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)

<h2>Singapore</h2><p>SREITs results in a glance (see detailed spreadsheet and calendar attached)</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/237/629/original/image_32975221321635260585172.png?1635260588" class="editor-image img-responsive" data-smartkarma-image-id="237629"></figure><h3><a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192" rel="noopener">Keppel REIT (KREIT SP)</a> 3Q21 Business Updates – Robust growth from acquisitions, healthy occupancy and collections</h3><ul><li>9M21 revenue and NPI increased by 34.8% and 36.8% YoY to S$162.2m (74.8% of BB est.) and S$129.4m (75.0% of BB est.), respectively. 9M21 DI was up 20.8% YoY to S$159.9m (83.3% of BB est.), mainly due to contributions from Victoria Police Centre, Pinnacle Office Park and Keppel Bay Tower. The increase in DI was partially offset by the impact of the divestment of 275 George Street in Jul21</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Keppel REIT (KREIT SP) 3Q21 Business Updates – Robust growth from acquisitions, healthy occupancy and collections9M21 revenue and NPI increased by 34.8% and 36.8% YoY to S$162.2m (74.8% of BB est.) and S$129.4m (75.0% of BB est.), respectively. 9M21 DI was up 20.8% YoY to S$159.9m (83.3% of BB est.), mainly due to contributions from Victoria Police Centre, Pinnacle Office Park and Keppel Bay Tower. The increase in DI was partially offset by the impact of the divestment of 275 George Street in Jul21

<h2>Singapore</h2><p>SREITs results in a glance (see detailed spreadsheet and calendar attached)</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/235/060/original/image_86658513151634177122386.png?1634177126" class="editor-image img-responsive" data-smartkarma-image-id="235060"></figure><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> 2Q22 DPU +18.8% YoY; Strong operational metrics with additional inorganic growth booster</h3><ul><li>1H22 revenue and NPI rose by 13.0% and 19.4% YoY, respectively, to S$65.2m (47.2% BB est.) and S$47.7m (55.5% BB est.), mainly due to acquisition of 7 Bulim Street (acquired in Oct20) and higher rental contribution from 7 Bulim Street, 20 Gul Way, 8 &amp; 10 Pandan Crescent and 541 Yishun Industrial Park A (new master tenant commenced in Jan21)</li><li>1H22 DPU surged 18.8% YoY to S$4.75c (50.0% BB est.). 2Q22 DPU also surged 25.0% YoY and 11.1% QoQ to S$2.50c</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)AIMS APAC REIT (AAREIT SP) 2Q22 DPU +18.8% YoY; Strong operational metrics with additional inorganic growth booster1H22 revenue and NPI rose by 13.0% and 19.4% YoY, respectively, to S$65.2m (47.2% BB est.) and S$47.7m (55.5% BB est.), mainly due to acquisition of 7 Bulim Street (acquired in Oct20) and higher rental contribution from 7 Bulim Street, 20 Gul Way, 8 &amp; 10 Pandan Crescent and 541 Yishun Industrial Park A (new master tenant commenced in Jan21)1H22 DPU surged 18.8% YoY to S$4.75c (50.0% BB est.). 2Q22 DPU also surged 25.0% YoY and 11.1% QoQ to S$2.50c

