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

Yoma Strategic Holdings / Equity Bottom-Up

Key Singapore Market Moves and Flows in July

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<strong>While ending the week up 0.2%, mid-week moves saw the STI decline 1.3% on Monday, before gaining 1.3% on Thursday. Within the STI, the biggest gainers for the week were CapitaLand, SGX and YZJ averaging 3.9% gains while CICT, Keppel DC REIT &amp; Thai Bev led the decliners, averaging 1.9% declines.  </strong><br>
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	<li>
<strong>CapitaLand was recipient to S$74 million of net institutional inflow over the four sessions, turning the 2021 YTD net institutional flows for the stock from net outflows of S$21 million to net inflows of S$53 million. CapitaLand also led all Singapore-listed stocks in the net institutional inflows logged for the week.  </strong><br>
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<strong>CapitaLand has attributed its 25.0% price gain this year to the significant restructure to sharpen its strategic focus to create CapitaLand Investment (“CLI”) built to be a leading listed global Real Estate Investment Manager, with a strong Asia foothold comprising funds management, lodging management, stakes in listed funds, stakes in unlisted funds and investment properties. </strong><br>
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	<li><strong>The CapitaLand/CLI EGM and Scheme Meeting is scheduled for 10 Aug, and if approved, the expected date for the delisting of CapitaLand and listing of CLI Shares is on or around 17 Sept 2021 (click <a href="https://links.sgx.com/1.0.0/corporate-announcements/CTY4YULXETR21OII/675564_CapitaLand%20Presentation%20on%20Proposed%20Restructuring%2023%20Jul%202021%20.pdf">here</a> for more).</strong></li>
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<p><br>
While the Straits Times Index (“STI”) was little changed on the week, posting a modest 0.2% gain to 3,157.05, a mid-week readjustment in economic sentiment saw the Singapore benchmark. On Monday the STI declined 1.3%, with Tuesday closed for the Hari Raya Haji holiday, and on Thursday the STI gained 1.3%. While the combined net institutional flow for the 30 STI stocks over the four sessions was S$37 million in outflow, the highly diversified stocks saw flows ranging from S$74.1 million in net institutional inflows for CapitaLand to S$28.3 million in net institutional outflow for United Overseas Bank.</p>
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While ending the week up 0.2%, mid-week moves saw the STI decline 1.3% on Monday, before gaining 1.3% on Thursday. Within the STI, the biggest gainers for the week were CapitaLand, SGX and YZJ averaging 3.9% gains while CICT, Keppel DC REIT &amp; Thai Bev led the decliners, averaging 1.9% declines.   
	 
	
CapitaLand was recipient to S$74 million of net institutional inflow over the four sessions, turning the 2021 YTD net institutional flows for the stock from net outflows of S$21 million to net inflows of S$53 million. CapitaLand also led all Singapore-listed stocks in the net institutional inflows logged for the week.   
	 
	
CapitaLand has attributed its 25.0% price gain this year to the significant restructure to sharpen its strategic focus to create CapitaLand Investment (“CLI”) built to be a leading listed global Real Estate Investment Manager, with a strong Asia foothold comprising funds management, lodging management, stakes in listed funds, stakes in unlisted funds and investment properties.  
	 
	The CapitaLand/CLI EGM and Scheme Meeting is scheduled for 10 Aug, and if approved, the expected date for the delisting of CapitaLand and listing of CLI Shares is on or around 17 Sept 2021 (click here for more).

 
While the Straits Times Index (“STI”) was little changed on the week, posting a modest 0.2% gain to 3,157.05, a mid-week readjustment in economic sentiment saw the Singapore benchmark. On Monday the STI declined 1.3%, with Tuesday closed for the Hari Raya Haji holiday, and on Thursday the STI gained 1.3%. While the combined net institutional flow for the 30 STI stocks over the four sessions was S$37 million in outflow, the highly diversified stocks saw flows ranging from S$74.1 million in net institutional inflows for CapitaLand to S$28.3 million in net institutional outflow for United Overseas Bank.



