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

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> 2H22 DPU -4.8% YoY; Robust rent reversions to end the fiscal year</li><li><a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> 1Q22 DPU -9.6% YoY; Rising utilities costs despite steady underlying performance  </li><li><a href="https://www.smartkarma.com/entities/frasers-centrepoint-trust" target="_blank" data-smartkarma-citation="entities:2870" rel="noopener">Frasers Centrepoint Trust (FCT SP)</a> 1H22 DPU +2.3% YoY; Omicron wave tapering shopper traffic</li></ul>

AIMS APAC REIT (AAREIT SP) 2H22 DPU -4.8% YoY; Robust rent reversions to end the fiscal yearESR-REIT (EREIT SP) 1Q22 DPU -9.6% YoY; Rising utilities costs despite steady underlying performance  Frasers Centrepoint Trust (FCT SP) 1H22 DPU +2.3% YoY; Omicron wave tapering shopper traffic

ASEAN Builder's Scoop (27Apr22) - AAREIT Robust Rent Reversions

<ul><li>SCCM | <a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> – Mixed FY21; Office will be key to revival (BUY; TP SGD2.24/share)</li><li>SCCM | <a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> – On a solid organic growth path (BUY; TP S$1.65/Unit)</li><li>SCCM | <a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> – Steady performance with new acquisitions in sight (BUY; TP S$0.55/Unit)</li></ul>

SCCM | Capitaland Integrated Commercial Trust (CICT SP) – Mixed FY21; Office will be key to revival (BUY; TP SGD2.24/share)SCCM | AIMS APAC REIT (AAREIT SP) – On a solid organic growth path (BUY; TP S$1.65/Unit)SCCM | ESR-REIT (EREIT SP) – Steady performance with new acquisitions in sight (BUY; TP S$0.55/Unit)

ASEAN Builder's Scoop (4Feb22) - CICT Office Will Be Key to Revival

<h2>Singapore</h2>
<h3>
<a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> and <a href="https://www.smartkarma.com/entities/ara-logos-logistics-trust" target="_blank" data-smartkarma-citation="entities:937" rel="noopener">ARA LOGOS (ALLT SP)</a> proposed merger to form ESR-LOGOS REIT; DPU accretive for both unitholders</h3>
<ul>
<li>The proposed merger will be effected by way of a Trust Scheme with EREIT acquiring all units of ALLT in exchange for a combination of cash and new units in EREIT. The merger is conditional upon, inter alia, the completion of ESR Cayman (“ESR” or the “Sponsor”) and ARA Asset Management’s merger. ALLT unitholders will receive a scheme consideration of S$0.95 for each ALLT unit comprising 1) the payment of S$0.095 in cash per ALLT unit and the allotment and issue of 1.6765 new EREIT units for each ALLT unit, issued at S$0.51. The total consideration for the proposed merger is ~S$1.4bn based on the Scheme Consideration of S$0.95 for each ALLT unit. Upon completion, the enlarged REIT will be renamed ESR-LOGOS REIT (E-LOG)</li>
<li>Post-merger, E-LOG will continue to be managed by EREIT manager. The shareholding structure of E-LOG will be: Summit Group (12.7%), ESR (10.9%), and public (76.4%). The merger also removes any potential overlapping mandate between EREIT and ALLT</li>
<li>From EREIT’s perspective, the merger is expected to be +5.8% DPU accretive on FY20 proforma basis and -6.4% NAV dilutive. From ALLT perspective, the merger is +8.2% DPU accretive on FY20 proforma basis and +2.2% NAV accretive as well</li>
<li>The effects of the merger: 1) Total assets will rise to 87 properties (S$5.4bn) with 2.2m sqft NLA and 437 tenants; 2) ~66% of portfolio exposure is in the new economy (logistics and hi-tech); 3) Rising occupancy to 94.5% (from 91.7%); 4) Increased WALE to 3.2yrs (from 2.8yrs); 5) Extend land lease expiry to 37.9yrs (from 31yrs); 6) lower cost of debt to 2.84% (from 3.24%) with longer WADE; and 7) +1.6x larger debt headroom</li>
<li>Unitholders’ approval for EREIT is required for both merger and issuance of units (&gt;50% of total number votes), while approval for ALLT are required for the scheme (&gt;50% in numbers, &gt;75% in value) and amendment of deed (&gt;=75%). Ivanhoe Cambridge Asia (holder of 8.74% of ALLT) has given an irrevocable undertaking to vote in favour of all resolutions</li>
<li>EREIT is trading at 1.17x P/B and 6.7% FY21E yield, while ALLT is trading at 1.39x P/B and 5.5% FY21E yield</li>
<li>The financing scheme and timeline is detailed on table below (illustrative purpose).</li>
</ul>

