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/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> 1H21 results boosted by dormitory management contracts; Continue to ride on co-living trend</h3><ul><li>1H21 revenue increased 24.9% YoY to S$64.5m, primarily due to higher contributions from Facilities Management Business (+225.5% YoY) and Logistics Services Business (+6.0% YoY), partially offset by lower revenue from Space Optimisation Business (-33.6% YoY)</li><li>Space Optimisation: Revenue fell 33.6% YoY to S$19.4m in 1H21, due to lower contributions from Industrial Properties (-42.7% YoY to S$8.8m) and Commercial Properties (-53.8% YoY to S$4.1m), partially offset by higher revenue from Residential Properties (+28.9% YoY to S$6.5m). Lower revenues from Industrial and Commercial Properties were mainly due to expiry of 6 master leases, negative reversions, downtime at 1557 Keppel Road due to AEI works and IFRS 16 impacts. Occupancy for Industrial Properties -0.9pp YoY to 89.0% in 1H21 (vs. 89.9% in 1H20), while occupancy for Commercial Properties -15.3pp YoY to 69.2% in 1H21 (vs. 84.5% in 1H20). Meanwhile, higher revenue from Residential Properties was boosted by new serviced residence in Cambodia (started in 1Q21) and increase in revenue at 1A Lutheran Road</li><li>Facilities Management: Revenue increased by 225.5% YoY to S$31.6m in 1H21, mainly due to the increase in facilities management services provided for short-term contracts under the dormitory business</li><li>Logistics Services: Revenue grew 6.0% YoY to S$13.5m in 1H21, mainly due to increase in transportation services provided from the trucking business</li><li>1H21 PATMI increased 366.3% YoY to S$14.8m on higher other income and share of results from associates and joint ventures. 1H21 dividend came in at S$0.75c per share (+300% YoY), translating to an annualised dividend yield of ~4.5%. LHN’s cash and bank balances came in at S$36.3m, while net gearing (excluding IFRS16 impact) stood at 0.31x</li><li>LHN is currently trading at 4.3% FY21E dividend yield and 5.30x FY21E P/E</li></ul>Comments: 1H21 Revenue and PATMI form 52.2% and 59.1% of our full-year FY21E forecasts, respectively. We have expected 1H21 results to be higher than 2H21E due to the frontloading of dormitory management contracts (expected to end in 3Q21). With the resurgence of Covid-19 cases in Singapore, we do not discount the probability of LHN renewing the dormitory management contracts. Nonetheless, we believe its string of expansion plans for co-living business should provide steady growth moving forward. In addition to the new serviced residence in Cambodia (commissioned since 1Q21), 1557 Keppel Road and Nan’an China should also start contributing in FY21E. Meanwhile, newly acquired 320 Balestier Road (16Dec20), as well as proposed acquisitions of 40 &amp; 42 Amber Road (to be completed by 8Jun21), 8 strata units at Fu Yuen Building (subject to completion of two underlying options), and 115 Geylang Road (to be completed by 21Jul21) should drive growth in FY22E and onwards. We are currently reviewing our recommendations.

SingaporeLHN Ltd (LHN SP) 1H21 results boosted by dormitory management contracts; Continue to ride on co-living trend1H21 revenue increased 24.9% YoY to S$64.5m, primarily due to higher contributions from Facilities Management Business (+225.5% YoY) and Logistics Services Business (+6.0% YoY), partially offset by lower revenue from Space Optimisation Business (-33.6% YoY)Space Optimisation: Revenue fell 33.6% YoY to S$19.4m in 1H21, due to lower contributions from Industrial Properties (-42.7% YoY to S$8.8m) and Commercial Properties (-53.8% YoY to S$4.1m), partially offset by higher revenue from Residential Properties (+28.9% YoY to S$6.5m). Lower revenues from Industrial and Commercial Properties were mainly due to expiry of 6 master leases, negative reversions, downtime at 1557 Keppel Road due to AEI works and IFRS 16 impacts. Occupancy for Industrial Properties -0.9pp YoY to 89.0% in 1H21 (vs. 89.9% in 1H20), while occupancy for Commercial Properties -15.3pp YoY to 69.2% in 1H21 (vs. 84.5% in 1H20). Meanwhile, higher revenue from Residential Properties was boosted by new serviced residence in Cambodia (started in 1Q21) and increase in revenue at 1A Lutheran RoadFacilities Management: Revenue increased by 225.5% YoY to S$31.6m in 1H21, mainly due to the increase in facilities management services provided for short-term contracts under the dormitory businessLogistics Services: Revenue grew 6.0% YoY to S$13.5m in 1H21, mainly due to increase in transportation services provided from the trucking business1H21 PATMI increased 366.3% YoY to S$14.8m on higher other income and share of results from associates and joint ventures. 1H21 dividend came in at S$0.75c per share (+300% YoY), translating to an annualised dividend yield of ~4.5%. LHN’s cash and bank balances came in at S$36.3m, while net gearing (excluding IFRS16 impact) stood at 0.31xLHN is currently trading at 4.3% FY21E dividend yield and 5.30x FY21E P/EComments: 1H21 Revenue and PATMI form 52.2% and 59.1% of our full-year FY21E forecasts, respectively. We have expected 1H21 results to be higher than 2H21E due to the frontloading of dormitory management contracts (expected to end in 3Q21). With the resurgence of Covid-19 cases in Singapore, we do not discount the probability of LHN renewing the dormitory management contracts. Nonetheless, we believe its string of expansion plans for co-living business should provide steady growth moving forward. In addition to the new serviced residence in Cambodia (commissioned since 1Q21), 1557 Keppel Road and Nan’an China should also start contributing in FY21E. Meanwhile, newly acquired 320 Balestier Road (16Dec20), as well as proposed acquisitions of 40 &amp; 42 Amber Road (to be completed by 8Jun21), 8 strata units at Fu Yuen Building (subject to completion of two underlying options), and 115 Geylang Road (to be completed by 21Jul21) should drive growth in FY22E and onwards. We are currently reviewing our recommendations.

