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

Equity Bottom-Up

<p><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>.</p><p><strong>We agree with David that Straits Trading is interesting but doubt a privatization is on the table. </strong>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). </p><div class="content-highlight"><p>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. <strong>We believe ARA gets relisted on the SGX between 2Q21 and 2Q22.</strong></p></div><p>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.</p><p>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.</p><p><strong>Conclusion:</strong> 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? </p><p> + Free upside comes from its tin, real estate, and hospitality assets. While you wait the stock pays you a 3% dividend yield.</p>

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

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Event-Driven

<p>In this Smartkarma Webinar, <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> will discuss the hostile situation between <a href="https://www.smartkarma.com/entities/cromwell-property-group" target="_blank" data-smartkarma-citation="entities:2780:1" rel="noopener">Cromwell Property (CMW AU)</a> and ARA Asset Management, further described in <a href="https://www.smartkarma.com/insights/cromwell-ara-a-festering-relationship" target="_blank" data-smartkarma-citation="insights:40614" rel="noopener">Cromwell/ARA: A Festering Relationship</a>.</p><div><h3>The webinar will be hosted on Wednesday, 15/July/2020, 5.00pm SGT/HKT.</h3></div><hr><div><div><div class="content-highlight"><h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=83779111093" target="_blank" rel="noopener">Register for the Webinar here</a></h2></div></div></div><hr><div><p>David is a highly experienced analyst with more than 20 years covering Asia Pacific equities, the past 13 years immersed in event strategies encompassing M&amp;A risk arbitrage, directional long/short, stub trades and restructuring.</p></div>

In this Smartkarma Webinar, David Blennerhassett will discuss the hostile situation between Cromwell Property (CMW AU) and ARA Asset Management, further described in Cromwell/ARA: A Festering Relationship.The webinar will be hosted on Wednesday, 15/July/2020, 5.00pm SGT/HKT.Register for the Webinar hereDavid is a highly experienced analyst with more than 20 years covering Asia Pacific equities, the past 13 years immersed in event strategies encompassing M&amp;A risk arbitrage, directional long/short, stub trades and restructuring.

Smartkarma Webinar | Cromwell/​ARA: A Festering Relationship

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Credit

Lippo Malls Indonesia Retail Trust / Credit

<p style="text-align: justify;">We initiate our coverage on <a href="https://www.smartkarma.com/entities/lippo-malls-indonesia-retail-trust" target="_blank" data-smartkarma-citation="entities:10946:1" rel="noopener">Lippo Malls Indonesia Retail Trust (LMRT SP)</a> (LMIRT)’s SGD bonds with an <strong>NEUTRAL</strong> recommendation on LMRTSP 4.15% maturing on 22-June 2020 (less than a month from the time of this report) at 5.6% yield-to-maturity (YTM) at the time of this report, and an <strong>UNDERWEIGHT </strong>recommendation on its other three bonds including two perpetual bonds (LMRTSP 6.6% and 7% Perpetual (in SGD)) and LMRTSP 7.25% 6/24 (in USD)).</p><p style="text-align: justify;">Our recommendations are based on our expectation of LMIRT’s sufficient liquidity to redeem LMRTS 6/20s in 2Q’20 on our expectation of a significant deterioration in LMIRT’s operating earnings this quarter as a result of COVID-19. However, we believe LMIRT 6/20s are simply not attractive versus peers.</p><p style="text-align: justify;">We question LMIRT’s liquidity beyond this quarter. We are less certain about the company’s liquidity position beyond 2Q’20 on a possible extension of closure of its retail malls and spaces due to the prolonged COVID-19 pandemic and the company’s proposed SGD325.4mn acquisition of Strata Title Units of Lippo Mall Puri expectedly to be completed no later than end-2020 while funding sources for this acquisition remain unclear.   </p><p style="text-align: justify;">If COVID-19 prolongs, resulting in continued mall closures in June and going into 3Q’20, LMIRT’s revenue could break Moody’s threshold of 15% revenue decline in 2020, triggering Moody’s to downgrade LMIRT’s rating.  We also do not rule out any preemptive downgrade if there is some certainty on, e.g., a delay of the scheduled asset divestments that will show that the company’s liquidity position is dire leading to a possible default on LMIRT’s obligations. </p><p style="text-align: justify;">Uncertainty over LMIRT’s cashflow and downgrade risk this year is asymmetrical downside risk which leads us not to recommend buying its other longer-dated bonds, including LMRTSP 6/24s at 12.5% YTM which we believe could go even higher.</p>

