Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Overstated 3Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 3Q21 results of SGD 1.7 bn, flat linked quarter. When one accounts for the unnecessary negative loss provision of SGD 70 mn (down 188.6%) while credit was weaker, DBS’ results would appear to be grossly overstated;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. We feel that reserves should be shored up in the neighborhood of SGD 1.1 bn – amounting now to about a half quarter of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

*Overstated 3Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 3Q21 results of SGD 1.7 bn, flat linked quarter. When one accounts for the unnecessary negative loss provision of SGD 70 mn (down 188.6%) while credit was weaker, DBS’ results would appear to be grossly overstated;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. We feel that reserves should be shored up in the neighborhood of SGD 1.1 bn – amounting now to about a half quarter of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

DBS Group Holdings – Pushing The Envelope

*Challenging Result: Oversea Chinese Banking Corp. (OCBC.SP) [OCBC] reported 3Q21 net profit of SGD 1.2 bn, a SGD 64 mn (5.5%) increase on a linked quarter basis. OCBC’s bottom-line improvement was primarily attributable to a decrease in loss provisions, as credit risk remains elevated; a tax rate decline; and stronger insurer earnings; and*Credit Breaking Down Again: By our calculation, we find that net new NPL growth has increased again to SGD 448 mn or 44.9% on an annualized basis. Given the increase in net new NPLs, reserve would appear to now be wanting by SGD 2.0 bn plus or just under two quarters of bottom-line results.

*Challenging Result: Oversea Chinese Banking Corp. (OCBC.SP) [OCBC] reported 3Q21 net profit of SGD 1.2 bn, a SGD 64 mn (5.5%) increase on a linked quarter basis. OCBC’s bottom-line improvement was primarily attributable to a decrease in loss provisions, as credit risk remains elevated; a tax rate decline; and stronger insurer earnings; and*Credit Breaking Down Again: By our calculation, we find that net new NPL growth has increased again to SGD 448 mn or 44.9% on an annualized basis. Given the increase in net new NPLs, reserve would appear to now be wanting by SGD 2.0 bn plus or just under two quarters of bottom-line results.

Oversea Chinese Banking Corp.- Negative Jaws & Weaker Credit

APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC 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.

<a href="https://www.smartkarma.com/entities/suntec-reit" target="_blank" data-smartkarma-citation="entities:151:1" rel="noopener">Suntec REIT (SUN SP)</a> reported its 3Q21 business updates pre-market on 22 Oct 21. In this note, we will analyze its performance for the period, current capital management, and share our thoughts on its outlook.

Suntec REIT (SUN SP) reported its 3Q21 business updates pre-market on 22 Oct 21. In this note, we will analyze its performance for the period, current capital management, and share our thoughts on its outlook.

Suntec REIT 3Q21 - Higher Topline and Gearing, Only Difference Is the Former Was One-Off

CapitaLand Ascendas REIT / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/ascendas-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:39:1" rel="noopener">Ascendas Real Estate Investment Trust (AREIT SP)</a> reported its 3Q21 business updates post-market on 19 Oct 21. In this note, we will analyze its performance for the period, current capital management, and share our thoughts on its outlook.

Ascendas Real Estate Investment Trust (AREIT SP) reported its 3Q21 business updates post-market on 19 Oct 21. In this note, we will analyze its performance for the period, current capital management, and share our thoughts on its outlook.

