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

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2021-12/SRE-CEO.png' alt='SRE- CEO' />
 </figure>
 <div class='content-caption'>SRE- CEO</div>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd">
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Despite spending nearly three decades of his career in the real estate investment and management industry, Desmond Tang has yet to experience a dull day. 
That’s because the real estate industry has continued to prove its resilience amid disruptive trends. And Tang’s start-up experience - prior to leading Straits Real Estate (SRE), a wholly owned subsidiary of SGX-listed The Straits Trading Company - has come in handy. 
“Real estate is never boring,” said Tang, the Chief Executive Officer of SRE. “Despite its image as a traditional old-fashioned industry - a common parochial view - real estate is difficult to replace, even as economies evolve, and technology changes lives and businesses.” 
“People talk about modernising real estate, but the truth of matter is that it has never stopped adapting itself to new uses, new user requirements, and new occupier habits,” he added. 
“When an old trade like real estate juxtaposes with never-ending changes in space usage, it’s both captivating and invigorating. It’s very much like playing a 40-year-old original-pressed vinyl on a modern sound system, and being surprised by the outcome.” 
The 55-year-old, who holds a Bachelor of Science with Honours degree in Real Estate from the National University of Singapore, and a Master of Applied Finance degree from Macquarie University, has helmed SRE since February 2014. 
At various times prior to joining SRE, he was Managing Director and Co-Head at Alpha Investment Partners, and Managing Director at GrowthPath Capital, which he co-founded.  
“I’ve possibly had more involvement with start-up businesses than most real estate investment professionals,” Tang acknowledged. “Every start-up is an adventure, and every adventure requires a first step, as the Cheshire Cat in Alice of Wonderland says.” 
“But mostly, that first step is error-laden, so the ability to respond, adjust and change course often makes the difference between ultimate success and failure. When you participate in a start-up knowing the odds are at best even, you‘re driven to better your chances, create options and seek control of your own luck. My career experience would have been that much poorer without all of that.” 
Now at SRE, Tang is grateful for having had the opportunity to create and build the company from scratch into what it is today.  
“My previous experience with start-up companies certainly helped. Having been mostly a real estate fund manager prior to this role, it was necessary for me and my colleagues to decide early on how the investment style should be adapted for a publicly listed company like Straits Trading,” he recalled. 
“We also worked on delivering quick, tangible results to garner confidence from the market. We were fortunate to achieve what we planned quite quickly, kept our discipline, and continued to produce the goods over the years.” Growth Driver 
SRE was established as a private equity real estate investment company in 2013. Since then, it has grown to manage a diverse investment portfolio, with over S$2 billion in assets spanning China, Malaysia, Singapore, Japan, Australia and South Korea. Its portfolio includes logistics, retail, office and business park properties. 
SRE is an important earnings driver and growth engine for Straits Trading. The latter is a conglomerate-investment company with operations and financial interests in resources, property, and hospitality. 
These include majority or strategic stakes in the world’s third-largest tin producer, Malaysia Smelting Corporation, which is dual listed on Bursa Malaysia and SGX; ARA Asset Management and Far East Hospitality Holdings, as well as a diversified property portfolio and real estate investments that are wholly owned by the Group. 
In August 2021, Straits Trading announced it was selling its 19% stake in ARA Asset Management for S$1.14 billion to Hong Kong-listed ESR Cayman. 
For Tang, a key priority is ensuring that SRE remains relevant to its key stakeholders - namely its shareholders and employees - as it navigates the markets and takes advantage of business opportunities.  
“The alignment of interest between stakeholders is not always natural, so you must work on finding the balance that gives you sustainability,” he added. 
“I emphasise “work on” because you cannot leave that to chance. It requires conscious effort to ensure the company remains valid to shareholders and employees as environment and circumstances evolve.” 
In particular, SRE has been anticipating and keeping abreast of new trends following the onset of the pandemic. 
“COVID-19 brought about massive and swift changes in space usage habits that the industry could never have anticipated,” Tang noted. “Lockdowns, work-from-home regimes, exponential growth in online retailing, and safe-distancing requirements all contributed to the disruption.” 
“So we zeroed-in on opportunities that provide short- to mid-term insulation against current challenges, with asset quality to benefit from the eventual market recovery, such as new economy assets and business parks.” 
Looking ahead, SRE will continue to focus on building a portfolio of predominantly income-producing assets with stable cash flows. In the near term, it is looking to acquire business parks and warehouse retail parks in the UK, as well as logistics assets across key geographies.  
It has also ventured into greenfield developments in South Korea and Australia to reap development upside through build-to-suit opportunities, which are geared to fulfil secular, or longer term, demand. 
“We always focus on return maximisation by driving capital efficiency. This is reflected in SRE’s consistent ROE track record of 10% over the last five years,” Tang pointed out, referring to the key industry metric of return on equity. 
"We achieve this through a disciplined approach to capital allocation, risk pricing, asset management and divestment - all of which ensure capital is recycled into higher-returning investments in a systematic and timely manner. As part of our active asset management process, we also implement enhancement initiatives to improve the marketability and operational efficiency of these assets.” Burgeoning Potential 
In addition, the outlook remains bright in SRE’s key markets. South Korea offers enormous potential, driven by its rapidly emerging domestic e-commerce market and a supply shortfall in modern logistics assets, while in Japan, its real estate sector has emerged as one of the most resilient and best-performing property investment markets in the world amidst the pandemic.  
As for China, the quick containment of the pandemic and swift rebound in consumption has instilled confidence in domestic and foreign brands, which is set to spur further investment in the expansion of retail store networks in the country.  
Meanwhile, in Australia, a robust economy, continued expansion in e-commerce and infrastructure spending, coupled with a shortage of high-specification logistics space, continues to underpin growth. 
Despite such rosy prospects, challenges loom, not the least of which is how the pandemic has dramatically altered lives and livelihoods. 
“The current overriding concern, from the perspective of a real estate investment company, is how much of the changes in user habits that occurred during the pandemic are going to be permanent, and how much of that are temporary,” Tang said. 
“What can we do to our portfolio of properties to keep them relevant to users? What’s the impact on asset value if some of the pandemic-induced changes become permanent? Must new buildings be designed for a future pandemic that may or may not happen?” 
SRE is also competing with record amounts of private capital dry powder for deals - many investors are flush with cash and looking to deploy their funds.  
“There’s also a mismatch in price expectations between potential buyers and sellers,” he added. “The low interest-rate environment is a double-edged sword - there’s ample funding for investors, but also stronger holding and bargaining power for owners of distressed assets due to lower borrowing costs.” 
However, unlike conventional private equity funds, SRE is not constrained by a mandate. This gives the company the agility to allocate capital in the most efficient manner, allowing it to punch above its weight despite its relatively small size. 
“We have the advantage of being sector-agnostic, of being able to pursue opportunities that generate attractive risk-adjusted returns,” Tang added. 
“Our investment decisions are not only informed by our market outlook or the competitive landscape, but also the expected return on investment or invested capital, and our country-specific strategy.” 
 

