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

Partner, River Valley Asset Management

River Valley Asset Management

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Singapore-based boutique asset management firm

River Valley Asset Management is a Singapore-based boutique asset management firm. Our team at RVAM strongly believes in being a trusted steward of our clients' wealth across generations.

Each of our fund managers has years of rich portfolio management experience over multiple market cycles at world-class investment houses. We bring our clients the combined strength of our investment team to manage their financial portfolios and to provide bespoke guidance on all aspects of their financial health.

We offer multi-asset class expert investment advice to accredited investors who are family offices, high net worth individuals and institutional investors to preserve and grow our clients' wealth.

The fund management team of the company includes Homiyar Vasania, Anand Ramachandran and Jamshed Desai.

As a mature economy with stable businesses, Singapore's equity benchmarks are dominated by Banks &amp; Government Linked Companies (GLC's) which have grown large over time. The large listed companies in Singapore (private as well as GLC’s) are now facing headwinds from tight labour markets resulting in rising costs and, in the absence of growth, the need to focus on raising productivity.  It is therefore not surprising that the Singapore markets do not excite the average investor. However, within this space we have been finding many hidden gems which have consistently delivered and increasingly fit the needs of a Singaporean investor looking for stable returns in a low growth environment: the REIT marketplace. Over the last seven years the REIT index has delivered over 10% p.a. annualized return which stands in stark contrast to the meagre 4% returns from benchmark STI index.

As a mature economy with stable businesses, Singapore's equity benchmarks are dominated by Banks &amp; Government Linked Companies (GLC's) which have grown large over time. The large listed companies in Singapore (private as well as GLC’s) are now facing headwinds from tight labour markets resulting in rising costs and, in the absence of growth, the need to focus on raising productivity.   It is therefore not surprising that the Singapore markets do not excite the average investor. However, within this space we have been finding many hidden gems which have consistently delivered and increasingly fit the needs of a Singaporean investor looking for stable returns in a low growth environment: the REIT marketplace. Over the last seven years the REIT index has delivered over 10% p.a. annualized return which stands in stark contrast to the meagre 4% returns from benchmark STI index.

Invest, Trade and Save in Singapore, Syfe

Syfe

Invest, Trade and Save in Singapore

Syfe is an investment platform offering Managed Portfolios, Brokerage services, and Cash Management solutions to help people build wealth for a better future.

Equity Bottom-Up

<ul>
<li>CapitaLand China Trust (“CLCT SP”) is a Singapore-listed real estate investment trust.  It is the first and largest China-focused REIT among S-REITs with its portfolio comprising 71.4% retail malls, 25.1% business park assets and 3.5% logistics parks, on gross rental income (“GRI”) basis.</li>
<li>In terms of portfolio, CLCT SP owns and operates 9 retail malls, 5 business parks and 4 logistics parks, with all of them located in China top-tier cities. The assets are valued at RMB24bn as of the end of 2024.</li>
<li>CLCT SP is a pure play on China, with &gt;70% of its assets in retail.  We think CLCT SP offers unique exposure to investors who are bullish on China and betting on an economic recovery, while providing stable yields. </li>
</ul>


CapitaLand China Trust (“CLCT SP”) is a Singapore-listed real estate investment trust.  It is the first and largest China-focused REIT among S-REITs with its portfolio comprising 71.4% retail malls, 25.1% business park assets and 3.5% logistics parks, on gross rental income (“GRI”) basis.
In terms of portfolio, CLCT SP owns and operates 9 retail malls, 5 business parks and 4 logistics parks, with all of them located in China top-tier cities. The assets are valued at RMB24bn as of the end of 2024.
CLCT SP is a pure play on China, with &gt;70% of its assets in retail.  We think CLCT SP offers unique exposure to investors who are bullish on China and betting on an economic recovery, while providing stable yields. 


Capitaland China Trust (CLCT SP) A Proxy To China’s Economic Recovery

Singapore

CapitaLand China Trust is Singapore's largest China-focused real estate investment trust (REIT). It invests in a diversified portfolio of income-producing retail, office, and industrial properties, including shopping malls, business parks, and logistics facilities, across various cities in China, Hong Kong, and Macau. The company was founded in 2006 and is headquartered in Singapore.

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CapitaLand China (CLCT SP)

ASEAN Builder's Scoop (12Oct21)

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ASEAN Builder's Scoop (30Sep21)

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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...

SCCM Asia Research

Singapore - The Hidden Gems

As a mature economy with stable businesses, Singapore's equity benchmarks are dominated by Banks & Government Linked Companies (GLC's) which...

River Valley Asset Management

Capitaland China Trust (CLCT SP) A Proxy To China’s Economic Recovery

CapitaLand China Trust (“CLCT SP”) is a Singapore-listed real estate investment trust. It is the first and largest China-focused REIT among...

Syfe

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