We initiate our coverage on Lippo Malls Indonesia Retail Trust (LMRT SP) (LMIRT)’s SGD bonds with an NEUTRAL recommendation on LMRTSP 4.15% maturing on 22-June 2020 (less than a month from the time of this report) at 5.6% yield-to-maturity (YTM) at the time of this report, and an UNDERWEIGHT recommendation on its other three bonds including two perpetual bonds (LMRTSP 6.6% and 7% Perpetual (in SGD)) and LMRTSP 7.25% 6/24 (in USD)).Our recommendations are based on our expectation of LMIRT’s sufficient liquidity to redeem LMRTS 6/20s in 2Q’20 on our expectation of a significant deterioration in LMIRT’s operating earnings this quarter as a result of COVID-19. However, we believe LMIRT 6/20s are simply not attractive versus peers.We question LMIRT’s liquidity beyond this quarter. We are less certain about the company’s liquidity position beyond 2Q’20 on a possible extension of closure of its retail malls and spaces due to the prolonged COVID-19 pandemic and the company’s proposed SGD325.4mn acquisition of Strata Title Units of Lippo Mall Puri expectedly to be completed no later than end-2020 while funding sources for this acquisition remain unclear.   If COVID-19 prolongs, resulting in continued mall closures in June and going into 3Q’20, LMIRT’s revenue could break Moody’s threshold of 15% revenue decline in 2020, triggering Moody’s to downgrade LMIRT’s rating.  We also do not rule out any preemptive downgrade if there is some certainty on, e.g., a delay of the scheduled asset divestments that will show that the company’s liquidity position is dire leading to a possible default on LMIRT’s obligations. Uncertainty over LMIRT’s cashflow and downgrade risk this year is asymmetrical downside risk which leads us not to recommend buying its other longer-dated bonds, including LMRTSP 6/24s at 12.5% YTM which we believe could go even higher.

Lippo Malls Indonesia Retail Trust: No Malls, No Mercy

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

<p><a href="https://www.smartkarma.com/entities/27983" target="_blank" data-smartkarma-citation="entities:27983:1">ESR Cayman (ESR HK)</a> aims to raise up to US$1.2bn in its planned Hong Kong listing. The company is backed by Warburg Pincus.</p><p>In my earlier insights:</p><ul>
<li>I touched upon the company's business model and provided an overview of its operations, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-a-giant-in-the-making" target="_blank">ESR Cayman Pre-IPO - A Giant in the Making</a>; </li>
<li>Talked about the financials and the drivers for each of the three segments, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-earnings-and-segment-analysis" target="_blank">ESR Cayman Pre-IPO - Earnings and Segment Analysis</a>.</li>
<li>Derived valuation for each of the segments: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-first-stab-at-valuation" target="_blank">ESR Cayman Pre-IPO- First Stab at Valuation</a>
</li>
<li>Provided updates from the PHIP: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updates-from-phip-growth-remains-on-track" target="_blank">ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track</a>
</li>
<li>Provided an update on valuations and key risks: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updated-valuation-and-key-risks" target="_blank">ESR Cayman Pre-IPO - Updated Valuation and Key Risks</a>
</li>
<li>Did a quick comparison with peers: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-peer-comparison-quick-take-bigger-than-some-much-smaller-than-others" target="_blank">ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others</a>
</li>
</ul><p>In this insight, I'll run the deal through our framework and comment on final valuations.</p>

ESR Cayman (ESR HK) aims to raise up to US$1.2bn in its planned Hong Kong listing. The company is backed by Warburg Pincus.In my earlier insights:
I touched upon the company's business model and provided an overview of its operations, ESR Cayman Pre-IPO - A Giant in the Making; 
Talked about the financials and the drivers for each of the three segments, ESR Cayman Pre-IPO - Earnings and Segment Analysis.
Derived valuation for each of the segments: ESR Cayman Pre-IPO- First Stab at Valuation

Provided updates from the PHIP: ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track

Provided an update on valuations and key risks: ESR Cayman Pre-IPO - Updated Valuation and Key Risks

Did a quick comparison with peers: ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others

In this insight, I'll run the deal through our framework and comment on final valuations.

