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)

<ul><li><a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> raises offer price for ARA Logos (ALLT SP); EGM and scheme meeting deferred</li><li>Keppel Data Centre fund II reaches US$1.1bn commitments with AIIB as latest investor</li><li>Suburban malls rents fared better than prime retail rents in 2021</li></ul>

ESR-REIT (EREIT SP) raises offer price for ARA Logos (ALLT SP); EGM and scheme meeting deferredKeppel Data Centre fund II reaches US$1.1bn commitments with AIIB as latest investorSuburban malls rents fared better than prime retail rents in 2021

ASEAN Builder's Scoop (24Jan22) - EREIT Closing in on ALLT Merger with Revised Pricing

<ul><li><a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> to divest industrial building at 28 Senoko Drive for S$12mTanglin</li><li>Shopping Centre en bloc sale could benefit <a href="https://www.smartkarma.com/entities/city-developments-ltd" target="_blank" data-smartkarma-citation="entities:57" rel="noopener">City Developments (CIT SP)</a> </li><li>Co-living providers expect higher demand in 2022 as inquiries rose; Robust occupancies may continue</li></ul>

ESR-REIT (EREIT SP) to divest industrial building at 28 Senoko Drive for S$12mTanglinShopping Centre en bloc sale could benefit City Developments (CIT SP) Co-living providers expect higher demand in 2022 as inquiries rose; Robust occupancies may continue

ASEAN Builder's Scoop (11Jan22) - EREIT to Divest 28 Senoko Drive

Equity Bottom-Up

<div><div><div><div><ul><li>Revising up our estimates on robust operating metrics. We raised our occupancy and passing rent estimates by 2.6 pp and 1.7% YoY to 93.7% and S$1.85psf pm in FY22E</li></ul><div><div><div><ul><li>Positive on the proposed merger with ALLT. We believe EREIT’s shareholder should vote in favour of the merger</li></ul><div><div><div><div><ul><li>Reiterate BUY; Upgrade TP to S$0.54/unit: We have priced-in latest developments including higher occupancy and passing rents, AEI and lower cost of funding.</li></ul></div></div></div></div></div></div></div></div></div></div></div>

Revising up our estimates on robust operating metrics. We raised our occupancy and passing rent estimates by 2.6 pp and 1.7% YoY to 93.7% and S$1.85psf pm in FY22EPositive on the proposed merger with ALLT. We believe EREIT’s shareholder should vote in favour of the mergerReiterate BUY; Upgrade TP to S$0.54/unit: We have priced-in latest developments including higher occupancy and passing rents, AEI and lower cost of funding.

ESR-REIT: Robust Performance; Pending Merger Approval

<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/000/237/882/original/image_38758426221635344719889.png?1635344723" class="editor-image img-responsive" data-smartkarma-image-id="237882"></figure><h3><a href="https://www.smartkarma.com/entities/frasers-centrepoint-trust" target="_blank" data-smartkarma-citation="entities:2870" rel="noopener">Frasers Centrepoint Trust (FCT SP)</a> 2H21 DPU +39.3% YoY; Resilient occupancy and tenants’ sales amidst Phase-2 temporary setbacks</h3><p>2H21 revenue and NPI surged by 159.9% and 213.2% YoY, respectively, to S$167.5m and S$120.9m, mainly boosted by ARF acquisition. This brought FY21 revenue and NPI to S$341.2m (+107.5% YoY) and S$246.6m (+122.4%) or 96%/98% of BBG estimates, respectively. On a HoH basis, 2H21 revenue and NPI fell 3.5% and 3.8%, respectively, due to rental rebates provided to tenants in Sep21</p>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Frasers Centrepoint Trust (FCT SP) 2H21 DPU +39.3% YoY; Resilient occupancy and tenants’ sales amidst Phase-2 temporary setbacks2H21 revenue and NPI surged by 159.9% and 213.2% YoY, respectively, to S$167.5m and S$120.9m, mainly boosted by ARF acquisition. This brought FY21 revenue and NPI to S$341.2m (+107.5% YoY) and S$246.6m (+122.4%) or 96%/98% of BBG estimates, respectively. On a HoH basis, 2H21 revenue and NPI fell 3.5% and 3.8%, respectively, due to rental rebates provided to tenants in Sep21

