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>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 141.25pt;"> </td><td style="width: 141.2pt;">PRIME (US$)</td><td style="width: 141.2pt;">KORE (US$)</td><td style="width: 141.2pt;">MUST (US$)</td></tr><tr><td style="width: 141.25pt;">Period</td><td style="width: 141.2pt;">1Q21</td><td style="width: 141.2pt;">1Q21</td><td style="width: 141.2pt;">1Q21</td></tr><tr><td style="width: 141.25pt;">Gross Revenue (S$ m)</td><td style="width: 141.2pt;">35.9 (+2.5% YoY)</td><td style="width: 141.2pt;">34.6 (-2.1% YoY)</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">NPI (S$ m)</td><td style="width: 141.2pt;">23.0 (-2.0% YoY)</td><td style="width: 141.2pt;">20.4 (-2.8% YoY)</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">DPU (S$ c)</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">NAV per Unit (S$)</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">0.730</td></tr><tr><td style="width: 141.25pt;">P/B (x)</td><td style="width: 141.2pt;">0.99(Based on 4Q20 NAV)</td><td style="width: 141.2pt;">0.90 (Based on 4Q20 NAV)</td><td style="width: 141.2pt;">1.030 (Based on 4Q20 NAV)</td></tr><tr><td style="width: 141.25pt;">Occupancy (%)</td><td style="width: 141.2pt;">91.7</td><td style="width: 141.2pt;">91.6</td><td style="width: 141.2pt;">92.0</td></tr><tr><td style="width: 141.25pt;">Reversion (%)</td><td style="width: 141.2pt;">8.5</td><td style="width: 141.2pt;">5.7</td><td style="width: 141.2pt;">2.1</td></tr><tr><td style="width: 141.25pt;">Gearing (%)</td><td style="width: 141.2pt;">33.6</td><td style="width: 141.2pt;">37.5</td><td style="width: 141.2pt;">41.3</td></tr><tr><td style="width: 141.25pt;">Cost of Debt (%)</td><td style="width: 141.2pt;">2.8</td><td style="width: 141.2pt;">2.82</td><td style="width: 141.2pt;">3.18</td></tr><tr><td style="width: 141.25pt;">1 Yr Fwd Yield (%)</td><td style="width: 141.2pt;">8.24</td><td style="width: 141.2pt;">8.3</td><td style="width: 141.2pt;">8.00</td></tr><tr><td style="width: 141.25pt;">Debt Hedged (%)</td><td style="width: 141.2pt;">90.0</td><td style="width: 141.2pt;">84.7</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">Target Price</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">Rating</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> 1Q21 Business Update – Robust operations metrics; Trading at an attractive 8+% USD yield  </h3><ul><li>1Q21 revenue and NPI came in +2.5% YoY and -2.0% YoY, respectively, to US$35.9m (25.2% BB est) and US$23.5m (26.7% BB est). 1Q21 DI came in -1.2% YoY at US$17.6m, which benefitted from lower interest cost. 1Q21 DPU was undisclosed</li><li>Leasing momentum remained robust with a positive rental reversion of +8.5% in 1Q21 (vs +8.7% in 4Q20 and +8.9% in 3Q20). Focusing on long-term leases – 57,647sqft of long-term leases were executed in 1Q21 at a rental reversion of +9.5%. Below-market portfolio in place rents (by 6.5%) also provide a buffer for rental reversion potential</li><li>Overall portfolio committed occupancy fell to 91.7% in 1Q21 (vs. 92.4% in 4Q20 and 92.6% in 3Q20). PRIME has ~100% of cash rental income with built-in rental escalations averaging over +2% pa. Portfolio occupancy still well above Class-A office average of 84.3%. Rent collections remained robust at 99% with minimal rent concessions. Portfolio WALE stood at 4.3%</li><li>Portfolio gearing stands at 33.8% (vs. 33.5% in 4Q20 and 32.7% in 3Q20) with average cost of debt of 2.8% pa. (vs. 2.7% in 4Q20 and 2.7% in 3Q20) and 90.0% of debt hedged</li><li>PRIME currently trades at 8.24% FY21E yield and 0.99x P/B.</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) PRIME (US$)KORE (US$)MUST (US$)Period1Q211Q211Q21Gross Revenue (S$ m)35.9 (+2.5% YoY)34.6 (-2.1% YoY)NANPI (S$ m)23.0 (-2.0% YoY)20.4 (-2.8% YoY)NADPU (S$ c)Not DisclosedNot DisclosedNANAV per Unit (S$)Not DisclosedNot Disclosed0.730P/B (x)0.99(Based on 4Q20 NAV)0.90 (Based on 4Q20 NAV)1.030 (Based on 4Q20 NAV)Occupancy (%)91.791.692.0Reversion (%)8.55.72.1Gearing (%)33.637.541.3Cost of Debt (%)2.82.823.181 Yr Fwd Yield (%)8.248.38.00Debt Hedged (%)90.084.7NATarget PriceNANANARatingNANANAPrime US REIT (PRIME SP) 1Q21 Business Update – Robust operations metrics; Trading at an attractive 8+% USD yield  1Q21 revenue and NPI came in +2.5% YoY and -2.0% YoY, respectively, to US$35.9m (25.2% BB est) and US$23.5m (26.7% BB est). 1Q21 DI came in -1.2% YoY at US$17.6m, which benefitted from lower interest cost. 1Q21 DPU was undisclosedLeasing momentum remained robust with a positive rental reversion of +8.5% in 1Q21 (vs +8.7% in 4Q20 and +8.9% in 3Q20). Focusing on long-term leases – 57,647sqft of long-term leases were executed in 1Q21 at a rental reversion of +9.5%. Below-market portfolio in place rents (by 6.5%) also provide a buffer for rental reversion potentialOverall portfolio committed occupancy fell to 91.7% in 1Q21 (vs. 92.4% in 4Q20 and 92.6% in 3Q20). PRIME has ~100% of cash rental income with built-in rental escalations averaging over +2% pa. Portfolio occupancy still well above Class-A office average of 84.3%. Rent collections remained robust at 99% with minimal rent concessions. Portfolio WALE stood at 4.3%Portfolio gearing stands at 33.8% (vs. 33.5% in 4Q20 and 32.7% in 3Q20) with average cost of debt of 2.8% pa. (vs. 2.7% in 4Q20 and 2.7% in 3Q20) and 90.0% of debt hedgedPRIME currently trades at 8.24% FY21E yield and 0.99x P/B.

