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/manulife-us-reit" target="_blank" data-smartkarma-citation="entities:567" rel="noopener">Manulife US REIT (MUST) (MUST SP)</a> 1Q22 Business Updates – Slow and bumpy return to office</li><li><a href="https://www.smartkarma.com/entities/first-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:15848" rel="noopener">First REIT (FIRT SP)</a> 1Q22 DPU +1.5% YoY; New chapter began with a steady DPU growth and lower gearing</li><li>ABSD of 35% to be imposed on transfers of residential property to living trust</li></ul>

Manulife US REIT (MUST) (MUST SP) 1Q22 Business Updates – Slow and bumpy return to officeFirst REIT (FIRT SP) 1Q22 DPU +1.5% YoY; New chapter began with a steady DPU growth and lower gearingABSD of 35% to be imposed on transfers of residential property to living trust

ASEAN Builder's Scoop (9May22) - MUST Slow and Bumpy Road

<ul><li><a href="https://www.smartkarma.com/entities/capitaland-investment-ltd-si" target="_blank" data-smartkarma-citation="entities:33774" rel="noopener">Capitaland Investment (CLI SP)</a> FY21 performance beats as fund management business takes off; Lodging recovering further</li><li><a href="https://www.smartkarma.com/entities/city-developments-ltd" target="_blank" data-smartkarma-citation="entities:57" rel="noopener">City Developments (CIT SP)</a> returns to black in 2H21; A surprise CDREIT dividend in specie</li><li><a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209" rel="noopener">Propnex Ltd (PROP SP)</a> 4Q21 net profit rose 90.5% YoY; Declared total dividends of S$0.125/share (~7.3% implied yield)</li></ul>

Capitaland Investment (CLI SP) FY21 performance beats as fund management business takes off; Lodging recovering furtherCity Developments (CIT SP) returns to black in 2H21; A surprise CDREIT dividend in speciePropnex Ltd (PROP SP) 4Q21 net profit rose 90.5% YoY; Declared total dividends of S$0.125/share (~7.3% implied yield)

ASEAN Builder's Scoop 25Feb22 - CLI Fund Management Takes Off

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

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ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.

While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).

According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.

Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.

In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.

ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.

The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.

It also notes the longer average leases of student housing at one year, versus hotel stays.

ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.

Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.

In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.

Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.

CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.

The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.

Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.

Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.

Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.

Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.

Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. 

REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/ascott-joins-trend-of-hospitality-reits-pivoting-to-student-housing">read</a><a href="https://www.businesstimes.com.sg/companies-markets/10-s-reits-yielding-long-term-annualised-returns"> </a>the original version.
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ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.

While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).

According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.

Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.

In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.

ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.

The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.

It also notes the longer average leases of student housing at one year, versus hotel stays.

ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.

Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.

In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.

Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.

CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.

The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.

Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.

Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.

Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.

Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.

Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. 

REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Ascott joins trend of hospitality Reits pivoting to student housing