<h2>Singapore</h2>
<h3>
<a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> and <a href="https://www.smartkarma.com/entities/ara-logos-logistics-trust" target="_blank" data-smartkarma-citation="entities:937" rel="noopener">ARA LOGOS (ALLT SP)</a> proposed merger to form ESR-LOGOS REIT; DPU accretive for both unitholders</h3>
<ul>
<li>The proposed merger will be effected by way of a Trust Scheme with EREIT acquiring all units of ALLT in exchange for a combination of cash and new units in EREIT. The merger is conditional upon, inter alia, the completion of ESR Cayman (“ESR” or the “Sponsor”) and ARA Asset Management’s merger. ALLT unitholders will receive a scheme consideration of S$0.95 for each ALLT unit comprising 1) the payment of S$0.095 in cash per ALLT unit and the allotment and issue of 1.6765 new EREIT units for each ALLT unit, issued at S$0.51. The total consideration for the proposed merger is ~S$1.4bn based on the Scheme Consideration of S$0.95 for each ALLT unit. Upon completion, the enlarged REIT will be renamed ESR-LOGOS REIT (E-LOG)</li>
<li>Post-merger, E-LOG will continue to be managed by EREIT manager. The shareholding structure of E-LOG will be: Summit Group (12.7%), ESR (10.9%), and public (76.4%). The merger also removes any potential overlapping mandate between EREIT and ALLT</li>
<li>From EREIT’s perspective, the merger is expected to be +5.8% DPU accretive on FY20 proforma basis and -6.4% NAV dilutive. From ALLT perspective, the merger is +8.2% DPU accretive on FY20 proforma basis and +2.2% NAV accretive as well</li>
<li>The effects of the merger: 1) Total assets will rise to 87 properties (S$5.4bn) with 2.2m sqft NLA and 437 tenants; 2) ~66% of portfolio exposure is in the new economy (logistics and hi-tech); 3) Rising occupancy to 94.5% (from 91.7%); 4) Increased WALE to 3.2yrs (from 2.8yrs); 5) Extend land lease expiry to 37.9yrs (from 31yrs); 6) lower cost of debt to 2.84% (from 3.24%) with longer WADE; and 7) +1.6x larger debt headroom</li>
<li>Unitholders’ approval for EREIT is required for both merger and issuance of units (&gt;50% of total number votes), while approval for ALLT are required for the scheme (&gt;50% in numbers, &gt;75% in value) and amendment of deed (&gt;=75%). Ivanhoe Cambridge Asia (holder of 8.74% of ALLT) has given an irrevocable undertaking to vote in favour of all resolutions</li>
<li>EREIT is trading at 1.17x P/B and 6.7% FY21E yield, while ALLT is trading at 1.39x P/B and 5.5% FY21E yield</li>
<li>The financing scheme and timeline is detailed on table below (illustrative purpose).</li>
</ul>

Singapore

ESR-REIT (EREIT SP) and ARA LOGOS (ALLT SP) proposed merger to form ESR-LOGOS REIT; DPU accretive for both unitholders