Ascendas REIT 3Q21 - Data Centres Could Unlock Re-Rating Opportunity

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934:1" rel="noopener">ESR-REIT (EREIT SP)</a> announced the proposed merger with <a href="https://www.smartkarma.com/entities/ara-logos-logistics-trust" target="_blank" data-smartkarma-citation="entities:937:1" rel="noopener">ARA LOGOS (ALLT SP)</a> by way of a trust scheme of arrangement. Under the scheme consideration, each ALLT unitholder will receive S$0.095 in cash and 1.6765 new EREIT units at an issue price of S$0.510. The total consideration implies a gross exchange ratio of 1.863x and a total scheme consideration of S$0.950 per ALLT unit, which is a 1.6% premium to the ALLT last close price of S$0.935 per unit (on 14 October). The merger was widely anticipated to avoid conflicts of interest arising from the proposed acquisition of ARA Asset Management by <a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a> for a total consideration of US$5.2 billion, which was announced on 5 August 2021. ESR Cayman which owns 67% of EREIT’s manager would also own 100% of ALLT’s manager on completion of the acquisition resulting in overlapping investment mandates.A key issue is on pricing particularly the EREIT issue price of S$0.510 which is based on EREIT’s 52-week high. Notably, at the last close EREIT price of S$0.465, implies a scheme consideration of S$0.875 per ALLT unit, which is a -6.5% discount to the ALLT last close price of S$0.935 per unit (on 14 October). <div class="content-highlight">As the cash consideration represents just 10% of the total scheme consideration, ALLT unitholders have greater exposure to any post-merger share price gains driven by the enlarged REIT’s higher free float, lower cost of capital, cost savings and higher growth potential. While short-term pricing concerns will linger, we note that the scheme consideration even at the last close EREIT price seems reasonable. Consequently, we believe that the merger will get the nod from both sets of unitholders.</div>

ESR-REIT (EREIT SP) announced the proposed merger with ARA LOGOS (ALLT SP) by way of a trust scheme of arrangement. Under the scheme consideration, each ALLT unitholder will receive S$0.095 in cash and 1.6765 new EREIT units at an issue price of S$0.510. The total consideration implies a gross exchange ratio of 1.863x and a total scheme consideration of S$0.950 per ALLT unit, which is a 1.6% premium to the ALLT last close price of S$0.935 per unit (on 14 October). The merger was widely anticipated to avoid conflicts of interest arising from the proposed acquisition of ARA Asset Management by ESR Cayman (1821 HK) for a total consideration of US$5.2 billion, which was announced on 5 August 2021. ESR Cayman which owns 67% of EREIT’s manager would also own 100% of ALLT’s manager on completion of the acquisition resulting in overlapping investment mandates.A key issue is on pricing particularly the EREIT issue price of S$0.510 which is based on EREIT’s 52-week high. Notably, at the last close EREIT price of S$0.465, implies a scheme consideration of S$0.875 per ALLT unit, which is a -6.5% discount to the ALLT last close price of S$0.935 per unit (on 14 October). As the cash consideration represents just 10% of the total scheme consideration, ALLT unitholders have greater exposure to any post-merger share price gains driven by the enlarged REIT’s higher free float, lower cost of capital, cost savings and higher growth potential. While short-term pricing concerns will linger, we note that the scheme consideration even at the last close EREIT price seems reasonable. Consequently, we believe that the merger will get the nod from both sets of unitholders.

ESR-REIT’s Proposed Merger with ARA LOGOS

Singapore

CapitaLand Ascendas REIT is an industrial real estate investment trust. The Trust invests in business and science park properties, integrated development, amenities, and retail (IDAR) properties, high-specifications industrial properties and data centers, light industrial and flatted factories, and logistics and distribution centers.

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CapitaLand Ascendas REIT (CLAR SP)

DBS Group Holdings – Pushing The Envelope

DBS: DBS reported flat 3Q21 QOQ results. Accounting for the unnecessary negative loss provision of SGD 70 mn (down 188.6%) while credit was weaker,...

Thomas J. Monaco

Oversea Chinese Banking Corp.- Negative Jaws & Weaker Credit

OCBC: OCBC reported a QOQ 3Q21 net profit increase of 5.5%, as it pulled on numerous levers. Net new NPL growth increased 44.9% annualized, and...

Thomas J. Monaco

Suntec REIT 3Q21 - Higher Topline and Gearing, Only Difference Is the Former Was One-Off

Suntec REIT (SUN SP) reported its 3Q21 business updates pre-market on 22 Oct 21. In this note, we will analyze its performance, current capital...

Clarence Chu

Ascendas REIT 3Q21 - Data Centres Could Unlock Re-Rating Opportunity

Ascendas Real Estate Investment Trust (AREIT SP) reported its 3Q21 business updates post-market on 19 Oct 21. In this note, we will analyze its...

Clarence Chu

ESR-REIT’s Proposed Merger with ARA LOGOS

A key issue is on pricing particularly the EREIT issue price of S$0.510, based on EREIT’s 52-week high. While short-term pricing concerns will...

Arun George

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