<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: 242.047px; height: 14px;"> </td><td style="width: 241.969px; height: 14px;">FLT</td><td style="width: 241.984px; height: 14px;">ARAUS (US$)</td></tr><tr><td style="width: 242.047px; height: 15px;">Period</td><td style="width: 241.969px; height: 15px;">3Q21</td><td style="width: 241.984px; height: 15px;">2Q21</td></tr><tr><td style="width: 242.047px; height: 15px;">Gross Revenue (S$m)</td><td style="width: 241.969px; height: 15px;">NA</td><td style="width: 241.984px; height: 15px;">33.3 (+69.9% QoQ)</td></tr><tr><td style="width: 242.047px; height: 14px;">NPI (S$m)</td><td style="width: 241.969px; height: 14px;">NA</td><td style="width: 241.984px; height: 14px;">8.7 (+2,075% QoQ)</td></tr><tr><td style="width: 242.047px; height: 14px;">DPU (S$ c)</td><td style="width: 241.969px; height: 14px;">NA</td><td style="width: 241.984px; height: 14px;">NA</td></tr><tr><td style="width: 242.047px; height: 14px;">NAV per Unit (S$)</td><td style="width: 241.969px; height: 14px;">Based on last qtr: 1.14</td><td style="width: 241.984px; height: 14px;">0.61</td></tr><tr><td style="width: 242.047px; height: 14px;">P/B (x)</td><td style="width: 241.969px; height: 14px;">1.33</td><td style="width: 241.984px; height: 14px;">0.87</td></tr><tr><td style="width: 242.047px; height: 14px;">Occupancy (%)</td><td style="width: 241.969px; height: 14px;">96.3</td><td style="width: 241.984px; height: 14px;">51.2 (Overall)55.8 (Hyatt Place)64.7 (Hyatt House)68 (AC Hotels)75.7 (Courtyard by Marriott)95 (Residence Inn)</td></tr><tr><td style="width: 242.047px; height: 7px;">Reversion (%)</td><td style="width: 241.969px; height: 7px;">0.8</td><td style="width: 241.984px; height: 7px;">RevPAR (% QoQ):66.7 (Overall Portfolio)70.6 (Hyatt Place)68.3 (Hyatt House)77.4 (AC Hotels)55.4 (Courtyard by Marriott)46.2 (Residence Inn)</td></tr><tr><td style="width: 242.047px; height: 14px;">Gearing (%)</td><td style="width: 241.969px; height: 14px;">36.4</td><td style="width: 241.984px; height: 14px;">49</td></tr><tr><td style="width: 242.047px; height: 14px;">Cost of Debt (%)</td><td style="width: 241.969px; height: 14px;">1.7</td><td style="width: 241.984px; height: 14px;">3.4</td></tr><tr><td style="width: 242.047px; height: 14px;">1 Yr Fwd Yield (%)</td><td style="width: 241.969px; height: 14px;">5.07</td><td style="width: 241.984px; height: 14px;">4.67</td></tr><tr><td style="width: 242.047px; height: 14px;">Debt Hedged (%)</td><td style="width: 241.969px; height: 14px;">69.4</td><td style="width: 241.984px; height: 14px;">76.7</td></tr><tr><td style="width: 242.047px; height: 14px;">Target Price</td><td style="width: 241.969px; height: 14px;">N/A</td><td style="width: 241.984px; height: 14px;">N/A</td></tr><tr><td style="width: 242.047px; height: 15px;">Rating</td><td style="width: 241.969px; height: 15px;">N/A</td><td style="width: 241.984px; height: 15px;">N/A</td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) FLTARAUS (US$)Period3Q212Q21Gross Revenue (S$m)NA33.3 (+69.9% QoQ)NPI (S$m)NA8.7 (+2,075% QoQ)DPU (S$ c)NANANAV per Unit (S$)Based on last qtr: 1.140.61P/B (x)1.330.87Occupancy (%)96.351.2 (Overall)55.8 (Hyatt Place)64.7 (Hyatt House)68 (AC Hotels)75.7 (Courtyard by Marriott)95 (Residence Inn)Reversion (%)0.8RevPAR (% QoQ):66.7 (Overall Portfolio)70.6 (Hyatt Place)68.3 (Hyatt House)77.4 (AC Hotels)55.4 (Courtyard by Marriott)46.2 (Residence Inn)Gearing (%)36.449Cost of Debt (%)1.73.41 Yr Fwd Yield (%)5.074.67Debt Hedged (%)69.476.7Target PriceN/AN/ARatingN/AN/A