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/capitaland-china-trust" target="_blank" data-smartkarma-citation="entities:8859" rel="noopener">CapitaLand China Trust (CLCT SP)</a> maiden acquisition of four prime logistics properties; DPU accretive by +3.5%</h3><ul><li>CLCT has proposed to acquire a portfolio of four prime logistics assets in Shanghai, Kunshan, Wuhan and Chengdu, which are key logistics hubs in China. This marks CLCT’s first foray into China’s logistics sector and increases its exposure to new economy asset classes, following CLCT’s maiden purchase of a portfolio of five business park properties. The acquisition is based on an aggregate agreed property value of RMB1,683.4m (~S$350.7m), representing a discount of ~0.6% to the aggregate valuation by an independent valuer. CLCT’s total cost is estimated at ~S$297.7m</li><li>The portfolio of four modern logistics properties has a total GFA of 265,259sqm, with a committed occupancy of 96.3% and WALE of 2.1 years as at 31Aug21. Three of the properties were completed between 2016-18, while the fourth was completed in 2010. Classification of tenant base by GRI includes logistics and warehouse (57%), E-commerce (37%) and others (6%). More than 80% of the leases have rental escalations in place, with a step-up ranging from 3-5% per annum</li><li>The transaction implies NPI yield of 5.0% (including rent support and rent-free reimbursement). CLCT intends to finance the acquisition through a 60% debt and 40% EFR (raising of up to ~S$120m), which will be DPU accretive by +3.5% on a 31Dec21 pro forma basis. This transaction is expected to be completed by end of 2021. Post transaction gearing will be 38.2% (from 35.9%)</li><li>Post-acquisition, the proportion of new economy assets in CLCT’s enlarged portfolio will rise to 21.4% from 15.3% by asset value. AUM will increase by 8.0% to S$4,729.2m. Given the longer land tenure of China’s logistics properties at 50 years at inception compared with retail assets at 40 years at inception, the remaining weighted average land tenure expiry of CLCT’s enlarged portfolio will positively extend by 1.94 years post-acquisition</li><li>Under its five-year acquisition growth roadmap, CLCT plans to achieve a balanced portfolio mix of 40% in commercial/integrated developments, 30% in retail properties and 30% in new economy assets (including business parks, logistics and data centers) by 2026.</li></ul>

SingaporeCapitaLand China Trust (CLCT SP) maiden acquisition of four prime logistics properties; DPU accretive by +3.5%CLCT has proposed to acquire a portfolio of four prime logistics assets in Shanghai, Kunshan, Wuhan and Chengdu, which are key logistics hubs in China. This marks CLCT’s first foray into China’s logistics sector and increases its exposure to new economy asset classes, following CLCT’s maiden purchase of a portfolio of five business park properties. The acquisition is based on an aggregate agreed property value of RMB1,683.4m (~S$350.7m), representing a discount of ~0.6% to the aggregate valuation by an independent valuer. CLCT’s total cost is estimated at ~S$297.7mThe portfolio of four modern logistics properties has a total GFA of 265,259sqm, with a committed occupancy of 96.3% and WALE of 2.1 years as at 31Aug21. Three of the properties were completed between 2016-18, while the fourth was completed in 2010. Classification of tenant base by GRI includes logistics and warehouse (57%), E-commerce (37%) and others (6%). More than 80% of the leases have rental escalations in place, with a step-up ranging from 3-5% per annumThe transaction implies NPI yield of 5.0% (including rent support and rent-free reimbursement). CLCT intends to finance the acquisition through a 60% debt and 40% EFR (raising of up to ~S$120m), which will be DPU accretive by +3.5% on a 31Dec21 pro forma basis. This transaction is expected to be completed by end of 2021. Post transaction gearing will be 38.2% (from 35.9%)Post-acquisition, the proportion of new economy assets in CLCT’s enlarged portfolio will rise to 21.4% from 15.3% by asset value. AUM will increase by 8.0% to S$4,729.2m. Given the longer land tenure of China’s logistics properties at 50 years at inception compared with retail assets at 40 years at inception, the remaining weighted average land tenure expiry of CLCT’s enlarged portfolio will positively extend by 1.94 years post-acquisitionUnder its five-year acquisition growth roadmap, CLCT plans to achieve a balanced portfolio mix of 40% in commercial/integrated developments, 30% in retail properties and 30% in new economy assets (including business parks, logistics and data centers) by 2026.

