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)

Equity Bottom-Up

<div><div><div><div><ul><li>1Q22 DPU below expectation: 1Q22 revenue and NPI rose by 4.4% and 7.4% YoY (0.7% and 3.2% QoQ) to S$32.2m and S$29.7m, respectively, largely due to RMB appreciation and step-up rents.</li></ul><div><div><div><div><ul><li>+ve revenue growth across three segments: On a QoQ basis, revenues from all three segments – Port Logistics, Specialized Logistics and E-Commerce Logistics have reported +ve growth, largely due to step-up rents and strengthening RMB.</li></ul><div><div><div><div><ul><li>Refinancing completion as a near-term catalyst: Mgmt. believes that it is very close to complete the refinancing exercise of its offshore facilities (~S$423m or 66% of total loans in FY22E), which will expire by end of May22.</li></ul></div></div></div></div></div></div></div></div></div></div></div></div>

1Q22 DPU below expectation: 1Q22 revenue and NPI rose by 4.4% and 7.4% YoY (0.7% and 3.2% QoQ) to S$32.2m and S$29.7m, respectively, largely due to RMB appreciation and step-up rents.+ve revenue growth across three segments: On a QoQ basis, revenues from all three segments – Port Logistics, Specialized Logistics and E-Commerce Logistics have reported +ve growth, largely due to step-up rents and strengthening RMB.Refinancing completion as a near-term catalyst: Mgmt. believes that it is very close to complete the refinancing exercise of its offshore facilities (~S$423m or 66% of total loans in FY22E), which will expire by end of May22.

EC World REIT - One-Off Event Impacted DPU

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.

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    <div class='content-caption'>Five trusts with 100% assets in China</div>
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<p>Listed on SGX are 4 S-Reits and 1 property trust with pure exposure to China. These trusts have assets across sub-sectors such as retail malls, logistics and industrial, and office and business parks based in China.</p>

<p>All 5 trusts have recorded stronger rental income and declared increases in distributions made to unitholders for full year 2021. Common themes across their full-year earnings were resilient portfolio occupancy rates, recovery in shopper footfalls and tenant sales, and contributions from acquisitions despite recent Covid-19 resurgences.<br><br>
CapitaLand China Trust (CLCT), which is diversified across 11 retail assets, five business parks and four logistics properties, reported 37.5 per cent higher FY2021 distribution per unit (DPU) and 85.2 per cent higher annual net property income (NPI) for the year. Increases were due to new contributions from its recently acquired logistics and business park portfolios, Rock Square and CapitaMall Nuohemule.<br><br>
CLCT noted better occupancy rate of 96.3 per cent in FY2021, alongside higher tenant sales and shopper traffic of 16.1 per cent and 9.3 per cent respectively despite mall closures and restrictions due to sporadic Covid-19 outbreaks.</p>