ASEAN Builder's Scoop (19May21) - PRIME robust operations metrics

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> 1H21 results boosted by dormitory management contracts; Continue to ride on co-living trend</h3><ul><li>1H21 revenue increased 24.9% YoY to S$64.5m, primarily due to higher contributions from Facilities Management Business (+225.5% YoY) and Logistics Services Business (+6.0% YoY), partially offset by lower revenue from Space Optimisation Business (-33.6% YoY)</li><li>Space Optimisation: Revenue fell 33.6% YoY to S$19.4m in 1H21, due to lower contributions from Industrial Properties (-42.7% YoY to S$8.8m) and Commercial Properties (-53.8% YoY to S$4.1m), partially offset by higher revenue from Residential Properties (+28.9% YoY to S$6.5m). Lower revenues from Industrial and Commercial Properties were mainly due to expiry of 6 master leases, negative reversions, downtime at 1557 Keppel Road due to AEI works and IFRS 16 impacts. Occupancy for Industrial Properties -0.9pp YoY to 89.0% in 1H21 (vs. 89.9% in 1H20), while occupancy for Commercial Properties -15.3pp YoY to 69.2% in 1H21 (vs. 84.5% in 1H20). Meanwhile, higher revenue from Residential Properties was boosted by new serviced residence in Cambodia (started in 1Q21) and increase in revenue at 1A Lutheran Road</li><li>Facilities Management: Revenue increased by 225.5% YoY to S$31.6m in 1H21, mainly due to the increase in facilities management services provided for short-term contracts under the dormitory business</li><li>Logistics Services: Revenue grew 6.0% YoY to S$13.5m in 1H21, mainly due to increase in transportation services provided from the trucking business</li><li>1H21 PATMI increased 366.3% YoY to S$14.8m on higher other income and share of results from associates and joint ventures. 1H21 dividend came in at S$0.75c per share (+300% YoY), translating to an annualised dividend yield of ~4.5%. LHN’s cash and bank balances came in at S$36.3m, while net gearing (excluding IFRS16 impact) stood at 0.31x</li><li>LHN is currently trading at 4.3% FY21E dividend yield and 5.30x FY21E P/E</li></ul>Comments: 1H21 Revenue and PATMI form 52.2% and 59.1% of our full-year FY21E forecasts, respectively. We have expected 1H21 results to be higher than 2H21E due to the frontloading of dormitory management contracts (expected to end in 3Q21). With the resurgence of Covid-19 cases in Singapore, we do not discount the probability of LHN renewing the dormitory management contracts. Nonetheless, we believe its string of expansion plans for co-living business should provide steady growth moving forward. In addition to the new serviced residence in Cambodia (commissioned since 1Q21), 1557 Keppel Road and Nan’an China should also start contributing in FY21E. Meanwhile, newly acquired 320 Balestier Road (16Dec20), as well as proposed acquisitions of 40 &amp; 42 Amber Road (to be completed by 8Jun21), 8 strata units at Fu Yuen Building (subject to completion of two underlying options), and 115 Geylang Road (to be completed by 21Jul21) should drive growth in FY22E and onwards. We are currently reviewing our recommendations.