<h2>Singapore</h2><h3>Office rents bottoming out in 3Q21, likely to head higher: Knight Frank, JLL</h3><ul><li>Office rents have turned a corner, bottoming out in 3Q21, according to Knight Frank. Prime-grade office rents in the Raffles Place/Marina Bay precinct grew for the first time since 4Q19, with rents rising by 0.2% QoQ to S$9.98psf per month. This came as the area's occupancy rates remained relatively stable, falling 0.7% QoQ to 93.6%, after 0.1%  growth in the previous quarter. Available pre-termination space also fell to about 76,000sqft in 3Q21, down 78.9% from 2Q21’s 360,000sqft</li><li>Growth in rents was also driven by Co-working operators, which expect demand for flexible work spaces to rise in the post-pandemic work environment. In Aug, co-working space providers The Executive Centre and The Great Room opened locations in the CBD spanning 38,736sqft and 37,000sqft, respectively</li><li>According to JLL, there is likely to be little or no office land releases in the CBD in the short to medium term. Guoco Midtown and Central Boulevard Towers are likely the last of fresh office injections on greenfield land within the CBD. Beyond that, we may see a reduction in office spaces as more older buildings are converted to mixed-use developments to take advantage of the CBD Incentive Scheme</li><li>Over the next few years, Grade-A office rents are expected to continue their climb, potentially gaining 23-30% by 2025. Demand for the upcoming supply of space from new office developments appears strong. For example, more than 90% of CapitaLand's upcoming integrated development CapitaSpring's space is already pre-committed or in advanced negotiations.</li></ul>

SingaporeOffice rents bottoming out in 3Q21, likely to head higher: Knight Frank, JLLOffice rents have turned a corner, bottoming out in 3Q21, according to Knight Frank. Prime-grade office rents in the Raffles Place/Marina Bay precinct grew for the first time since 4Q19, with rents rising by 0.2% QoQ to S$9.98psf per month. This came as the area's occupancy rates remained relatively stable, falling 0.7% QoQ to 93.6%, after 0.1%  growth in the previous quarter. Available pre-termination space also fell to about 76,000sqft in 3Q21, down 78.9% from 2Q21’s 360,000sqftGrowth in rents was also driven by Co-working operators, which expect demand for flexible work spaces to rise in the post-pandemic work environment. In Aug, co-working space providers The Executive Centre and The Great Room opened locations in the CBD spanning 38,736sqft and 37,000sqft, respectivelyAccording to JLL, there is likely to be little or no office land releases in the CBD in the short to medium term. Guoco Midtown and Central Boulevard Towers are likely the last of fresh office injections on greenfield land within the CBD. Beyond that, we may see a reduction in office spaces as more older buildings are converted to mixed-use developments to take advantage of the CBD Incentive SchemeOver the next few years, Grade-A office rents are expected to continue their climb, potentially gaining 23-30% by 2025. Demand for the upcoming supply of space from new office developments appears strong. For example, more than 90% of CapitaLand's upcoming integrated development CapitaSpring's space is already pre-committed or in advanced negotiations.

