MAC pre-condition and will not proceed with the partial offer. As a reminder on 21 October 2019, Temasek tabled a voluntary pre-conditional cash partial offer to buy an additional 30.6% stake at S$7.35 per share. We labelled this insight bearish as in the near-term, the share price will be under pressure from the negative sentiment resulting from Temasek’s aborted partial offer and weak trading conditions of the O&amp;M division. As the dust settles after the market digests the news, investors with a longer-term view should look for an entry point at the sub-S$5.00 per share level. 

Singapore

Keppel Corporation Limited's core businesses are offshore and marine, infrastructure, property investment and development, telecommunications and transportation, energy, and engineering.

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Keppel Corp (KEP SP)

Keppel REIT Repositions for the Future

As far back as he can remember, the twin touchstones of Paul Tham’s life have been wisdom and learning. Growing up, a familiar...

Singapore Exchange Ltd (SGX)

The Week that Was in ASEAN@Smartkarma - Thai Politics, BCA's +ve Liabilities, and Singapore O&M

This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable...

Angus Mackintosh

Last Week in Event SPACE: Sembcorp, Keppel, Cathay Pacific, China Conch, BHP, Swire, Huya/Douyu

Last Week in Event SPACE ... The dynamics here make this entire exercise regarding Sembcorp Marine (SMM SP) effectively a "Virtual IPO" or a...

David Blennerhassett

Sembcorp Marine Rights Decided And "Virtual IPO" Set (Still Avoid)

This morning at the Sembcorp Marine (SMM SP) Extraordinary General Meeting, SMM shareholders voted to approve both the Rights Offering and the...

Travis Lundy

Keppel: Temasek Pulls the Partial Offer

Keppel Corp (KEP SP) is a diversified conglomerate with its core businesses in property investments and development, offshore & marine...

Arun George

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