The Straits Trading Company Ltd 
Incorporated in 1887, Straits Trading is a conglomerate-investment company with operations, as well as financial interests, in resources, property, and hospitality. These include majority or strategic stakes in Malaysia Smelting Corporation - the world’s third-largest tin producer that is dual-listed on Bursa Malaysia and SGX - ARA Asset Management, Far East Hospitality Holdings, as well as a diversified property portfolio and real estate investments that are wholly owned by the Group. In August 2021, Straits Trading announced it was selling its 19% stake in ARA Asset Management for S$1.14 billion to Hong Kong-listed ESR Cayman. 
The company website is: <a href="http://www.stc.com.sg">www.stc.com.sg</a> 
Click <a href="https://www.sgx.com/securities/equities/S20">here </a>for the company's StockFacts page. 
For the half year ended 30 June 2021 financial results, click <a href="https://links.sgx.com/1.0.0/corporate-announcements/X9SCUY9SG97QHZ9Z/678773_STC%201H21%20PR_Release%20FINAL%20FOR%20SGX%2013.08.2021.pdf">here</a>. 
 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic 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="https://www.sgx.com/research-education/market-dialogues">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="https://www.sgx.com/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
</body></html>


      
    
    SRE- CEO


Despite spending nearly three decades of his career in the real estate investment and management industry, Desmond Tang has yet to experience a dull day.  
That’s because the real estate industry has continued to prove its resilience amid disruptive trends. And Tang’s start-up experience - prior to leading Straits Real Estate (SRE), a wholly owned subsidiary of SGX-listed The Straits Trading Company - has come in handy.  
“Real estate is never boring,” said Tang, the Chief Executive Officer of SRE. “Despite its image as a traditional old-fashioned industry - a common parochial view - real estate is difficult to replace, even as economies evolve, and technology changes lives and businesses.”  
“People talk about modernising real estate, but the truth of matter is that it has never stopped adapting itself to new uses, new user requirements, and new occupier habits,” he added.  
“When an old trade like real estate juxtaposes with never-ending changes in space usage, it’s both captivating and invigorating. It’s very much like playing a 40-year-old original-pressed vinyl on a modern sound system, and being surprised by the outcome.”  
The 55-year-old, who holds a Bachelor of Science with Honours degree in Real Estate from the National University of Singapore, and a Master of Applied Finance degree from Macquarie University, has helmed SRE since February 2014.  
At various times prior to joining SRE, he was Managing Director and Co-Head at Alpha Investment Partners, and Managing Director at GrowthPath Capital, which he co-founded.   
“I’ve possibly had more involvement with start-up businesses than most real estate investment professionals,” Tang acknowledged. “Every start-up is an adventure, and every adventure requires a first step, as the Cheshire Cat in Alice of Wonderland says.”  
“But mostly, that first step is error-laden, so the ability to respond, adjust and change course often makes the difference between ultimate success and failure. When you participate in a start-up knowing the odds are at best even, you‘re driven to better your chances, create options and seek control of your own luck. My career experience would have been that much poorer without all of that.”  
Now at SRE, Tang is grateful for having had the opportunity to create and build the company from scratch into what it is today.   
“My previous experience with start-up companies certainly helped. Having been mostly a real estate fund manager prior to this role, it was necessary for me and my colleagues to decide early on how the investment style should be adapted for a publicly listed company like Straits Trading,” he recalled.  
“We also worked on delivering quick, tangible results to garner confidence from the market. We were fortunate to achieve what we planned quite quickly, kept our discipline, and continued to produce the goods over the years.”  Growth Driver  
SRE was established as a private equity real estate investment company in 2013. Since then, it has grown to manage a diverse investment portfolio, with over S$2 billion in assets spanning China, Malaysia, Singapore, Japan, Australia and South Korea. Its portfolio includes logistics, retail, office and business park properties.  
SRE is an important earnings driver and growth engine for Straits Trading. The latter is a conglomerate-investment company with operations and financial interests in resources, property, and hospitality.  
These include majority or strategic stakes in the world’s third-largest tin producer, Malaysia Smelting Corporation, which is dual listed on Bursa Malaysia and SGX; ARA Asset Management and Far East Hospitality Holdings, as well as a diversified property portfolio and real estate investments that are wholly owned by the Group.  