<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: 241.969px;"><p> </p></td><td style="width: 241.969px;"><p>CLCT</p></td><td style="width: 242.062px;"><p>AIT</p></td></tr><tr><td style="width: 241.969px;"><p>Period</p></td><td style="width: 241.969px;"><p>1H21</p></td><td style="width: 242.062px;"><p>1H21</p></td></tr><tr><td style="width: 241.969px;"><p>Gross Revenue (S$m)</p></td><td style="width: 241.969px;"><p>176.9 (74.2% YoY)</p></td><td style="width: 242.062px;"><p>95.4 (-4% YoY)</p></td></tr><tr><td style="width: 241.969px;"><p>NPI (S$m)</p></td><td style="width: 241.969px;"><p>120.3 (84.4% YoY)</p></td><td style="width: 242.062px;"><p>77.3 (+5% YoY)</p></td></tr><tr><td style="width: 241.969px;"><p>DPU (S$ c)</p></td><td style="width: 241.969px;"><p>4.23 (40.1% YoY)</p></td><td style="width: 242.062px;"><p>0.042 (-9% YoY)</p></td></tr><tr><td style="width: 241.969px;"><p>NAV per Unit (S$)</p></td><td style="width: 241.969px;"><p>1.57</p></td><td style="width: 242.062px;"><p>1.1</p></td></tr><tr><td style="width: 241.969px;"><p>P/B (x)</p></td><td style="width: 241.969px;"><p>0.86</p></td><td style="width: 242.062px;"><p>1.32</p></td></tr><tr><td style="width: 241.969px;"><p>Occupancy (%)</p></td><td style="width: 241.969px;"><p>95.4 (Retail)</p><p>94.0 (Business Park)</p></td><td style="width: 242.062px;"><p>90</p></td></tr><tr><td style="width: 241.969px;"><p>Reversion (%)</p></td><td style="width: 241.969px;"><p>-2.1 (Retail)</p><p>+6.7 (Business Park)</p></td><td style="width: 242.062px;"><p>+8 (Bangalore)</p><p>+12 (Chennai)</p><p>+7-16% (Hyderabad)</p><p>+21 (Pune)</p></td></tr><tr><td style="width: 241.969px;"><p>Gearing (%)</p></td><td style="width: 241.969px;"><p>35.9</p></td><td style="width: 242.062px;"><p>33</p></td></tr><tr><td style="width: 241.969px;"><p>Cost of Debt (%)</p></td><td style="width: 241.969px;"><p>2.57</p></td><td style="width: 242.062px;"><p>5.3</p></td></tr><tr><td style="width: 241.969px;"><p>1 Yr Fwd Yield (%)</p></td><td style="width: 241.969px;"><p>6.67</p></td><td style="width: 242.062px;"><p>6.41</p></td></tr><tr><td style="width: 241.969px;"><p>Debt Hedged (%)</p></td><td style="width: 241.969px;"><p>78</p></td><td style="width: 242.062px;"><p>77</p></td></tr><tr><td style="width: 241.969px;"><p>Target Price</p></td><td style="width: 241.969px;"><p>N/A</p></td><td style="width: 242.062px;"><p>N/A</p></td></tr><tr><td style="width: 241.969px;"><p>Rating</p></td><td style="width: 241.969px;"><p>N/A</p></td><td style="width: 242.062px;"><p>N/A</p></td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) CLCTAITPeriod1H211H21Gross Revenue (S$m)176.9 (74.2% YoY)95.4 (-4% YoY)NPI (S$m)120.3 (84.4% YoY)77.3 (+5% YoY)DPU (S$ c)4.23 (40.1% YoY)0.042 (-9% YoY)NAV per Unit (S$)1.571.1P/B (x)0.861.32Occupancy (%)95.4 (Retail)94.0 (Business Park)90Reversion (%)-2.1 (Retail)+6.7 (Business Park)+8 (Bangalore)+12 (Chennai)+7-16% (Hyderabad)+21 (Pune)Gearing (%)35.933Cost of Debt (%)2.575.31 Yr Fwd Yield (%)6.676.41Debt Hedged (%)7877Target PriceN/AN/ARatingN/AN/A

ASEAN Builder's Scoop (29Jul21) - CLCT Consecutive Quarterly Improvements

Singapore

Capitaland China Trust is a shopping mall real estate investment trust. The trust was established with the objective of investing on a long term basis in a diversified portfolio of income -producing real estate used primarily for retail purposed and located in China.

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CapitaLand China Trust (CLCT SP)

ASEAN Builder's Scoop (26Oct21)

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CLCT maiden acquisition of logistics assets; AREIT obtains SEC approval for swap deal; CLI 9M21 sales reached record level; LPKR 9M21 sales reached...

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Office rents bottoming in 3Q21; IOIPG awarded Marina View site; CLI breaks ground Mandaue project; MREIT listing moved back; IHB begins RM380m...

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ASEAN Builder's Scoop (29Jul21) - CLCT Consecutive Quarterly Improvements

CLCT consecutive quarterly improvements; AIT healthy collections, robust reversions; EREIT unvexed by Phase 2; Phils remaining tax reforms still...

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