ASEAN Builder's Scoop (14May21) - LHN Robust 1H21, Boosted by Mgmt Contracts

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

10 in 10 with APAC Realty  - Expanding ASEAN Footprint

Singapore Property Analyst

Anni Kum

The real estate brokerage industry in Singapore is highly competitive. On average, the ratio of residential transaction volume to real estate agents was just 1.8 per agent in 2017.   According to the Council of Estate Agencies, as at 11 August 2019, <a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209:1" rel="noopener">Propnex Ltd (PROP SP)</a> is the largest listed real estate agency in Singapore with 8,049 salespersons, a growth of 649 salespersons or 8.8% since the beginning of 2019. Whilst its closest competitor, <a href="https://www.smartkarma.com/entities/apac-realty-ltd" target="_blank" data-smartkarma-citation="entities:25900:1" rel="noopener">APAC Realty Ltd (APAC SP)</a>, still commands a stronger gross profit margin than Propnex, Propnex is rapidly catching up with APAC Realty, as shown by its 2Q19 financial results announced last evening.In this insight, we provide a summary and review of Propnex’s financial results and a comparison with its competitor APAC Realty’s performance. We discovered that operationally, Propnex has performed better than APAC Realty in 2Q19 and it is likely that APAC Realty has also lost market share to Propnex in the project marketing segment as seen from the narrowing revenue gap between the two companies. Propnex is paying out 81.1% of its 1H19 profit as interim dividend. While this payout ratio is much higher compared to FY18, it is still sustainable as the total cash dividend payment can be supported by the operating cashflow without tapping onto its cash hoard. Based on Propnex’s closing price of S$0.495 per share yesterday, the interim dividend translates into an annualised yield of 5.1% per annum. In contrast, APAC Realty announced 62.5% YoY decline in its interim dividend, from 2.0 cents per share in 1H18 to 0.75 cents per share in 1H19. This works out to an annualised yield of 3.1% per annum based on APAC Realty’s closing price of S$0.49 per share. Overall, with zero debt and a large cash hoard, Propnex has a stronger and more defensive balance sheet than APAC Realty that can help the company to weather a prolonged downturn in the property market and also allow it to make opportunistic acquisitions.Compared to its debut, therefore, Propnex currently has a better value proposition.

The real estate brokerage industry in Singapore is highly competitive. On average, the ratio of residential transaction volume to real estate agents was just 1.8 per agent in 2017.   According to the Council of Estate Agencies, as at 11 August 2019, Propnex Ltd (PROP SP) is the largest listed real estate agency in Singapore with 8,049 salespersons, a growth of 649 salespersons or 8.8% since the beginning of 2019. Whilst its closest competitor, APAC Realty Ltd (APAC SP), still commands a stronger gross profit margin than Propnex, Propnex is rapidly catching up with APAC Realty, as shown by its 2Q19 financial results announced last evening.In this insight, we provide a summary and review of Propnex’s financial results and a comparison with its competitor APAC Realty’s performance. We discovered that operationally, Propnex has performed better than APAC Realty in 2Q19 and it is likely that APAC Realty has also lost market share to Propnex in the project marketing segment as seen from the narrowing revenue gap between the two companies. Propnex is paying out 81.1% of its 1H19 profit as interim dividend. While this payout ratio is much higher compared to FY18, it is still sustainable as the total cash dividend payment can be supported by the operating cashflow without tapping onto its cash hoard. Based on Propnex’s closing price of S$0.495 per share yesterday, the interim dividend translates into an annualised yield of 5.1% per annum. In contrast, APAC Realty announced 62.5% YoY decline in its interim dividend, from 2.0 cents per share in 1H18 to 0.75 cents per share in 1H19. This works out to an annualised yield of 3.1% per annum based on APAC Realty’s closing price of S$0.49 per share. Overall, with zero debt and a large cash hoard, Propnex has a stronger and more defensive balance sheet than APAC Realty that can help the company to weather a prolonged downturn in the property market and also allow it to make opportunistic acquisitions.Compared to its debut, therefore, Propnex currently has a better value proposition. 