In August 2021, Straits Trading announced it was selling its 19% stake in ARA Asset Management for S$1.14 billion to Hong Kong-listed ESR Cayman.  
For Tang, a key priority is ensuring that SRE remains relevant to its key stakeholders - namely its shareholders and employees - as it navigates the markets and takes advantage of business opportunities.   
“The alignment of interest between stakeholders is not always natural, so you must work on finding the balance that gives you sustainability,” he added.  
“I emphasise “work on” because you cannot leave that to chance. It requires conscious effort to ensure the company remains valid to shareholders and employees as environment and circumstances evolve.”  
In particular, SRE has been anticipating and keeping abreast of new trends following the onset of the pandemic.  
“COVID-19 brought about massive and swift changes in space usage habits that the industry could never have anticipated,” Tang noted. “Lockdowns, work-from-home regimes, exponential growth in online retailing, and safe-distancing requirements all contributed to the disruption.”  
“So we zeroed-in on opportunities that provide short- to mid-term insulation against current challenges, with asset quality to benefit from the eventual market recovery, such as new economy assets and business parks.”  
Looking ahead, SRE will continue to focus on building a portfolio of predominantly income-producing assets with stable cash flows. In the near term, it is looking to acquire business parks and warehouse retail parks in the UK, as well as logistics assets across key geographies.   
It has also ventured into greenfield developments in South Korea and Australia to reap development upside through build-to-suit opportunities, which are geared to fulfil secular, or longer term, demand.  
“We always focus on return maximisation by driving capital efficiency. This is reflected in SRE’s consistent ROE track record of 10% over the last five years,” Tang pointed out, referring to the key industry metric of return on equity.  
"We achieve this through a disciplined approach to capital allocation, risk pricing, asset management and divestment - all of which ensure capital is recycled into higher-returning investments in a systematic and timely manner. As part of our active asset management process, we also implement enhancement initiatives to improve the marketability and operational efficiency of these assets.”  Burgeoning Potential  
In addition, the outlook remains bright in SRE’s key markets. South Korea offers enormous potential, driven by its rapidly emerging domestic e-commerce market and a supply shortfall in modern logistics assets, while in Japan, its real estate sector has emerged as one of the most resilient and best-performing property investment markets in the world amidst the pandemic.   
As for China, the quick containment of the pandemic and swift rebound in consumption has instilled confidence in domestic and foreign brands, which is set to spur further investment in the expansion of retail store networks in the country.   
Meanwhile, in Australia, a robust economy, continued expansion in e-commerce and infrastructure spending, coupled with a shortage of high-specification logistics space, continues to underpin growth.  
Despite such rosy prospects, challenges loom, not the least of which is how the pandemic has dramatically altered lives and livelihoods.  
“The current overriding concern, from the perspective of a real estate investment company, is how much of the changes in user habits that occurred during the pandemic are going to be permanent, and how much of that are temporary,” Tang said.  
“What can we do to our portfolio of properties to keep them relevant to users? What’s the impact on asset value if some of the pandemic-induced changes become permanent? Must new buildings be designed for a future pandemic that may or may not happen?”  
SRE is also competing with record amounts of private capital dry powder for deals - many investors are flush with cash and looking to deploy their funds.   
“There’s also a mismatch in price expectations between potential buyers and sellers,” he added. “The low interest-rate environment is a double-edged sword - there’s ample funding for investors, but also stronger holding and bargaining power for owners of distressed assets due to lower borrowing costs.”  
However, unlike conventional private equity funds, SRE is not constrained by a mandate. This gives the company the agility to allocate capital in the most efficient manner, allowing it to punch above its weight despite its relatively small size.  
“We have the advantage of being sector-agnostic, of being able to pursue opportunities that generate attractive risk-adjusted returns,” Tang added.  
“Our investment decisions are not only informed by our market outlook or the competitive landscape, but also the expected return on investment or invested capital, and our country-specific strategy.” 
 