CapitaLand Led STI Last Week with 5% Gain on S$74M Net Insti Inflow

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-ltd" target="_blank" data-smartkarma-citation="entities:55" rel="noopener">Capitaland (CAPL SP)</a> restructuring plan is deemed 'fair and reasonable'</h3><ul><li>CAPL proposed to split its business into a privately held real estate development arm, CapitaLand Investment (CLI), which would become the largest real estate investment manager (REIM) on the Singapore bourse, with pro forma real estate AUM of ~S$115bn as at 31De20. Under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage, as the pro forma net debt-to-equity ratio of 0.56 times for CLI, against CAPL’s net debt to equity of 0.68 times as at 31Dec20</li><li>Evercore Asia, the IFA, has called the value of the deal fair and reasonable from a financial point of view, as of the latest practicable date and shareholders can also choose to sell their shares on the open market, if they can get a higher price</li><li>The implied consideration represents a premium over the volume-weighted average price up to date of the restructuring announcement. The implied value in the deal includes both a consideration of S$4.102/share and the FY20 dividend for those who held shares by 4May21. CAPL will hold an EGM and a scheme meeting on 10Aug21 for shareholders to decide on the planned transaction.</li></ul>

SingaporeCapitaland (CAPL SP) restructuring plan is deemed 'fair and reasonable'CAPL proposed to split its business into a privately held real estate development arm, CapitaLand Investment (CLI), which would become the largest real estate investment manager (REIM) on the Singapore bourse, with pro forma real estate AUM of ~S$115bn as at 31De20. Under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage, as the pro forma net debt-to-equity ratio of 0.56 times for CLI, against CAPL’s net debt to equity of 0.68 times as at 31Dec20Evercore Asia, the IFA, has called the value of the deal fair and reasonable from a financial point of view, as of the latest practicable date and shareholders can also choose to sell their shares on the open market, if they can get a higher priceThe implied consideration represents a premium over the volume-weighted average price up to date of the restructuring announcement. The implied value in the deal includes both a consideration of S$4.102/share and the FY20 dividend for those who held shares by 4May21. CAPL will hold an EGM and a scheme meeting on 10Aug21 for shareholders to decide on the planned transaction.

ASEAN Builder's Scoop (19Jul21) - CAPL Restructuring Plan Fair and Reasonable

<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: 141.25pt;">
<p> </p>
</td>
<td style="width: 141.2pt;">
<p>SPHREIT</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Period</p>
</td>
<td style="width: 141.2pt;">
<p>3Q21</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Gross Revenue (S$ m)</p>
</td>
<td style="width: 141.2pt;">
<p>69.6 (+82.8% YoY)</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>NPI (S$ m)</p>
</td>
<td style="width: 141.2pt;">
<p>Not Disclosed</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>DPU (S$ c)</p>
</td>
<td style="width: 141.2pt;">
<p>1.38 (+176.0% YoY)</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>NAV per Unit (S$)</p>
</td>
<td style="width: 141.2pt;">
<p>Not Disclosed</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>P/B (x)</p>
</td>
<td style="width: 141.2pt;">
<p>1.02 (Based on 2Q21 NAV)</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Occupancy (%)</p>
</td>
<td style="width: 141.2pt;">
<p>98.4</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Reversion (%)</p>
</td>
<td style="width: 141.2pt;">
<p>Not Disclosed</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Gearing (%)</p>
</td>
<td style="width: 141.2pt;">
<p>Not Disclosed</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Cost of Debt (%)</p>
</td>
<td style="width: 141.2pt;">
<p>1.86</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>1 Yr Fwd Yield (%)</p>
</td>
<td style="width: 141.2pt;">
<p>5.62</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Debt Hedged (%)</p>
</td>
<td style="width: 141.2pt;">
<p>58</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Target Price</p>
</td>
<td style="width: 141.2pt;">
<p>NA</p>
</td>
</tr>
<tr>
<td style="width: 141.25pt;">
<p>Rating</p>
</td>
<td style="width: 141.2pt;">
<p>NA</p>
</td>
</tr>
</tbody>
</table>

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




 


SPHREIT




Period


3Q21




Gross Revenue (S$ m)


69.6 (+82.8% YoY)




NPI (S$ m)


Not Disclosed




DPU (S$ c)


1.38 (+176.0% YoY)




NAV per Unit (S$)


Not Disclosed




P/B (x)


1.02 (Based on 2Q21 NAV)




Occupancy (%)


98.4




Reversion (%)


Not Disclosed




Gearing (%)


Not Disclosed




Cost of Debt (%)


1.86




1 Yr Fwd Yield (%)


5.62




Debt Hedged (%)