Singapore

ESR-REIT (EREIT SP) and ARA LOGOS (ALLT SP) proposed merger to form ESR-LOGOS REIT; DPU accretive for both unitholders

The proposed merger will be effected by way of a Trust Scheme with EREIT acquiring all units of ALLT in exchange for a combination of cash and new units in EREIT. The merger is conditional upon, inter alia, the completion of ESR Cayman (“ESR” or the “Sponsor”) and ARA Asset Management’s merger. ALLT unitholders will receive a scheme consideration of S$0.95 for each ALLT unit comprising 1) the payment of S$0.095 in cash per ALLT unit and the allotment and issue of 1.6765 new EREIT units for each ALLT unit, issued at S$0.51. The total consideration for the proposed merger is ~S$1.4bn based on the Scheme Consideration of S$0.95 for each ALLT unit. Upon completion, the enlarged REIT will be renamed ESR-LOGOS REIT (E-LOG)
Post-merger, E-LOG will continue to be managed by EREIT manager. The shareholding structure of E-LOG will be: Summit Group (12.7%), ESR (10.9%), and public (76.4%). The merger also removes any potential overlapping mandate between EREIT and ALLT
From EREIT’s perspective, the merger is expected to be +5.8% DPU accretive on FY20 proforma basis and -6.4% NAV dilutive. From ALLT perspective, the merger is +8.2% DPU accretive on FY20 proforma basis and +2.2% NAV accretive as well
The effects of the merger: 1) Total assets will rise to 87 properties (S$5.4bn) with 2.2m sqft NLA and 437 tenants; 2) ~66% of portfolio exposure is in the new economy (logistics and hi-tech); 3) Rising occupancy to 94.5% (from 91.7%); 4) Increased WALE to 3.2yrs (from 2.8yrs); 5) Extend land lease expiry to 37.9yrs (from 31yrs); 6) lower cost of debt to 2.84% (from 3.24%) with longer WADE; and 7) +1.6x larger debt headroom
Unitholders’ approval for EREIT is required for both merger and issuance of units (&gt;50% of total number votes), while approval for ALLT are required for the scheme (&gt;50% in numbers, &gt;75% in value) and amendment of deed (&gt;=75%). Ivanhoe Cambridge Asia (holder of 8.74% of ALLT) has given an irrevocable undertaking to vote in favour of all resolutions
EREIT is trading at 1.17x P/B and 6.7% FY21E yield, while ALLT is trading at 1.39x P/B and 5.5% FY21E yield
The financing scheme and timeline is detailed on table below (illustrative purpose).


<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> to acquire Woolworths headquarters at 5.17% NPI yield; Accretive to DPU by 4.7%</h3><ul><li>AAREIT has acquired Woolworths headquarters for a purchase consideration of AUD463.25m (~S$454.0m) from Inmark Asset Management. The property is fully leased to Woolworths Group – Australia’s largest supermarket retailer, top 10 ASX listed companies. Woolworths HQ property is a corporate campus with a total site area of 90,010sqm and a total NLA of 44,972sqm. The current NLA provides for significant development potential to circa 180,000sqm based on the maximum allowable GFA. The purchase consideration of AUD463.25m excludes transaction costs of ~AUD31.0m. As such, the total acquisition cost is AUD494.25m (~S$484.4m)</li><li>The property has a long-term lease balance of 10 years and built-in rental escalation of 2.75% pa. Portfolio value will be enlarged by 26.6% to over S$2.28bn, while WALE will rise to 4.92 years. Portfolio occupancy will rise to 95.9% (from 95.7%) and master lease will represent 48% of total portfolio (from 38%)</li><li>The initial NPI yield is 5.17% and AAREIT plans to funding this acquisition through a combination of debt financing, recently issued S$250m perpetual securities, and potentially EFR. The funding structure utilising local debt financing (56%) and perpetual securities (44%) will bring aggregate leverage to 38.6% and result in DPU accretion of 4.7% on FY21 pro-forma basis. Upon settlement, the Manager has elected to receive the acquisition fee in AAREIT units</li><li>Following the completion of the proposed acquisition, AAREIT will have a total of 29 properties, of which 26 properties are located throughout Singapore (62%) and the remaining in Australia (38%).</li></ul>