The Straits Trading Company Ltd  
Incorporated in 1887, Straits Trading is a conglomerate-investment company with operations, as well as financial interests, in resources, property, and hospitality. These include majority or strategic stakes in Malaysia Smelting Corporation - the world’s third-largest tin producer that is dual-listed on Bursa Malaysia and SGX - ARA Asset Management, Far East Hospitality Holdings, as well as a diversified property portfolio and real estate investments that are wholly owned by the Group. In August 2021, Straits Trading announced it was selling its 19% stake in ARA Asset Management for S$1.14 billion to Hong Kong-listed ESR Cayman.  
The company website is: www.stc.com.sg  
Click here for the company's StockFacts page.  
For the half year ended 30 June 2021 financial results, click here.  
 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic 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.



Straits Trading Revs Up Real Estate Growth Engine

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

Digital Core REIT / Equity Capital Markets

<ul>
<li>Digital Core REIT (DCREIT), a data center REIT, aims to raise up to US$600m in its Singapore IPO.</li>
<li>The company is sponsored by Digital Realty, one of the largest REITs in the US, and over 60% of the deal is already spoken for by cornerstone investors.</li>
<li>In this note, we will talk about the deal background</li>
</ul>


Digital Core REIT (DCREIT), a data center REIT, aims to raise up to US$600m in its Singapore IPO.
The company is sponsored by Digital Realty, one of the largest REITs in the US, and over 60% of the deal is already spoken for by cornerstone investors.
In this note, we will talk about the deal background


Digital Core REIT IPO - Hot Sector, Strong Backing but Has More than a Few Peculiar Points

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>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 136.6pt;">
 