SingaporeLHN Ltd (LHN SP) 1H21 results boosted by dormitory management contracts; Continue to ride on co-living trend1H21 revenue increased 24.9% YoY to S$64.5m, primarily due to higher contributions from Facilities Management Business (+225.5% YoY) and Logistics Services Business (+6.0% YoY), partially offset by lower revenue from Space Optimisation Business (-33.6% YoY)Space Optimisation: Revenue fell 33.6% YoY to S$19.4m in 1H21, due to lower contributions from Industrial Properties (-42.7% YoY to S$8.8m) and Commercial Properties (-53.8% YoY to S$4.1m), partially offset by higher revenue from Residential Properties (+28.9% YoY to S$6.5m). Lower revenues from Industrial and Commercial Properties were mainly due to expiry of 6 master leases, negative reversions, downtime at 1557 Keppel Road due to AEI works and IFRS 16 impacts. Occupancy for Industrial Properties -0.9pp YoY to 89.0% in 1H21 (vs. 89.9% in 1H20), while occupancy for Commercial Properties -15.3pp YoY to 69.2% in 1H21 (vs. 84.5% in 1H20). Meanwhile, higher revenue from Residential Properties was boosted by new serviced residence in Cambodia (started in 1Q21) and increase in revenue at 1A Lutheran RoadFacilities Management: Revenue increased by 225.5% YoY to S$31.6m in 1H21, mainly due to the increase in facilities management services provided for short-term contracts under the dormitory businessLogistics Services: Revenue grew 6.0% YoY to S$13.5m in 1H21, mainly due to increase in transportation services provided from the trucking business1H21 PATMI increased 366.3% YoY to S$14.8m on higher other income and share of results from associates and joint ventures. 1H21 dividend came in at S$0.75c per share (+300% YoY), translating to an annualised dividend yield of ~4.5%. LHN’s cash and bank balances came in at S$36.3m, while net gearing (excluding IFRS16 impact) stood at 0.31xLHN is currently trading at 4.3% FY21E dividend yield and 5.30x FY21E P/EComments: 1H21 Revenue and PATMI form 52.2% and 59.1% of our full-year FY21E forecasts, respectively. We have expected 1H21 results to be higher than 2H21E due to the frontloading of dormitory management contracts (expected to end in 3Q21). With the resurgence of Covid-19 cases in Singapore, we do not discount the probability of LHN renewing the dormitory management contracts. Nonetheless, we believe its string of expansion plans for co-living business should provide steady growth moving forward. In addition to the new serviced residence in Cambodia (commissioned since 1Q21), 1557 Keppel Road and Nan’an China should also start contributing in FY21E. Meanwhile, newly acquired 320 Balestier Road (16Dec20), as well as proposed acquisitions of 40 &amp; 42 Amber Road (to be completed by 8Jun21), 8 strata units at Fu Yuen Building (subject to completion of two underlying options), and 115 Geylang Road (to be completed by 21Jul21) should drive growth in FY22E and onwards. We are currently reviewing our recommendations.