ARA US Hospitality Trust / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/28048" target="_blank" data-smartkarma-citation="entities:28048:1">ARA US Hospitality Trust (HOTEL SP)</a> (ARAHT) plans to raise upto US$450m via its IPO on SGX. The initial portfolio comprises of 38 hotels in the US and was recently purchased by ARA from Lone Star. Lone Star in turn had bought the assets from <a href="https://www.smartkarma.com/entities/1912" target="_blank" data-smartkarma-citation="entities:1912:1">Hyatt Hotels Corp Cl A (H US)</a> in 2014.</p>
<p>ARAHT is being offered at 7.8% FY19 and 8.0% FY20 yield. Over the past few years, the portfolio hasn't really recorded much growth. The Hyatt House brand has been doing better than the Hyatt Place Hotels. ARAHT expects this trend to reverse going forward, for reasons that haven't been mentioned. Even then, the forecast growth rate is only of 3.2%.</p>
<p>Moreover as most of the assets were recently refurbished there don't seem to be any asset enhancement opportunities. To add to that, the sponsor doesn't have a ready pipeline of assets either for future injections.</p>

ARA US Hospitality Trust (HOTEL SP) (ARAHT) plans to raise upto US$450m via its IPO on SGX. The initial portfolio comprises of 38 hotels in the US and was recently purchased by ARA from Lone Star. Lone Star in turn had bought the assets from Hyatt Hotels Corp Cl A (H US) in 2014.
ARAHT is being offered at 7.8% FY19 and 8.0% FY20 yield. Over the past few years, the portfolio hasn't really recorded much growth. The Hyatt House brand has been doing better than the Hyatt Place Hotels. ARAHT expects this trend to reverse going forward, for reasons that haven't been mentioned. Even then, the forecast growth rate is only of 3.2%.
Moreover as most of the assets were recently refurbished there don't seem to be any asset enhancement opportunities. To add to that, the sponsor doesn't have a ready pipeline of assets either for future injections.

ARA US Hospitality Trust IPO - Matured Portfolio with Few Signs of Growth

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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ARA Asset Management (ARA SP)

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

Straits Trading offers a discounted way to invest in what is likely going to be the hottest IPO on the SGX in 2021. If our thesis is right Straits...

Nicolas Van Broekhoven

Smartkarma Webinar | Cromwell/ARA: A Festering Relationship

In this Smartkarma Webinar, David Blennerhassett will discuss the hostile situation between Cromwell Property (CMW AU) and ARA Asset Management,...

Smartkarma Research

Lippo Malls Indonesia Retail Trust: No Malls, No Mercy

We initiate our coverage on Lippo Malls Indonesia Retail Trust (LMRT SP) (LMIRT)’s SGD bonds with an NEUTRAL recommendation on LMRTSP 4.15%...

Bondcritic

ESR Cayman IPO - Richly Valued

ESR Cayman (ESR HK) aims to raise up to US$1.2bn in its planned Hong Kong listing. The company is backed by Warburg Pincus.In my earlier...

Sumeet Singh

ARA US Hospitality Trust IPO - Matured Portfolio with Few Signs of Growth

ARA US Hospitality Trust (HOTEL SP) (ARAHT) plans to raise upto US$450m via its IPO on SGX. The initial portfolio comprises of 38 hotels in the US...

Sumeet Singh

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

Straits Trading offers a discounted way to invest in what is likely going to be the hottest IPO on the SGX in 2021. If our thesis is right Straits...

Nicolas Van Broekhoven

Smartkarma Webinar | Cromwell/​ARA: A Festering Relationship

In this Smartkarma Webinar, David Blennerhassett will discuss the hostile situation between Cromwell Property (CMW AU) and ARA Asset Management,...

Smartkarma Research

Lippo Malls Indonesia Retail Trust: No Malls, No Mercy

We initiate our coverage on Lippo Malls Indonesia Retail Trust (LMRT SP) (LMIRT)’s SGD bonds with an NEUTRAL recommendation on LMRTSP 4.15%...

Bondcritic

ESR Cayman IPO - Richly Valued

ESR Cayman (ESR HK) aims to raise up to US$1.2bn in its planned Hong Kong listing. The company is backed by Warburg Pincus.In my earlier...

Sumeet Singh

ARA US Hospitality Trust IPO - Matured Portfolio with Few Signs of Growth

ARA US Hospitality Trust (HOTEL SP) (ARAHT) plans to raise upto US$450m via its IPO on SGX. The initial portfolio comprises of 38 hotels in the US...

Sumeet Singh

Smartkarma Webinar | Cromwell/ARA: A Festering Relationship