</td>
<td style="width: 136.55pt;">
DASIN
</td>
<td style="width: 136.55pt;">
SASSR
</td>
<td style="width: 136.55pt;">
BHGREIT
</td>
<td style="width: 136.55pt;">
CLCT
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Period
</td>
<td style="width: 136.55pt;">
1Q21
</td>
<td style="width: 136.55pt;">
1Q21
</td>
<td style="width: 136.55pt;">
1Q21
</td>
<td style="width: 136.55pt;">
1Q21
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Gross Revenue (S$ m)
</td>
<td style="width: 136.55pt;">
Not Disclosed in SGD terms; RMB127.3m (+87.4% YoY); or RMB101.6m if w/o Shunde Metro Mall and Tanbei Metro Mall (+51.0% YoY)
</td>
<td style="width: 136.55pt;">
EMA Rental Income: 34.1 (+23.4% YoY)
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
NPI (S$ m)
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
EMA Rental Income (Excluding straight-line adjustments): 32.3 (+27.8% YoY)
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
264.2 (RMB)
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
DPU (S$ c)
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
1.759 (+31.9% YoY)
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
NAV per Unit (S$)
</td>
<td style="width: 136.55pt;">
1.41 (Based on 4Q20)
</td>
<td style="width: 136.55pt;">
0.922
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
P/B (x)
</td>
<td style="width: 136.55pt;">
0.510
</td>
<td style="width: 136.55pt;">
1.00
</td>
<td style="width: 136.55pt;">
0.64 (Based on 4Q20 NAV)
</td>
<td style="width: 136.55pt;">
0.94 (Based on 4Q20 NAV)
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Occupancy (%)
</td>
<td style="width: 136.55pt;">
96.1
</td>
<td style="width: 136.55pt;">
93.5
</td>
<td style="width: 136.55pt;">
92.1
</td>
<td style="width: 136.55pt;">
Retail: 94.4 Business Parks: 92.1
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Reversion (%)
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Gearing (%)
</td>
<td style="width: 136.55pt;">
37.2
</td>
<td style="width: 136.55pt;">
27.6
</td>
<td style="width: 136.55pt;">
35.6
</td>
<td style="width: 136.55pt;">
35.1
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Cost of Debt (%)
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
3.3
</td>
<td style="width: 136.55pt;">
3.8
</td>
<td style="width: 136.55pt;">
2.51
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
1 Yr Fwd Yield (%)
</td>
<td style="width: 136.55pt;">
6.99
</td>
<td style="width: 136.55pt;">
7.46
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
6.21
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Debt Hedged (%)
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
Not Disclosed
</td>
<td style="width: 136.55pt;">
60% of offshore loans
</td>
<td style="width: 136.55pt;">
~70
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Target Price
</td>
<td style="width: 136.55pt;">
S$0.81
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
NA
</td>
</tr>
<tr>
<td style="width: 136.6pt;">
Rating
</td>
<td style="width: 136.55pt;">
BUY
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
NA
</td>
<td style="width: 136.55pt;">
NA
</td>
</tr>
</tbody>
</table>
<h3>
<a href="https://www.smartkarma.com/entities/dasin-retail-trust" target="_blank" data-smartkarma-citation="entities:23743" rel="noopener">Dasin Retail Trust (DASIN SP)</a> 1Q21 Business Updates – Revenue recovered to 94% of pre-Covid level; ARA’s strategic stake underscores GBA’s potential</h3>
<ul>
<li>1Q21 revenue (in RMB terms; on same-mall basis) increased 51.0% YoY to ~RMB101.6m. Total revenues of the four malls (IPO portfolio), namely Shiqi Metro Mall, Xiaolan Metro Mall, Ocean Metro Mall and Dasin E-Colour, has recovered to 94% of 1Q19 (pre-pandemic)’s level. Including Shunde Metro Mall and Tanbei Metro Mall (8Jul20), 1Q21 revenue (in RMB terms) increased 87.4% YoY to ~RMB127.3m</li>
<li>Overall portfolio committed occupancy stabilized at 96.1% (vs. 96.5% in 4Q20 and 96.1% in 3Q20). ~9,085sqm (12.7% of total Ocean Metro Mall NLA) of “furniture and finishing” space at the mall has been reconfigured in 4Q20 into a children’s education area, which brought a positive rental reversion of ~46%. Portfolio WALE stood at 5.9 years by NLA and 3.6 years by GRI. ~31.1% of GRI will be due for renewal in FY21E</li>
<li>Portfolio gearing stands at 37.2% (vs. 37.8% in 4Q20 and 38.5% in 3Q20). DASIN is currently negotiating with banks for extension of loans amounting to S$235.2m, which are due on 18Jul21</li>
<li>Mr. Zhang Zhencheng, Chairman and controlling shareholder of the Trustee-Manager, as well as Aqua Wealth Holdings Limited (a controlling unitholder of the Trust), had entered into a sale and purchase agreement with ARA DSRT (Holdings) and ARA Real Estate Investors 22 in pursuance of a strategic partnership with ARA Asset Management. ARA will acquire 50% of interest in the Trustee-Manager from Mr. Zhang Zhencheng, as well as ~5.0% of interest in DASIN from Aqua Wealth Holdings Limited in two separate tranches. The sale of 50% stake in Trustee-Manager and first tranche of DASIN’s units (2.5% stake) is expected to complete by May21</li>
<li>DASIN currently trades at 7.0% FY21E yield and 0.51x P/B.</li>
</ul>
Comments: 1Q21 Revenue forms 23.6% of our full-year FY21E revenue (based on avg. 1Q21 RMB/SGD of 4.8727). We are encouraged by Dasin E-Colour’s strong revenue recovery (to near pre-Covid level) despite a challenging occupancy profile of 86.5% (vs. portfolio average of 96.1% and 1Q20’s 91.9%), thus translating to a robust passing rent at ~RMB125.6psm pm with +107% YoY reversions. Meanwhile, its 2 mature assets, namely Shiqi Metro Mall and Xiaolan Metro Mall (contributed to ~45.6% of 1Q21 revenue), appear to be on track for a sustained recovery – upticks in both occupancy rates and passing rents. The two newly acquired Shunde Metro Mall and Tanbei Metro Mall should provide inorganic boost to with its full-year contributions (vs. 6 mths contributions in FY20). Notwithstanding a challenging leasing market (portfolio occupancy remains below pre-Covid level of 97-98%), DASIN’s lease structure with high fixed components (fixed rent and fixed rent with built-in escalation) at 82.8%% of Mar21 GRI, offer income stability somewhat. We have a BUY rating with TP of S$0.81/Unit for DASIN.
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/207/030/original/image021.png?1621332221" class="editor-image img-responsive" data-smartkarma-image-id="207030"></figure>
</section>