ASEAN Builder's Scoop (05Aug21) - FLT Acq-Driven Growth

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
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Singapore Company Update
<h2>Far East Orchard Limited</h2>
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<h3>Poised to rerate as earnings bottom</h3>
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<h3>Investment Thesis:</h3>
Deep value and compelling reasons to trade higher. Far East Orchard (FEOR) is currently trading at a TTM P/B multiple of 0.41x, at a deep discount to its hospitality peers (0.82x), PBSA peers (0.66x), and historical average (-0.43 S.D. of its 4-year historical mean). As FEOR pivots away from the lumpy residential business into recurring income-focused businesses (Hospitality and PBSA), we believe that earnings volatility will minimise and the stock should re-rate higher.
Aims to be a significant PBSA player; EBIT from PBSA to grow at a CAGR of 21.6%. FEOR plans to expand the number of PBSA beds from 3,561 to 5,000 in 2025. This asset class has shown resilience against economic downturns and we believe that this segment will be FEOR’s main growth engine in the next few years. We project its EBIT to grow at a CAGR of 21.6% from FY20-25F.
Recovery at its hospitality segment to boost earnings in FY21/22F. We believe that the gradual return of leisure travel in Singapore is imminent with Singapore’s high vaccination rate and its ongoing discussions to establish travel corridors. FEOR aims to add c.8,500 hotel rooms by 2025 and based on our estimates, it could translate to c.S$32m and c.S$7m of additional revenue and EBIT respectively.
Valuation: Maintain BUY and TP of S$1.70. Our TP is based on a blend of its 10-year DCF valuation (5.14% WACC, 2% terminal growth) followed by a 10-year transition using the H-Model, and 0.60x FY21F P/B multiple.
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



Singapore Company Update
Far East Orchard Limited



Poised to rerate as earnings bottom



Investment Thesis:
Deep value and compelling reasons to trade higher. Far East Orchard (FEOR) is currently trading at a TTM P/B multiple of 0.41x, at a deep discount to its hospitality peers (0.82x), PBSA peers (0.66x), and historical average (-0.43 S.D. of its 4-year historical mean). As FEOR pivots away from the lumpy residential business into recurring income-focused businesses (Hospitality and PBSA), we believe that earnings volatility will minimise and the stock should re-rate higher.
Aims to be a significant PBSA player; EBIT from PBSA to grow at a CAGR of 21.6%. FEOR plans to expand the number of PBSA beds from 3,561 to 5,000 in 2025. This asset class has shown resilience against economic downturns and we believe that this segment will be FEOR’s main growth engine in the next few years. We project its EBIT to grow at a CAGR of 21.6% from FY20-25F.
Recovery at its hospitality segment to boost earnings in FY21/22F. We believe that the gradual return of leisure travel in Singapore is imminent with Singapore’s high vaccination rate and its ongoing discussions to establish travel corridors. FEOR aims to add c.8,500 hotel rooms by 2025 and based on our estimates, it could translate to c.S$32m and c.S$7m of additional revenue and EBIT respectively.
Valuation: Maintain BUY and TP of S$1.70. Our TP is based on a blend of its 10-year DCF valuation (5.14% WACC, 2% terminal growth) followed by a 10-year transition using the H-Model, and 0.60x FY21F P/B multiple.










(Non-SGX Report) Far East Orchard Limited: Poised to Rerate as Earnings Bottom

Singapore

Far East Orchard Limited operates a diversified portfolio focusing on property development, hospitality real estate development and management and healthcare real estate. The Company operates a hospitality portfolio spanning Australia, China, Denmark, Germany, Hungary, Malaysia, New Zealand, and Singapore and owns purpose-built medical suites in Singapore.

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Far East Orchard (FEOR SP)

ASEAN Builder's Scoop (9May22) - MUST Slow and Bumpy Road

FIRT new chapter began with steady growth; ABSD 35% imposed to Living Trust; Piccadilly Grand 77% sold; BS previews Liv @ MB; YLLG Apr22 presales...

SCCM Asia Research

ASEAN Builder's Scoop 25Feb22 - CLI Fund Management Takes Off

CIT surprise CDREIT divvy in specie; PROP ~7.3% implied divvy yield; ALLHC 4Q21 earnings fell 27% YoY; SDPR targets MYR2.8bn new launches

SCCM Asia Research

REIT Watch - Ascott joins trend of hospitality Reits pivoting to student housing

ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property...

Singapore Exchange Ltd (SGX)

ASEAN Builder's Scoop (05Aug21) - FLT Acq-Driven Growth

FLT acq-driven growth; ARAUS QoQ recovery on full speed; ESR/ARA - what's next?; MEG 2Q21 NI underperforms; SEC approves RLC, MEG REITs; Indo...

SCCM Asia Research

(Non-SGX Report) Far East Orchard Limited: Poised to Rerate as Earnings Bottom

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

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