ASEAN Builder's Scoop (14May21) - LHN Robust 1H21, Boosted by Mgmt Contracts

Partner, River Valley Asset Management

River Valley Asset Management

Partner

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.

Asia Real Estate News Tracker, Asia Real Estate Tracker

Asia Real Estate Tracker

Asia Real Estate News Tracker

Tracking developments across Asia's regional real estate markets

Equity Bottom-Up

First Real Estate Investment Trust / Equity Bottom-Up

First Real Estate Investment Trust (FIRT SP)

<ul><li>Santarli and Apex make joint bid worth $368M for a site in Western Singapore, expanding their real estate portfolio.</li><li>CVC-backed chain competes for First REIT's Indonesian assets valued at $599M, increasing their presence in the market.</li><li>EdgeConneX ventures into Japan with a 140MW data center project in Greater Osaka, showcasing their global growth strategy.</li></ul>

Santarli and Apex make joint bid worth $368M for a site in Western Singapore, expanding their real estate portfolio.CVC-backed chain competes for First REIT's Indonesian assets valued at $599M, increasing their presence in the market.EdgeConneX ventures into Japan with a 140MW data center project in Greater Osaka, showcasing their global growth strategy.

Asia Real Estate Tracker (15-Jan-2025): Santarli, Apex $368M top bid for West Singapore site

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.

<ul><li>THE first seven months of 2023 saw the iEdge S-Reit Index gain 3.9 per cent in total return terms, reversing its 11.9 per cent decline in 2022.</li><li>This was followed by hospitality S-Reits with 5.8 per cent average total returns, after being the best performing sub-segment last year.</li><li>PLife Reit declared a distribution per unit (DPU) of 7.29 Singapore cents for H1 2023, representing an increase of 3.3 per cent year on year.</li></ul>

THE first seven months of 2023 saw the iEdge S-Reit Index gain 3.9 per cent in total return terms, reversing its 11.9 per cent decline in 2022.This was followed by hospitality S-Reits with 5.8 per cent average total returns, after being the best performing sub-segment last year.PLife Reit declared a distribution per unit (DPU) of 7.29 Singapore cents for H1 2023, representing an increase of 3.3 per cent year on year.

REIT Watch - Healthcare S-REITs remain committed to expansion strategies

Singapore

First Real Estate Investment Trust is a Singapore-based healthcare real estate investment trust. It invests in a diversified portfolio of income-producing real estate and related assets in Asia, primarily used for healthcare and healthcare-related purposes, including hospitals and nursing homes. The Trust was listed on the SGX-ST in December 2006 and is headquartered in Singapore.

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First Real Estate Investment Trust (FIRT SP)

ASEAN Builder's Scoop (19May21) - PRIME robust operations metrics

PRIME robust operations metrics; CIT plans for GBP500m SREIT IPO; FIRT completes restructuring; Retail landlords roll out tenants support; China...

SCCM Asia Research

ASEAN Builder's Scoop (14May21) - LHN Robust 1H21, Boosted by Mgmt Contracts

LHN robust 1H21, boosted by mgmt contracts; UHU riding on US consumer recovery; IREIT attractive 12% EUR yield; RLC eyes REIT listing by 2H21; MEG...

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

Asia Real Estate Tracker (15-Jan-2025): Santarli, Apex $368M top bid for West Singapore site

Santarli, Apex, and CVC-backed chain make significant bids for properties in Singapore, Indonesia, and Japan, respectively, totaling over $967...

Asia Real Estate Tracker

REIT Watch - Healthcare S-REITs remain committed to expansion strategies

THE first seven months of 2023 saw the iEdge S-Reit Index gain 3.9 per cent in total return terms, reversing its 11.9 per cent decline in...

Singapore Exchange Ltd (SGX)

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