Propnex Ltd: One-Up on Real Estate Brokerage

Singapore and emerging market real estate

Royston Foo

Top Singapore property news this week that you need to know.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/057/554/original/photo1.jpg?1531390720" class="editor-image img-responsive" data-smartkarma-image-id="57554"></figure><div class="content-caption">55 Market Street - Sold at 45% above valuation</div>Insider Trades &amp; Share Buybacks<a href="https://www.businesstimes.com.sg/real-estate/oxley-deputy-ceo-buys-25-million-shares" target="_blank">12th Jul 2018 - Oxley deputy CEO buys 2.5 million shares</a>Royston Foo: Since the announcement of new property cooling measures last Thursday evening, share prices of property-related counters had fallen by 8.1% on average to-date. On the immediate trading day after the announcement, share prices of property-related companies declined sharply by 10.6% on average…

Top Singapore property news this week that you need to know.55 Market Street - Sold at 45% above valuationInsider Trades &amp; Share Buybacks12th Jul 2018 - Oxley deputy CEO buys 2.5 million sharesRoyston Foo: Since the announcement of new property cooling measures last Thursday evening, share prices of property-related counters had fallen by 8.1% on average to-date. On the immediate trading day after the announcement, share prices of property-related companies declined sharply by 10.6% on average…

Singapore Property Weekly Recap (7th Jul to 13th Jul) - A Week After New Property Cooling Measures

Deciphering real estate markets globally., Rems Advisors

TAN Kok Keong

Deciphering real estate markets globally.

Rems Advisors

To promote a stable and sustainable market, the Singapore Government increased the tax payable for investment residential properties and foreign purchasers as well as reducing the loan availability for private housing purchasers.  It triggered a tsunami of activities that meant that the market was anything but stable last night. The announcement jettisoned the dinner plans of many. Developers scrambled to bring forward property launches and for projects that were already launched for sale, show…

To promote a stable and sustainable market, the Singapore Government increased the tax payable for investment residential properties and foreign purchasers as well as reducing the loan availability for private housing purchasers.  It triggered a tsunami of activities that meant that the market was anything but stable last night. The announcement jettisoned the dinner plans of many. Developers scrambled to bring forward property launches and for projects that were already launched for sale, show…

Why Wait for Residential Property Prices to Fall?

Singapore

APAC Realty is a leading real estate services provider, holding the exclusive ERA regional master franchise rights for 17 countries in Asia Pacific. Through its ERA franchisee network, the Group has one of the largest brand footprints in Asia with more than 17,300 salespersons across 651 offices as at 31 December 2019, and is one of the largest ERA Member Brokers globally by transaction value.

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APAC Realty Ltd (APAC SP)

ASEAN Builder's Scoop (14May21) - LHN Robust 1H21, Boosted by Mgmt Contracts

LHN robust 1H21, boosted by mgmt contracts; UHU riding on US consumer recovery; IREIT attractive 12% EUR yield; RLC eyes REIT listing by 2H21; MEG...

SCCM Asia Research

10 in 10 with APAC Realty - Expanding ASEAN Footprint

Singapore Exchange Ltd (SGX)

Propnex Ltd: One-Up on Real Estate Brokerage

The real estate brokerage industry in Singapore is highly competitive. On average, the ratio of residential transaction volume to real estate...

Anni Kum

Singapore Property Weekly Recap (7th Jul to 13th Jul) - A Week After New Property Cooling Measures

Top Singapore property news this week that you need to know.Insider Trades & Share Buybacks12th Jul 2018 - Oxley deputy CEO buys 2.5 million...

Royston Foo

Why Wait for Residential Property Prices to Fall?

To promote a stable and sustainable market, the Singapore Government increased the tax payable for investment residential properties and foreign...

TAN Kok Keong

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