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




 


DASIN


SASSR


BHGREIT


CLCT




Period


1Q21


1Q21


1Q21


1Q21




Gross Revenue (S$ m)


Not Disclosed in SGD terms; RMB127.3m (+87.4% YoY); or RMB101.6m if w/o Shunde Metro Mall and Tanbei Metro Mall (+51.0% YoY)


EMA Rental Income: 34.1 (+23.4% YoY)


Not Disclosed


Not Disclosed




NPI (S$ m)


Not Disclosed


EMA Rental Income (Excluding straight-line adjustments): 32.3 (+27.8% YoY)


Not Disclosed


264.2 (RMB)




DPU (S$ c)


Not Disclosed


1.759 (+31.9% YoY)


Not Disclosed


Not Disclosed




NAV per Unit (S$)


1.41 (Based on 4Q20)


0.922


Not Disclosed


Not Disclosed




P/B (x)


0.510


1.00


0.64 (Based on 4Q20 NAV)


0.94 (Based on 4Q20 NAV)




Occupancy (%)


96.1


93.5


92.1


Retail: 94.4 Business Parks: 92.1




Reversion (%)


NA


Not Disclosed


Not Disclosed


Not Disclosed




Gearing (%)


37.2


27.6


35.6


35.1




Cost of Debt (%)


NA


3.3


3.8


2.51




1 Yr Fwd Yield (%)


6.99


7.46


NA


6.21




Debt Hedged (%)


NA


Not Disclosed


60% of offshore loans


~70




Target Price


S$0.81


NA


NA


NA




Rating


BUY


NA


NA


NA





Dasin Retail Trust (DASIN SP) 1Q21 Business Updates – Revenue recovered to 94% of pre-Covid level; ARA’s strategic stake underscores GBA’s potential