<p>Beyond retail malls, CLCT now has a combined 21.9 per cent exposure to new economy assets through its business park and logistics portfolio which registered 7.0 per cent and 2.7 per cent in rental reversion respectively in FY2021. CLCT is also the first S-Reit to secure a loan linked to the sustainability performance of a China portfolio.<br><br>
Sasseur REIT and its portfolio of four retail outlet malls posted 8.5 per cent growth in DPU and 10.1 per cent growth in entrusted management agreement (EMA) rental income in FY2021, despite COVID-19 disruptions.<br><br>
The Reit saw continued robust consumption trends in the cities where its outlets are located, coupled with intensive promotional efforts with tenants which drove higher sales. Its portfolio occupancy rate rose to 94.5 per cent in Q42021 compared to 93.7 per cent in Q32021. The Reit believes that it will continue to benefit from China's domestic consumption.<br><br>
EC World REIT (ECW) is a specialised logistics and e-commerce logistics REIT with eight properties in Hangzhou and Wuhan. The REIT recorded 12.7 per cent growth in NPI and 16.9 per cent increase in DPU, largely due to the absence of one-off rebates provided to tenants in FY2020. Its portfolio has an occupancy rate of 99.2 per cent as of 31 December 2021 and is diversified across three segments: e-commerce logistics (41.8 per cent of portfolio valuation), port logistics (40.5 per cent), and specialised logistics (17.8 per cent).<br><br>
On Jan 10, 2022, ECW received a formal notice in relation to the compulsory expropriation of Fu Zhuo Industrial and is entitled to receive compensation based on the expropriation valuation. The Reit does not expect the compulsory expropriation to have a material impact on its portfolio and Fu Zhuo Industrial accounts for under 1.5 per cent of its portfolio valuation and 1.6 per cent of its NPI in FY2021.<br><br>
BHG Retail REIT across its six retail malls reported increases of 14.9 per cent in NPI and 11.3 per cent in DPU for FY2021. The REIT noted that its malls continued to see healthy leasing demands with occupancy rate at 97.0 per cent as at 31 December 2021 alongside healthy retention rates. The REIT will remain cautious about risks of COVID-19 resurgence and continues to refresh its malls’ offerings to pursue growth opportunities.<br><br>
Dasin Retail Trust has a portfolio of seven retail malls and registered increases of 10.9 per cent in NPI and 32.5 per cent in DPU for FY2021. It maintains an occupancy rate of 93.9 per cent across a diversified tenant base with no single trade sector contributing over 25.0 per cent of its gross rental income. The Trust Manager also looks to source new expansion opportunities with its new strategic partner and major shareholder Sino-Ocean Capital.<br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/green-shoots-for-retail-and-hospitality-s-reits-amid-new-pandemic-phase"> </a><a href="https://www.businesstimes.com.sg/companies-markets/pure-play-china-s-reits-record-strong-2021-growth-0">read </a>the original version.</em></strong></p>
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    Five trusts with 100% assets in China


Listed on SGX are 4 S-Reits and 1 property trust with pure exposure to China. These trusts have assets across sub-sectors such as retail malls, logistics and industrial, and office and business parks based in China.

All 5 trusts have recorded stronger rental income and declared increases in distributions made to unitholders for full year 2021. Common themes across their full-year earnings were resilient portfolio occupancy rates, recovery in shopper footfalls and tenant sales, and contributions from acquisitions despite recent Covid-19 resurgences.  
CapitaLand China Trust (CLCT), which is diversified across 11 retail assets, five business parks and four logistics properties, reported 37.5 per cent higher FY2021 distribution per unit (DPU) and 85.2 per cent higher annual net property income (NPI) for the year. Increases were due to new contributions from its recently acquired logistics and business park portfolios, Rock Square and CapitaMall Nuohemule.  
CLCT noted better occupancy rate of 96.3 per cent in FY2021, alongside higher tenant sales and shopper traffic of 16.1 per cent and 9.3 per cent respectively despite mall closures and restrictions due to sporadic Covid-19 outbreaks.

Beyond retail malls, CLCT now has a combined 21.9 per cent exposure to new economy assets through its business park and logistics portfolio which registered 7.0 per cent and 2.7 per cent in rental reversion respectively in FY2021. CLCT is also the first S-Reit to secure a loan linked to the sustainability performance of a China portfolio.  
Sasseur REIT and its portfolio of four retail outlet malls posted 8.5 per cent growth in DPU and 10.1 per cent growth in entrusted management agreement (EMA) rental income in FY2021, despite COVID-19 disruptions.  
The Reit saw continued robust consumption trends in the cities where its outlets are located, coupled with intensive promotional efforts with tenants which drove higher sales. Its portfolio occupancy rate rose to 94.5 per cent in Q42021 compared to 93.7 per cent in Q32021. The Reit believes that it will continue to benefit from China's domestic consumption.  
EC World REIT (ECW) is a specialised logistics and e-commerce logistics REIT with eight properties in Hangzhou and Wuhan. The REIT recorded 12.7 per cent growth in NPI and 16.9 per cent increase in DPU, largely due to the absence of one-off rebates provided to tenants in FY2020. Its portfolio has an occupancy rate of 99.2 per cent as of 31 December 2021 and is diversified across three segments: e-commerce logistics (41.8 per cent of portfolio valuation), port logistics (40.5 per cent), and specialised logistics (17.8 per cent).  
On Jan 10, 2022, ECW received a formal notice in relation to the compulsory expropriation of Fu Zhuo Industrial and is entitled to receive compensation based on the expropriation valuation. The Reit does not expect the compulsory expropriation to have a material impact on its portfolio and Fu Zhuo Industrial accounts for under 1.5 per cent of its portfolio valuation and 1.6 per cent of its NPI in FY2021.  
BHG Retail REIT across its six retail malls reported increases of 14.9 per cent in NPI and 11.3 per cent in DPU for FY2021. The REIT noted that its malls continued to see healthy leasing demands with occupancy rate at 97.0 per cent as at 31 December 2021 alongside healthy retention rates. The REIT will remain cautious about risks of COVID-19 resurgence and continues to refresh its malls’ offerings to pursue growth opportunities.  
Dasin Retail Trust has a portfolio of seven retail malls and registered increases of 10.9 per cent in NPI and 32.5 per cent in DPU for FY2021. It maintains an occupancy rate of 93.9 per cent across a diversified tenant base with no single trade sector contributing over 25.0 per cent of its gross rental income. The Trust Manager also looks to source new expansion opportunities with its new strategic partner and major shareholder Sino-Ocean Capital.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Pure-play China S-Reits record strong 2021 growth

