Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Three plus months ago I wrote about <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a>'s proposed restructuring Scheme in <a href="https://www.smartkarma.com/insights/capitaland-capl-sp-restructuring-is-big-but-still-vague-lots-of-fine-print-to-read" target="_blank" data-smartkarma-citation="insights:49463" rel="noopener">Capitaland (CAPL SP) Restructuring Is Big But Still Vague. Lots of Fine Print to Read.</a>The proposed construct was complicated, and difficult to value, and required reading a lot of fine print, only some of which we had available. Little did I know how much fine print there would be. Late Friday night Capitaland <a href="https://investor.capitaland.com/newsroom/20210716_203319_C31_W6Z3Q02B78EAPQP3.1.pdf" target="_blank" rel="noopener">announced</a> it had received SGX-ST approval to list <a href="https://www.smartkarma.com/entities/capitaland-investment-management" target="_blank" data-smartkarma-citation="entities:33774:1" rel="noopener">Capitaland Investment Management (CAPINVEST SP)</a>. Saturday night, Capitaland released its <a href="https://investor.capitaland.com/misc/20210717_1143_SchemeDocument.pdf" target="_blank" rel="noopener">Scheme Document</a>. It is 922 pages of fine print. There is an <a href="https://links.sgx.com/FileOpen/SCR21050093AmazonIntroDoc.ashx?App=Announcement&amp;FileID=675106" target="_blank" rel="noopener">Introductory Document</a> which is shorter. It is 744 pages. There is also a brief 8-page <a href="https://links.sgx.com/FileOpen/17072021CapitaLand%20to%20seek%20Shareholders%20approval%20of%20proposed%20restructuring.ashx?App=Announcement&amp;FileID=675108" target="_blank" rel="noopener">press release</a> and an <a href="https://links.sgx.com/FileOpen/CL_Despatch_Notices_Announcement.ashx?App=Announcement&amp;FileID=675107" target="_blank" rel="noopener">Announcement of the Scheme Meeting</a>.The deal as announced at the time is the same now. We have more timing details. The restructuring involves the controlling holder of <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a> (CLA Real Estate Holdings - ultimately that is Temasek) buying out the real estate development business of Capitaland in return for S$0.951/share of cash and 0.155* units/share of <a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105:1" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> where the parent's stake will fall. <div class="content-remarks">* the CICT distribution is actually 0.1546727 shares of CICT per share of Capitaland, but fractional entitlements will be disregarded so using 0.155 is probably fine</div>Investors who own CAPL, assuming that the 10 August EGM approves the deal, will get shares in Capitaland Investment ("CLI") which is a kind of SpinCo, the cash, and the CICT units. The Value of that consideration as per the Scheme Document is S$4.102/share with the idea that the CLI portion itself will have a per-share Value of 1.0x NAV which will be S$2.823/share. Importantly, that is a pro-forma NAV as per 31 December 2020. The Scheme Document itself contains an Independent Financial Advisor letter to the Independent Directors which comes to the conclusion that the Assessed Value of the Consideration was S$4.56-4.99/share, which was well above the S$4.102/share in the document, coming to the conclusion that it is "fair and reasonable". Given that the value of the 0.155 shares of is S$0.3248 per Capitaland share (though assessed value is slightly higher), and the cash is unchanging at S$0.951/share, that means the major difference between S$4.102/share and S$4.56-4.99/share is the idea that CLI is worth S$3.19-S$3.62/share rather than S$2.823/share (the difference here is the FY20 dividend).That's where the rubber hits the road. So we take a closer look below the fold.