SingaporeAIMS APAC REIT (AAREIT SP) to acquire Woolworths headquarters at 5.17% NPI yield; Accretive to DPU by 4.7%AAREIT has acquired Woolworths headquarters for a purchase consideration of AUD463.25m (~S$454.0m) from Inmark Asset Management. The property is fully leased to Woolworths Group – Australia’s largest supermarket retailer, top 10 ASX listed companies. Woolworths HQ property is a corporate campus with a total site area of 90,010sqm and a total NLA of 44,972sqm. The current NLA provides for significant development potential to circa 180,000sqm based on the maximum allowable GFA. The purchase consideration of AUD463.25m excludes transaction costs of ~AUD31.0m. As such, the total acquisition cost is AUD494.25m (~S$484.4m)The property has a long-term lease balance of 10 years and built-in rental escalation of 2.75% pa. Portfolio value will be enlarged by 26.6% to over S$2.28bn, while WALE will rise to 4.92 years. Portfolio occupancy will rise to 95.9% (from 95.7%) and master lease will represent 48% of total portfolio (from 38%)The initial NPI yield is 5.17% and AAREIT plans to funding this acquisition through a combination of debt financing, recently issued S$250m perpetual securities, and potentially EFR. The funding structure utilising local debt financing (56%) and perpetual securities (44%) will bring aggregate leverage to 38.6% and result in DPU accretion of 4.7% on FY21 pro-forma basis. Upon settlement, the Manager has elected to receive the acquisition fee in AAREIT unitsFollowing the completion of the proposed acquisition, AAREIT will have a total of 29 properties, of which 26 properties are located throughout Singapore (62%) and the remaining in Australia (38%).

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/city-developments-ltd" target="_blank" data-smartkarma-citation="entities:57" rel="noopener">City Developments (CIT SP)</a> sells Sincere stake for US$1; Raises stake in Shenzhen tech park</h3><ul><li>CIT has exited its investment in China-based Sincere Property Group for a consideration of US$1, while raising its stake in a technology park in Shenzhen. CIT has agreed to sell its 63.75% interest in HCP Chongqing Property Development (HCP Cayman) to an unrelated third party incorporated in the Republic of Seychelles. HCP Cayman holds an 80.01% equity interest in Sincere</li><li>The consideration was agreed upon after taking into account Sincere's current liquidity issues and its potential bankruptcy. For FY20, CIT had booked a S$1.78bn impairment for losses attributable to Sincere – effectively writing down 93% of its total investment in Sincere. Concurrently, CIT is increasing its stake in a company that owns 65% of Shenzhen Longgang Tusincere Tech Park. A Shenzhen Longgang District state-owned enterprise holds the remaining 35%</li></ul>

SingaporeCity Developments (CIT SP) sells Sincere stake for US$1; Raises stake in Shenzhen tech parkCIT has exited its investment in China-based Sincere Property Group for a consideration of US$1, while raising its stake in a technology park in Shenzhen. CIT has agreed to sell its 63.75% interest in HCP Chongqing Property Development (HCP Cayman) to an unrelated third party incorporated in the Republic of Seychelles. HCP Cayman holds an 80.01% equity interest in SincereThe consideration was agreed upon after taking into account Sincere's current liquidity issues and its potential bankruptcy. For FY20, CIT had booked a S$1.78bn impairment for losses attributable to Sincere – effectively writing down 93% of its total investment in Sincere. Concurrently, CIT is increasing its stake in a company that owns 65% of Shenzhen Longgang Tusincere Tech Park. A Shenzhen Longgang District state-owned enterprise holds the remaining 35%

Singapore

AIMS APAC REIT is a real estate investment trust that invests in and manages a diversified portfolio of income-producing industrial, logistics, and business park properties across the Asia-Pacific region. It provides leasing and rental services for assets used in warehousing, distribution, business park, light industrial, high-tech, and manufacturing activities. The company is headquartered in Singapore and was incorporated in 2006.

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AIMS APAC REIT (AAREIT SP)

ASEAN Builder's Scoop (27Apr22) - AAREIT Robust Rent Reversions

EREIT rising utilities cost; FCT tapering shopper traffic; MINT boosted by acquisitions; SSREIT voted down Charlie Chan as Director

SCCM Asia Research

ASEAN Builder's Scoop (4Feb22) - CICT Office Will Be Key to Revival

AAREIT on a solid organic growth path; EREIT steady as she goes; MBS expansion set for 2026 completion; Orchard Towers S$1.6bn enbloc; SREIT sets...

SCCM Asia Research

ASEAN Builder's Scoop (15Oct21)

EREIT/ALLT merger, DPU accretive for both unitholders; AAREIT strong quarter, Upgrade to BUY; Porcelain Hotel on sale for S$90m; WCTHG mixed-use...

SCCM Asia Research

ASEAN Builder's Scoop (1Oct21)

AAREIT acquires Woolworths HQ, DPU accretive by +4.7%; Luxury condo prices climbing 5.2% YoY in 3Q21; Mapletree buys S$4bn US logistics assets; SC...

SCCM Asia Research

ASEAN Builder's Scoop (13Sep21)

CIT sells Sincere stake, raises stake in Shenzhen tech park; Hoi Hup/Sunway JV acquires Flynn Park enbloc; TSH focuses in SG, Indo, AUS; MREIT...

SCCM Asia Research

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