<div><div><div><div><ul><li><strong>Inline 4Q21 results</strong>: 4Q21 revenue and NPI rose by 8.2% and 5.9% YoY (1.2% and 0.8% QoQ) to S$31.9m and S$28.8m, respectively, mainly due to strengthening of RMB (4.4% YoY) and positive straight line adjustments.</li><li><strong>Robust Port and E-Commerce Logistics</strong>: On a QoQ basis, revenues from Port Logistics and E-Commerce Logistics segments have remained robust, increasing for seven consecutive quarters, largely due to embedded step-up rents and the strengthening RMB. Meanwhile, Specialized Logistics’s performance has stabilized with revenue turned slightly +ve QoQ (+1.6%).</li><li><strong>Potentially lower interest cost</strong>: ECWREIT is currently in discussion with lenders to refinance ~S$708m of loans (~98% of loans outstanding) that will be due in FY22E. <div><div><ul style="list-style-type: none;"><li> </li></ul></div></div></li></ul></div></div></div></div>

Inline 4Q21 results: 4Q21 revenue and NPI rose by 8.2% and 5.9% YoY (1.2% and 0.8% QoQ) to S$31.9m and S$28.8m, respectively, mainly due to strengthening of RMB (4.4% YoY) and positive straight line adjustments.Robust Port and E-Commerce Logistics: On a QoQ basis, revenues from Port Logistics and E-Commerce Logistics segments have remained robust, increasing for seven consecutive quarters, largely due to embedded step-up rents and the strengthening RMB. Meanwhile, Specialized Logistics’s performance has stabilized with revenue turned slightly +ve QoQ (+1.6%).Potentially lower interest cost: ECWREIT is currently in discussion with lenders to refinance ~S$708m of loans (~98% of loans outstanding) that will be due in FY22E.  

EC World REIT - DI Retention Has Been Ceased

First Real Estate Investment Trust / Equity Bottom-Up

First Real Estate Investment Trust (FIRT SP)

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    <div class='content-caption'>Top 10 performing SREITs since Nov 1, 2021</div>
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<p>Global Reit markets dipped over the last 3 sessions of November, as investors grappled with the unknowns of the Covid Omicron variant.</p>

<p>Similarly, the 3 sessions saw the iEdge S-Reit Index shave off 3.8 per cent in total returns, ending November with a 2.4 per cent decline.<br><br>
The top five performers over the month of November were firstly, S-REITs with healthcare assets – First REIT (12.2 per cent in total returns) and ParkwayLife REIT (6.6 per cent) – and secondly, S-REITs with assets located in China – Sasseur REIT (4.7 per cent), EC World REIT (3.1 per cent) and BHG Retail REIT (2.9 per cent).<br><br>
As uncertainty over the Omicron variant eased gradually, the iEdge S-Reit Index regained 1.2 per cent over the first 7 sessions of December, bringing its total returns since the start of November to a decline of 1.2 per cent.</p>