The proposed merger will be effected by way of a Trust Scheme with EREIT acquiring all units of ALLT in exchange for a combination of cash and new units in EREIT. The merger is conditional upon, inter alia, the completion of ESR Cayman (“ESR” or the “Sponsor”) and ARA Asset Management’s merger. ALLT unitholders will receive a scheme consideration of S$0.95 for each ALLT unit comprising 1) the payment of S$0.095 in cash per ALLT unit and the allotment and issue of 1.6765 new EREIT units for each ALLT unit, issued at S$0.51. The total consideration for the proposed merger is ~S$1.4bn based on the Scheme Consideration of S$0.95 for each ALLT unit. Upon completion, the enlarged REIT will be renamed ESR-LOGOS REIT (E-LOG)
Post-merger, E-LOG will continue to be managed by EREIT manager. The shareholding structure of E-LOG will be: Summit Group (12.7%), ESR (10.9%), and public (76.4%). The merger also removes any potential overlapping mandate between EREIT and ALLT
From EREIT’s perspective, the merger is expected to be +5.8% DPU accretive on FY20 proforma basis and -6.4% NAV dilutive. From ALLT perspective, the merger is +8.2% DPU accretive on FY20 proforma basis and +2.2% NAV accretive as well
The effects of the merger: 1) Total assets will rise to 87 properties (S$5.4bn) with 2.2m sqft NLA and 437 tenants; 2) ~66% of portfolio exposure is in the new economy (logistics and hi-tech); 3) Rising occupancy to 94.5% (from 91.7%); 4) Increased WALE to 3.2yrs (from 2.8yrs); 5) Extend land lease expiry to 37.9yrs (from 31yrs); 6) lower cost of debt to 2.84% (from 3.24%) with longer WADE; and 7) +1.6x larger debt headroom
Unitholders’ approval for EREIT is required for both merger and issuance of units (&gt;50% of total number votes), while approval for ALLT are required for the scheme (&gt;50% in numbers, &gt;75% in value) and amendment of deed (&gt;=75%). Ivanhoe Cambridge Asia (holder of 8.74% of ALLT) has given an irrevocable undertaking to vote in favour of all resolutions
EREIT is trading at 1.17x P/B and 6.7% FY21E yield, while ALLT is trading at 1.39x P/B and 5.5% FY21E yield
The financing scheme and timeline is detailed on table below (illustrative purpose).


Singapore

ESR-LOGOS Real Estate Investment Trust (“ESR-LOGOS REIT”) is a leading New Economy and future-ready Asia Pacific S-REIT. Listed on the Singapore Exchange Securities Trading Limited since 25 July 2006, ESR-LOGOS REIT invests in quality income-producing industrial properties in key gateway markets.

As at 28 April 2022, ESR-LOGOS REIT holds interests in a diversified portfolio of logistics properties, high-specifications industrial properties, business parks and general industrial properties with total assets of approximately S$5.5 billion. Its portfolio comprises 84 properties located across the developed markets of Singapore (63 assets) and Australia (21 assets), with a total gross floor area of approximately 2.4 million sqm, as well as investments in three property funds in Australia. ESR-LOGOS REIT is also a constituent of the FTSE EPRA Nareit Global Real Estate Index. 

ESR-LOGOS REIT is managed by ESR-LOGOS Funds Management (S) Limited (the “Manager”) and sponsored by the ESR Group (“ESR”). The Manager is owned by ESR (67.3%), Shanghai Summit Pte. Ltd. (25.0%), and Mitsui & Co., Ltd (7.7%), respectively.

For further information on ESR-LOGOS REIT, please visit www.esr-logosreit.com.sg.

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ESR-LOGOS REIT (EREIT SP)

ASEAN Builder's Scoop (24Jan22) - EREIT Closing in on ALLT Merger with Revised Pricing

EREIT closing in on ALLT merger with revised pricing; Suburban malls' rents fared better in 2021; Belgravia Ace 72% sold over the wkd; AC transfers...

SCCM Asia Research

ASEAN Builder's Scoop (11Jan22) - EREIT to Divest 28 Senoko Drive

EREIT to divest 28 Senoko Drive; Tanglin Shopping Centre en-bloc; Co-living robust occupancies; Retail rents down 7 straight quarters; DMW...

SCCM Asia Research

ESR-REIT: Robust Performance; Pending Merger Approval

Robust performance; Pending merger approval. We raised our TP to S$0.54/unit as we expect operating metrics to remain robust in FY22E.

SCCM Asia Research

ASEAN Builder's Scoop (27Oct21)

FCT temporary hiccups; EREIT persistent negative reversions; MINT boosted by US acquisitions; LMRT early signs of recovery; FIRT performance...

SCCM Asia Research

ASEAN Builder's Scoop (15Oct21)

EREIT/ALLT merger, DPU accretive for both unitholders; AAREIT strong quarter, Upgrade to BUY; Porcelain Hotel on sale for S$90m; WCTHG mixed-use...

SCCM Asia Research

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