Three plus months ago I wrote about Capitaland (CAPL SP)'s proposed restructuring Scheme in Capitaland (CAPL SP) Restructuring Is Big But Still Vague. Lots of Fine Print to Read.The proposed construct was complicated, and difficult to value, and required reading a lot of fine print, only some of which we had available. Little did I know how much fine print there would be. Late Friday night Capitaland announced it had received SGX-ST approval to list Capitaland Investment Management (CAPINVEST SP). Saturday night, Capitaland released its Scheme Document. It is 922 pages of fine print. There is an Introductory Document which is shorter. It is 744 pages. There is also a brief 8-page press release and an Announcement of the Scheme Meeting.The deal as announced at the time is the same now. We have more timing details. The restructuring involves the controlling holder of Capitaland (CAPL SP) (CLA Real Estate Holdings - ultimately that is Temasek) buying out the real estate development business of Capitaland in return for S$0.951/share of cash and 0.155* units/share of Capitaland Integrated Commercial Trust (CICT SP) where the parent's stake will fall. * the CICT distribution is actually 0.1546727 shares of CICT per share of Capitaland, but fractional entitlements will be disregarded so using 0.155 is probably fineInvestors who own CAPL, assuming that the 10 August EGM approves the deal, will get shares in Capitaland Investment ("CLI") which is a kind of SpinCo, the cash, and the CICT units. The Value of that consideration as per the Scheme Document is S$4.102/share with the idea that the CLI portion itself will have a per-share Value of 1.0x NAV which will be S$2.823/share. Importantly, that is a pro-forma NAV as per 31 December 2020. The Scheme Document itself contains an Independent Financial Advisor letter to the Independent Directors which comes to the conclusion that the Assessed Value of the Consideration was S$4.56-4.99/share, which was well above the S$4.102/share in the document, coming to the conclusion that it is "fair and reasonable". Given that the value of the 0.155 shares of is S$0.3248 per Capitaland share (though assessed value is slightly higher), and the cash is unchanging at S$0.951/share, that means the major difference between S$4.102/share and S$4.56-4.99/share is the idea that CLI is worth S$3.19-S$3.62/share rather than S$2.823/share (the difference here is the FY20 dividend).That's where the rubber hits the road. So we take a closer look below the fold. 

Capitaland Restructuring - Be Careful Not to Price In the NEXT Restructuring Too Soon

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

Equity Bottom-Up

The ban on dining-in as part of the stricter measures by the Singapore government starting today until next month has caused some fears in the market and ComfortDelgro is not spared. Singapore is on target to reach 2/3 of the country fully vaccinated by the 9th of Aug 2021 during the National Day hence there should be some restrictions easing as the Singapore government has to open the economy at some stage which means more mobility and reinstatement of dining-in among others. The government has mentioned that Singapore will live alongside COVID-19 as it expects to shift from pandemic to endemic. 
While mall operators such as <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a> and <a href="https://www.smartkarma.com/entities/city-developments-ltd" target="_blank" data-smartkarma-citation="entities:57:1" rel="noopener">City Developments (CIT SP)</a> have to give some form of rent relief to their tenants, <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a>does not need to give relief to its drivers and mobility does not seem to drastically decrease. Investors should expect some restrictions on easing measures during the National Day period that will lift <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> share price. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/219/946/original/image_98050974441626926957065.png?1626926957" class="editor-image img-responsive" data-smartkarma-image-id="219946"></figure>
<div class="content-remarks">
source: analyst
</div>

The ban on dining-in as part of the stricter measures by the Singapore government starting today until next month has caused some fears in the market and ComfortDelgro is not spared. Singapore is on target to reach 2/3 of the country fully vaccinated by the 9th of Aug 2021 during the National Day hence there should be some restrictions easing as the Singapore government has to open the economy at some stage which means more mobility and reinstatement of dining-in among others. The government has mentioned that Singapore will live alongside COVID-19 as it expects to shift from pandemic to endemic. 
While mall operators such as Capitaland (CAPL SP) and City Developments (CIT SP) have to give some form of rent relief to their tenants, Comfortdelgro Corp (CD SP)does not need to give relief to its drivers and mobility does not seem to drastically decrease. Investors should expect some restrictions on easing measures during the National Day period that will lift Comfortdelgro Corp (CD SP) share price. 