<p>S-Reits with healthcare and China-based assets continued to be the top performers over the extended period from the start of November to Dec 9, 2021.<br><br>
These S-REITs were: First REIT (18.0 per cent in total returns), BHG Retail REIT (15.4 per cent), ParkwayLife REIT (8.9 per cent), Sasseur REIT (4.7 per cent) and Mapletree North Asia Commercial Trust (4.5 per cent).<br><br>
First Reit, in its third quarter business update ended Sep 30, 2021, noted that it continued to see performance stabilising, following the restructuring of the master lease agreements for 14 Indonesia hospitals in January 2021 and its recapitalisation efforts in Q12021.</p>

<p>Last week, the trust also unveiled its 2.0 Growth Strategy, which includes diversifying into developed markets, strengthening of capital structure, reshaping of portfolio for capital-efficient growth as well as a pivoting to ride megatrends like ESG (environmental, social and governance).<br><br>
In line with its 2.0 Growth Strategy, First REIT announced the proposed acquisition of 12 nursing homes in Japan from its sponsor, OUE Lippo Healthcare for JPY 24.2 billion.<br><br>
Post-acquisition, First Reit will increase its exposure to developed markets, from 3.6 per cent of its asset value as at H12021, to 27.1 per cent on a pro forma basis.</p>

<p>Sasseur Reit declared distribution per unit (DPU) of 1.831 Singapore cents for Q32021, an increase of 13.4 per cent year on year.</p>

<p>The Reit manager noted that despite strict government regulations, the Reit's outlet sales grew 12.0 per cent quarter on quarter to 996.6 million yuan.</p>

<p>For the 9-month period ended Sep 30, 2021, Sasseur Reit's four outlets registered total sales of 3.02 billion yuan, representing an increase of 21.8 per cent compared to a year ago.</p>

<p>Similarly, EC World Reit announced higher DPU of 1.662 Singapore cents for Q32021, an increase of 19.7 per cent year on year.</p>

<p>Four out of EC World Reit's portfolio of 8 properties cater to the e-commerce logistics sector. The occupancy rate of its Wuhan Meiluote property increased from 79.4 per cent to 84.5 per cent, as it secured a 3-month lease starting Oct 1, 2021, in anticipation of the annual Singles Day sales.</p>

<p>As at Oct 31, 2021, EC World Reit's portfolio occupancy is 99.2 per cent. <br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/pure-play-data-centre-digital-core-reit-to-start-trading-on-monday"> </a><a href="https://www.businesstimes.com.sg/companies-markets/s-reits-with-healthcare-and-china-assets-outshine-in-november">read </a>the original version.</em></strong></p>
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    Top 10 performing SREITs since Nov 1, 2021


Global Reit markets dipped over the last 3 sessions of November, as investors grappled with the unknowns of the Covid Omicron variant.

Similarly, the 3 sessions saw the iEdge S-Reit Index shave off 3.8 per cent in total returns, ending November with a 2.4 per cent decline.  
The top five performers over the month of November were firstly, S-REITs with healthcare assets – First REIT (12.2 per cent in total returns) and ParkwayLife REIT (6.6 per cent) – and secondly, S-REITs with assets located in China – Sasseur REIT (4.7 per cent), EC World REIT (3.1 per cent) and BHG Retail REIT (2.9 per cent).  
As uncertainty over the Omicron variant eased gradually, the iEdge S-Reit Index regained 1.2 per cent over the first 7 sessions of December, bringing its total returns since the start of November to a decline of 1.2 per cent.

S-Reits with healthcare and China-based assets continued to be the top performers over the extended period from the start of November to Dec 9, 2021.  
These S-REITs were: First REIT (18.0 per cent in total returns), BHG Retail REIT (15.4 per cent), ParkwayLife REIT (8.9 per cent), Sasseur REIT (4.7 per cent) and Mapletree North Asia Commercial Trust (4.5 per cent).  
First Reit, in its third quarter business update ended Sep 30, 2021, noted that it continued to see performance stabilising, following the restructuring of the master lease agreements for 14 Indonesia hospitals in January 2021 and its recapitalisation efforts in Q12021.