58




Target Price


NA




Rating


NA





ASEAN Builder's Scoop (13Jul21) - SPHREIT No Mention of Rebates

<h2>Singapore</h2>
<h3>SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)</h3>
<p>With Singapore moving into Phase 3, economic recovery should regain momentum, albeit uneven across sectors. The accelerated timetable for US interest rate hikes has triggered yield spread compression, but also signaled a stronger and sustainable economic growth, which bodes well for trade-dependent Singapore. We reinitiate the SREIT sector with BUY. Top picks are FCT, DASIN, AAREIT and AREIT. SGREIT offers a good entry point for midterm recovery play; while ECWREIT could see a DPU boost from deferred DI.</p>
<ul>
<li>Economy recovery provides strong tailwind for yield, albeit uneven across sectors. Following a setback from a month-long partial lockdown in Phase 2, Singapore has resume gradual reopening on 14Jun, thus setting economy back on track to recovery. However, we should see some deviation from initial expected timeline and recovery pace across sectors. In particular, tourism-related sectors are set to see further delays in recovery given the slower lifting of global travel curbs and the recent cut in capacity limits at local attractions. On the other hand, domestic-driven expenditures and outward-oriented sectors, such as retail and manufacturing, are expected to benefit from the pick-up in demand</li>
<li>We prefer Retail and Commercial subsectors, which should recover on stronger pace and offer attractive yields within the SREIT sector, while trading at c.1.0x forward P/B. Industrial subsector offers mixed picture, where we are positive on warehouse space, but neutral on other property types. Continued M&amp;A activities within the Industrial subsector should boost future DPU growth in addition to organic growth</li>
<li>We underweight both Hospitality and Healthcare subsectors. Outlook for Hospitality subsector remains cloudy in near term. Nonetheless, we remain upbeat on the longer-term prospect of the subsector in anticipation of international border reopening. On the other hand, the robust valuations of Healthcare subsector and low cash-flow growth realizations could indicate over optimism in investors’ expectations</li>
<li>Our top picks: FCT (Buy; S$2.89) for its faster recovery in near term. DASIN (Buy; S$0.81) for China-focused retail play with its Greater Bay Area (GBA) exposure. We favour AAREIT (Buy; S$1.60) and AREIT (Buy; S$3.55) for their strong balance sheet, which allows them financial flexibility in pursuing new acquisitions, or embarking on development/ redevelopment/ AEI projects. Tactical investment into ECWREIT (Buy; S$0.82) on potential DPU boost from deferred DI.
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</li>
</ul>

Singapore
SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)
With Singapore moving into Phase 3, economic recovery should regain momentum, albeit uneven across sectors. The accelerated timetable for US interest rate hikes has triggered yield spread compression, but also signaled a stronger and sustainable economic growth, which bodes well for trade-dependent Singapore. We reinitiate the SREIT sector with BUY. Top picks are FCT, DASIN, AAREIT and AREIT. SGREIT offers a good entry point for midterm recovery play; while ECWREIT could see a DPU boost from deferred DI.

Economy recovery provides strong tailwind for yield, albeit uneven across sectors. Following a setback from a month-long partial lockdown in Phase 2, Singapore has resume gradual reopening on 14Jun, thus setting economy back on track to recovery. However, we should see some deviation from initial expected timeline and recovery pace across sectors. In particular, tourism-related sectors are set to see further delays in recovery given the slower lifting of global travel curbs and the recent cut in capacity limits at local attractions. On the other hand, domestic-driven expenditures and outward-oriented sectors, such as retail and manufacturing, are expected to benefit from the pick-up in demand
We prefer Retail and Commercial subsectors, which should recover on stronger pace and offer attractive yields within the SREIT sector, while trading at c.1.0x forward P/B. Industrial subsector offers mixed picture, where we are positive on warehouse space, but neutral on other property types. Continued M&amp;A activities within the Industrial subsector should boost future DPU growth in addition to organic growth
We underweight both Hospitality and Healthcare subsectors. Outlook for Hospitality subsector remains cloudy in near term. Nonetheless, we remain upbeat on the longer-term prospect of the subsector in anticipation of international border reopening. On the other hand, the robust valuations of Healthcare subsector and low cash-flow growth realizations could indicate over optimism in investors’ expectations
Our top picks: FCT (Buy; S$2.89) for its faster recovery in near term. DASIN (Buy; S$0.81) for China-focused retail play with its Greater Bay Area (GBA) exposure. We favour AAREIT (Buy; S$1.60) and AREIT (Buy; S$3.55) for their strong balance sheet, which allows them financial flexibility in pursuing new acquisitions, or embarking on development/ redevelopment/ AEI projects. Tactical investment into ECWREIT (Buy; S$0.82) on potential DPU boost from deferred DI.






ASEAN Builder's Scoop (1Jul21) - SREITs Reflation Is Working in Its Favour

Singapore

CapitaLand Limited is a real estate company focused on investment holding. The Company and its subsidiaries are principally engaged in investment holding, real estate development, investment in real estate financial products and real estate assets, investment advisory and management services, as well as the management of serviced residences.

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