source: analyst


ComfortDelgro (CD): Buy On (Temp) Weakness

Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55" rel="noopener">Capitaland (CAPL SP)</a> restructuring plan is deemed 'fair and reasonable'</h3><ul><li>CAPL proposed to split its business into a privately held real estate development arm, CapitaLand Investment (CLI), which would become the largest real estate investment manager (REIM) on the Singapore bourse, with pro forma real estate AUM of ~S$115bn as at 31De20. Under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage, as the pro forma net debt-to-equity ratio of 0.56 times for CLI, against CAPL’s net debt to equity of 0.68 times as at 31Dec20</li><li>Evercore Asia, the IFA, has called the value of the deal fair and reasonable from a financial point of view, as of the latest practicable date and shareholders can also choose to sell their shares on the open market, if they can get a higher price</li><li>The implied consideration represents a premium over the volume-weighted average price up to date of the restructuring announcement. The implied value in the deal includes both a consideration of S$4.102/share and the FY20 dividend for those who held shares by 4May21. CAPL will hold an EGM and a scheme meeting on 10Aug21 for shareholders to decide on the planned transaction.</li></ul>

SingaporeCapitaland (CAPL SP) restructuring plan is deemed 'fair and reasonable'CAPL proposed to split its business into a privately held real estate development arm, CapitaLand Investment (CLI), which would become the largest real estate investment manager (REIM) on the Singapore bourse, with pro forma real estate AUM of ~S$115bn as at 31De20. Under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage, as the pro forma net debt-to-equity ratio of 0.56 times for CLI, against CAPL’s net debt to equity of 0.68 times as at 31Dec20Evercore Asia, the IFA, has called the value of the deal fair and reasonable from a financial point of view, as of the latest practicable date and shareholders can also choose to sell their shares on the open market, if they can get a higher priceThe implied consideration represents a premium over the volume-weighted average price up to date of the restructuring announcement. The implied value in the deal includes both a consideration of S$4.102/share and the FY20 dividend for those who held shares by 4May21. CAPL will hold an EGM and a scheme meeting on 10Aug21 for shareholders to decide on the planned transaction.

ASEAN Builder's Scoop (19Jul21) - CAPL Restructuring Plan Fair and Reasonable

<h2>Singapore</h2>
<h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 141.25pt;">
 
</td>
<td style="width: 141.2pt;">
SPHREIT
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Period
</td>
<td style="width: 141.2pt;">
3Q21
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Gross Revenue (S$ m)
</td>
<td style="width: 141.2pt;">
69.6 (+82.8% YoY)
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
NPI (S$ m)
</td>
<td style="width: 141.2pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
DPU (S$ c)
</td>
<td style="width: 141.2pt;">
1.38 (+176.0% YoY)
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
NAV per Unit (S$)
</td>
<td style="width: 141.2pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
P/B (x)
</td>
<td style="width: 141.2pt;">
1.02 (Based on 2Q21 NAV)
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Occupancy (%)
</td>
<td style="width: 141.2pt;">
98.4
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Reversion (%)
</td>
<td style="width: 141.2pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Gearing (%)
</td>
<td style="width: 141.2pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Cost of Debt (%)
</td>
<td style="width: 141.2pt;">
1.86
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
1 Yr Fwd Yield (%)
</td>
<td style="width: 141.2pt;">
5.62
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Debt Hedged (%)
</td>
<td style="width: 141.2pt;">
58
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Target Price
</td>
<td style="width: 141.2pt;">
NA
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
Rating
</td>
<td style="width: 141.2pt;">
NA
</td>
</tr>
</tbody>
</table>

Singapore
SREITs results in a glance (see detailed spreadsheet and calendar attached)




 


SPHREIT




Period


3Q21




Gross Revenue (S$ m)


69.6 (+82.8% YoY)