1Q21 revenue (in RMB terms; on same-mall basis) increased 51.0% YoY to ~RMB101.6m. Total revenues of the four malls (IPO portfolio), namely Shiqi Metro Mall, Xiaolan Metro Mall, Ocean Metro Mall and Dasin E-Colour, has recovered to 94% of 1Q19 (pre-pandemic)’s level. Including Shunde Metro Mall and Tanbei Metro Mall (8Jul20), 1Q21 revenue (in RMB terms) increased 87.4% YoY to ~RMB127.3m
Overall portfolio committed occupancy stabilized at 96.1% (vs. 96.5% in 4Q20 and 96.1% in 3Q20). ~9,085sqm (12.7% of total Ocean Metro Mall NLA) of “furniture and finishing” space at the mall has been reconfigured in 4Q20 into a children’s education area, which brought a positive rental reversion of ~46%. Portfolio WALE stood at 5.9 years by NLA and 3.6 years by GRI. ~31.1% of GRI will be due for renewal in FY21E
Portfolio gearing stands at 37.2% (vs. 37.8% in 4Q20 and 38.5% in 3Q20). DASIN is currently negotiating with banks for extension of loans amounting to S$235.2m, which are due on 18Jul21
Mr. Zhang Zhencheng, Chairman and controlling shareholder of the Trustee-Manager, as well as Aqua Wealth Holdings Limited (a controlling unitholder of the Trust), had entered into a sale and purchase agreement with ARA DSRT (Holdings) and ARA Real Estate Investors 22 in pursuance of a strategic partnership with ARA Asset Management. ARA will acquire 50% of interest in the Trustee-Manager from Mr. Zhang Zhencheng, as well as ~5.0% of interest in DASIN from Aqua Wealth Holdings Limited in two separate tranches. The sale of 50% stake in Trustee-Manager and first tranche of DASIN’s units (2.5% stake) is expected to complete by May21
DASIN currently trades at 7.0% FY21E yield and 0.51x P/B.

Comments: 1Q21 Revenue forms 23.6% of our full-year FY21E revenue (based on avg. 1Q21 RMB/SGD of 4.8727). We are encouraged by Dasin E-Colour’s strong revenue recovery (to near pre-Covid level) despite a challenging occupancy profile of 86.5% (vs. portfolio average of 96.1% and 1Q20’s 91.9%), thus translating to a robust passing rent at ~RMB125.6psm pm with +107% YoY reversions. Meanwhile, its 2 mature assets, namely Shiqi Metro Mall and Xiaolan Metro Mall (contributed to ~45.6% of 1Q21 revenue), appear to be on track for a sustained recovery – upticks in both occupancy rates and passing rents. The two newly acquired Shunde Metro Mall and Tanbei Metro Mall should provide inorganic boost to with its full-year contributions (vs. 6 mths contributions in FY20). Notwithstanding a challenging leasing market (portfolio occupancy remains below pre-Covid level of 97-98%), DASIN’s lease structure with high fixed components (fixed rent and fixed rent with built-in escalation) at 82.8%% of Mar21 GRI, offer income stability somewhat. We have a BUY rating with TP of S$0.81/Unit for DASIN.




ASEAN Builder's Scoop (18May21) - DASIN strategic investment from ARA

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/mapletree-commercial-trust" target="_blank" data-smartkarma-citation="entities:106" rel="noopener">Mapletree Commercial Trust (MCT SP)</a> to provide more tenant support amid stricter Covid-19 measures</h3>MCT said it is committed to providing the necessary rental and operating assistance to its retail tenants as Singapore tightens its Covid-19 measures till 13Jun. Since the start of the pandemic, MCT has implemented support packages comprising more than S$70m of rental rebates to help eligible retail tenants offset, on average, more than four months of fixed rent. This includes the passing on of property tax rebates, cash grants from the government and other mandated grants to qualifying tenants. MCT's properties have implemented health and safety protocols.Comments: Rental rebates are likely returning as F&amp;B tenants grapple with no-dining-in restrictions for ~1mo. We understand few tenants at Paragon have already requested for assistance but SPHREIT is still reviewing. We will keep track for every landlord’s decision and report accordingly.

SingaporeMapletree Commercial Trust (MCT SP) to provide more tenant support amid stricter Covid-19 measuresMCT said it is committed to providing the necessary rental and operating assistance to its retail tenants as Singapore tightens its Covid-19 measures till 13Jun. Since the start of the pandemic, MCT has implemented support packages comprising more than S$70m of rental rebates to help eligible retail tenants offset, on average, more than four months of fixed rent. This includes the passing on of property tax rebates, cash grants from the government and other mandated grants to qualifying tenants. MCT's properties have implemented health and safety protocols.Comments: Rental rebates are likely returning as F&amp;B tenants grapple with no-dining-in restrictions for ~1mo. We understand few tenants at Paragon have already requested for assistance but SPHREIT is still reviewing. We will keep track for every landlord’s decision and report accordingly.