Last week, the trust also unveiled its 2.0 Growth Strategy, which includes diversifying into developed markets, strengthening of capital structure, reshaping of portfolio for capital-efficient growth as well as a pivoting to ride megatrends like ESG (environmental, social and governance).  
In line with its 2.0 Growth Strategy, First REIT announced the proposed acquisition of 12 nursing homes in Japan from its sponsor, OUE Lippo Healthcare for JPY 24.2 billion.  
Post-acquisition, First Reit will increase its exposure to developed markets, from 3.6 per cent of its asset value as at H12021, to 27.1 per cent on a pro forma basis.

Sasseur Reit declared distribution per unit (DPU) of 1.831 Singapore cents for Q32021, an increase of 13.4 per cent year on year.

The Reit manager noted that despite strict government regulations, the Reit's outlet sales grew 12.0 per cent quarter on quarter to 996.6 million yuan.

For the 9-month period ended Sep 30, 2021, Sasseur Reit's four outlets registered total sales of 3.02 billion yuan, representing an increase of 21.8 per cent compared to a year ago.

Similarly, EC World Reit announced higher DPU of 1.662 Singapore cents for Q32021, an increase of 19.7 per cent year on year.

Four out of EC World Reit's portfolio of 8 properties cater to the e-commerce logistics sector. The occupancy rate of its Wuhan Meiluote property increased from 79.4 per cent to 84.5 per cent, as it secured a 3-month lease starting Oct 1, 2021, in anticipation of the annual Singles Day sales.

As at Oct 31, 2021, EC World Reit's portfolio occupancy is 99.2 per cent.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - S-Reits with healthcare and China assets outshine in November

<div><div><div><div><ul><li>RMB appreciation and lower DI retention rate drove performance. 3Q21 Revenue and NPI rose by 10.9% and 9.4% YoY</li><li>Robust Port and E-Commerce Logistics. Revenue from Port Logistics and ECommerce Logistics segments have increased for six consecutive quarters on a QoQ basis</li><li>Maintain BUY with TP of S$0.87/unit: We maintain our forecasts for FY21E</li></ul><div><div><div><div><div><div><div></div></div></div></div></div></div></div></div></div></div></div>

RMB appreciation and lower DI retention rate drove performance. 3Q21 Revenue and NPI rose by 10.9% and 9.4% YoYRobust Port and E-Commerce Logistics. Revenue from Port Logistics and ECommerce Logistics segments have increased for six consecutive quarters on a QoQ basisMaintain BUY with TP of S$0.87/unit: We maintain our forecasts for FY21E

SCCM | EC World REIT (ECWREIT SP): Awaiting Asset Deal While Collecting 8+% Yield

Singapore

EC World Real Estate Investment Trust is a Singapore-based real estate investment trust (REIT) that invests in a diversified portfolio of income-producing properties primarily used for e-commerce, supply chain management, and logistics. Its portfolio includes properties like Chongxian Port Investment and Hengde Logistics, located predominantly in the Yangtze River Delta, People's Republic of China. The company is headquartered in Singapore and was founded in 2015.

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EC World (ECWREIT SP)

EC World REIT - One-Off Event Impacted DPU

All segments saw +ve QoQ revenue growth in 1Q22, but DPU fell 9.7% YoY due to one-off early termination charges and higher income tax, resulting in...

SCCM Asia Research

REIT Watch - Pure-play China S-Reits record strong 2021 growth

Listed on SGX are 4 S-Reits and 1 property trust with pure exposure to China. These trusts have assets across sub-sectors such...

Singapore Exchange Ltd (SGX)

EC World REIT - DI Retention Has Been Ceased

4Q21 DPU grew 7.7% YoY due to RMB appreciation and absence of DI retention (vs 10% in 4Q20), resulting in FY21 DPU to form 98% of our forecast.

SCCM Asia Research

REIT Watch - S-Reits with healthcare and China assets outshine in November

Global Reit markets dipped over the last 3 sessions of November, as investors grappled with the unknowns of the Covid Omicron...

Singapore Exchange Ltd (SGX)

SCCM | EC World REIT (ECWREIT SP): Awaiting Asset Deal While Collecting 8+% Yield

3Q21 results were driven mainly by RMB appreciation (5.2% YoY) and lower DI retention rate at 5% (vs 9% in 3Q20), with 9M21 figures forming 74.0...

SCCM Asia Research

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