NPI (S$ m)


Not Disclosed




DPU (S$ c)


1.38 (+176.0% YoY)




NAV per Unit (S$)


Not Disclosed




P/B (x)


1.02 (Based on 2Q21 NAV)




Occupancy (%)


98.4




Reversion (%)


Not Disclosed




Gearing (%)


Not Disclosed




Cost of Debt (%)


1.86




1 Yr Fwd Yield (%)


5.62




Debt Hedged (%)


58




Target Price


NA




Rating


NA





ASEAN Builder's Scoop (13Jul21) - SPHREIT No Mention of Rebates

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

CTOS Digital (CTOS) aims to raise up to US$291m via its Malaysian IPO. It is majority owned by Creador, a PE firm. CTOS is an investment holding whose subsidiaries are principally involved in the business of credit reporting, digital software related services, software development, outsourcing and training services and investment holding. CTOS was the largest credit reporting agency (CRA) in Malaysia with an estimated market share in terms of revenue of 71.2% in 2020 according to the IMR Report. Its associate, Experian, was the second largest credit reporting agency (CRA) in Malaysia, with an estimated market share in terms of revenue of 17.5%.We covered most aspects of the deal in our earlier note, <a href="https://www.smartkarma.com/insights/ctos-digital-pre-ipo-credit-where-credit-s-due" target="_blank" rel="noopener">CTOS Digital Pre-IPO - Credit where credit’s due</a>.In this note, we will run the deal through our ECM framework and talk about the deal dynamics.

CTOS Digital (CTOS) aims to raise up to US$291m via its Malaysian IPO. It is majority owned by Creador, a PE firm. CTOS is an investment holding whose subsidiaries are principally involved in the business of credit reporting, digital software related services, software development, outsourcing and training services and investment holding. CTOS was the largest credit reporting agency (CRA) in Malaysia with an estimated market share in terms of revenue of 71.2% in 2020 according to the IMR Report. Its associate, Experian, was the second largest credit reporting agency (CRA) in Malaysia, with an estimated market share in terms of revenue of 17.5%.We covered most aspects of the deal in our earlier note, CTOS Digital Pre-IPO - Credit where credit’s due.In this note, we will run the deal through our ECM framework and talk about the deal dynamics.

CTOS Digital IPO - Market Leader, Strong PE Record and Cornerstone

Singapore

CapitaLand Limited is a real estate company focused on investment holding. The Company and its subsidiaries are principally engaged in investment holding, real estate development, investment in real estate financial products and real estate assets, investment advisory and management services, as well as the management of serviced residences.

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Capitaland (CAPL SP)

Capitaland Restructuring - Be Careful Not to Price In the NEXT Restructuring Too Soon

Capitaland proposed a restructuring where parent CLA will buy the development biz, and spin out to investors a kind of large virtually-stapled...

Travis Lundy

ComfortDelgro (CD): Buy On (Temp) Weakness

Capitaland and City Dev are to provide rent relief to their tenants, Comfort does not need to give relief to its drivers, and SG mobility rate is...

Henry Soediarko

ASEAN Builder's Scoop (19Jul21) - CAPL Restructuring Plan Fair and Reasonable

CAPL restructuring plan fair and reasonable; MPI restructures logistics biz; AWC to invest THB100bn in mixed-use developments; Indo extends tax...

SCCM Asia Research

ASEAN Builder's Scoop (13Jul21) - SPHREIT No Mention of Rebates

SPHREIT no mention of rebates; CAPL opens RC the Bund Shanghai; LMRT extends mall closure in Medan; SLI plans for 3bn shares follow-on offer; 2Q21...

SCCM Asia Research

CTOS Digital IPO - Market Leader, Strong PE Record and Cornerstone

CTOS Digital (CTOS) aims to raise up to US$291m via its Malaysian IPO. It is majority owned by Creador, a PE firm. CTOS is the largest credit...

Sumeet Singh

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