ASEAN Builder's Scoop (17May21) - MCT to provide more tenant supports

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

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

<a href="https://www.smartkarma.com/entities/straits-trading-co-ltd" target="_blank" data-smartkarma-citation="entities:15745:1" rel="noopener">Straits Trading (STRTR SP)</a> was written up as a privatization candidate almost two months ago. <a href="https://www.smartkarma.com/insights/straits-trading-ripe-for-privatisation" target="_blank" data-smartkarma-citation="insights:44300" rel="noopener">Straits Trading - Ripe For Privatisation</a> by <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a>.We agree with David that Straits Trading is interesting but doubt a privatization is on the table. Straits Trading has been publicly traded since 1979 and the SGX listing is actually useful for the family behind TeCity (controlling shareholder is itself a family office). <div class="content-highlight">The crown jewel of Straits Trading is its 22% stake in <a href="https://www.smartkarma.com/entities/ara-asset-management" target="_blank" data-smartkarma-citation="entities:13301:1" rel="noopener">ARA Asset Management (ARA SP)</a>. ARA was delisted from the SGX by founder John Lim, Warburg Pincus, and Straits Trading in February 2017. We believe ARA gets relisted on the SGX between 2Q21 and 2Q22.</div>Assuming 120-150 billion SGD Assets Under Management at the time of IPO ARA could be valued between 6-7.5 billion SGD. This market cap would lead to entry into the STI Index relatively quickly.Assuming the above Straits Trading's 22% stake in ARA is potentially worth 1.32-1.65 billion SGD. Compare this to the current market cap of Straits Trading at 754 million SGD. Admittedly, there are some "if" and "but" that applies as we don't know the leverage of ARA at the time of IPO, the cost of its debt, and if markets will again apply an EV/AUM ratio of 5% (similar to its delisting in 2017). Still, risk/reward seems heavily skewed to the upside.Conclusion: if investment bank "ABC" approached you to invest in SGX's hottest 2021 IPO at a +/- 50% discount to its likely list price (with additional assets thrown in for free!) would you take the call?  + Free upside comes from its tin, real estate, and hospitality assets. While you wait the stock pays you a 3% dividend yield.

Straits Trading (STRTR SP) was written up as a privatization candidate almost two months ago. Straits Trading - Ripe For Privatisation by David Blennerhassett.We agree with David that Straits Trading is interesting but doubt a privatization is on the table. Straits Trading has been publicly traded since 1979 and the SGX listing is actually useful for the family behind TeCity (controlling shareholder is itself a family office). The crown jewel of Straits Trading is its 22% stake in ARA Asset Management (ARA SP). ARA was delisted from the SGX by founder John Lim, Warburg Pincus, and Straits Trading in February 2017. We believe ARA gets relisted on the SGX between 2Q21 and 2Q22.Assuming 120-150 billion SGD Assets Under Management at the time of IPO ARA could be valued between 6-7.5 billion SGD. This market cap would lead to entry into the STI Index relatively quickly.Assuming the above Straits Trading's 22% stake in ARA is potentially worth 1.32-1.65 billion SGD. Compare this to the current market cap of Straits Trading at 754 million SGD. Admittedly, there are some "if" and "but" that applies as we don't know the leverage of ARA at the time of IPO, the cost of its debt, and if markets will again apply an EV/AUM ratio of 5% (similar to its delisting in 2017). Still, risk/reward seems heavily skewed to the upside.Conclusion: if investment bank "ABC" approached you to invest in SGX's hottest 2021 IPO at a +/- 50% discount to its likely list price (with additional assets thrown in for free!) would you take the call?  + Free upside comes from its tin, real estate, and hospitality assets. While you wait the stock pays you a 3% dividend yield.

Straits Trading: Discounted Way into 2021 SGX's Hottest IPO

Singapore

ARA Asset Management Limited is a real estate fund management company that focuses on the management of public-listed real estate investment trusts, REITs. The Company manages REITs, private real estate funds, specialist equity funds and offers corporate finance advisory services.

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