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)

<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/000/237/629/original/image_32975221321635260585172.png?1635260588" class="editor-image img-responsive" data-smartkarma-image-id="237629"></figure><h3><a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192" rel="noopener">Keppel REIT (KREIT SP)</a> 3Q21 Business Updates – Robust growth from acquisitions, healthy occupancy and collections</h3><ul><li>9M21 revenue and NPI increased by 34.8% and 36.8% YoY to S$162.2m (74.8% of BB est.) and S$129.4m (75.0% of BB est.), respectively. 9M21 DI was up 20.8% YoY to S$159.9m (83.3% of BB est.), mainly due to contributions from Victoria Police Centre, Pinnacle Office Park and Keppel Bay Tower. The increase in DI was partially offset by the impact of the divestment of 275 George Street in Jul21</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Keppel REIT (KREIT SP) 3Q21 Business Updates – Robust growth from acquisitions, healthy occupancy and collections9M21 revenue and NPI increased by 34.8% and 36.8% YoY to S$162.2m (74.8% of BB est.) and S$129.4m (75.0% of BB est.), respectively. 9M21 DI was up 20.8% YoY to S$159.9m (83.3% of BB est.), mainly due to contributions from Victoria Police Centre, Pinnacle Office Park and Keppel Bay Tower. The increase in DI was partially offset by the impact of the divestment of 275 George Street in Jul21

<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/000/236/273/original/image_54776601321634694560432.png?1634694565" class="editor-image img-responsive" data-smartkarma-image-id="236273"></figure><ul><li><h3></h3><a href="https://www.smartkarma.com/entities/ascendas-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:39" rel="noopener">Ascendas Real Estate Investment Trust (AREIT SP)</a> 3Q21 Business Updates; Robust reversions while on virtuous cycle of inorganic growth (BUY; TP S$3.55/unit)</li><li>3Q21 revenue, NPI and DPU were undisclosed. AREIT has completed the development of the Grab Headquarters, with a total development cost of S$184.6m. Divestment of two Australian logistics properties has also been completed at a price of S$104.5m (AUD101.6m)</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Ascendas Real Estate Investment Trust (AREIT SP) 3Q21 Business Updates; Robust reversions while on virtuous cycle of inorganic growth (BUY; TP S$3.55/unit)3Q21 revenue, NPI and DPU were undisclosed. AREIT has completed the development of the Grab Headquarters, with a total development cost of S$184.6m. Divestment of two Australian logistics properties has also been completed at a price of S$104.5m (AUD101.6m)

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

Lendlease Global Commercial REIT / Equity Bottom-Up

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>Lendlease Global Commercial REIT</h2>
<h3>Weighed down by lower rents</h3>
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<li>FY21 NPI missed, but DPU met expectations. Revenue and NPI at 92.4%/91.6% of our FY21e estimates, due to lower rental income during Phase 2HA.</li>
<li>Lacklustre tenant sales and mall visitors may continue as safe-distancing measures and border closures remain in place. Rents weighed down by negative reversions.</li>
<li>Downgrade to NEUTRAL from ACCUMULATE. Our DDM target price, however, climbs to S$0.87 from S$0.82 (COE 8%) as we roll over our estimates and assume that LREIT will acquire an additional 5% stake in Jem by the end of FY22. Recent share-price appreciation has priced in most positives, in our view.</li>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/298/original/image_16883174981635861871990.png?1635861874" class="editor-image img-responsive" data-smartkarma-image-id="239298"></figure>
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<p><strong>The Positives</strong><br><strong>+ FY21 NPI missed, but DPU met expectations.</strong> Revenue and NPI were lower than expected at 92.4%/91.6% of FY21e estimates, attributable to a decline in rental income during Phase 2HA. That said, annualised FY21 gross revenue and NPI were still 5.6%/5.4% higher YoY. This was due to lesser rental waivers for 313@somerset. Expenses were higher in FY21 mainly because of provisions for doubtful debts of S$2.3mn. Distributable income and DPU were in line, at 99%/98.7% of our FY21e estimates. They were aided by higher net FX gains of S$5.4mn in 2H21.</p>
<p><strong>The Negative</strong><br><strong>- Lower portfolio valuation.</strong> Both 313 and Sky Complex’s fair values fell 2.5%, attributable to higher discount rates of 6.15-6.75% vs. 6.00-6.75% in FY20. The valuers also project longer rent- free periods of 1-2 years and lower renewal rates. This was partially offset by a slightly higher 10-year average market rental growth rate of 2.85%, up 0.05% from the previous year. Overall, portfolio valuation dipped 1.2%, held up by the Grange Road carpark redevelopment. LREIT was appointed project manager for this site on 18 February 2021.</p>
<p><strong>Outlook</strong><br><strong>2H21 tenant sales and mall visitors grew 33.7% and 6.2% YoY respectively, from their low bases in 2H20 during Singapore’s circuit breaker.</strong> 313’s occupancy inched up QoQ from 98.6% to 99.2%, after LREIT secured three new tenants in 4Q21. To replace Forever 21’s lease which expired in FY21, LREIT brought in Marks and Spencer on a short-term lease of less than a year. M&amp;S is looking to extend its lease while LREIT has a few other prospects interested in the space.</p>
<p><strong>Tenant sales and mall visitors may remain muted even as Singapore resumes economic and community activities in a calibrated way.</strong> Demand for retail space is likely to remain soft with continued safe distancing and border closures. Although rental reversions are improving QoQ, they remain negative, in the double digits. Weak demand may continue to weigh on 313’s rentals. Office vacancy in Milan was stable at 9.6% in 1Q21. With a long WALE of 10.9 years, income contributions from Sky Complex are expected to be resilient.</p>
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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.






Lendlease Global Commercial REIT
Weighed down by lower rents





FY21 NPI missed, but DPU met expectations. Revenue and NPI at 92.4%/91.6% of our FY21e estimates, due to lower rental income during Phase 2HA.
Lacklustre tenant sales and mall visitors may continue as safe-distancing measures and border closures remain in place. Rents weighed down by negative reversions.
Downgrade to NEUTRAL from ACCUMULATE. Our DDM target price, however, climbs to S$0.87 from S$0.82 (COE 8%) as we roll over our estimates and assume that LREIT will acquire an additional 5% stake in Jem by the end of FY22. Recent share-price appreciation has priced in most positives, in our view.






The Positives + FY21 NPI missed, but DPU met expectations. Revenue and NPI were lower than expected at 92.4%/91.6% of FY21e estimates, attributable to a decline in rental income during Phase 2HA. That said, annualised FY21 gross revenue and NPI were still 5.6%/5.4% higher YoY. This was due to lesser rental waivers for 313@somerset. Expenses were higher in FY21 mainly because of provisions for doubtful debts of S$2.3mn. Distributable income and DPU were in line, at 99%/98.7% of our FY21e estimates. They were aided by higher net FX gains of S$5.4mn in 2H21.
The Negative - Lower portfolio valuation. Both 313 and Sky Complex’s fair values fell 2.5%, attributable to higher discount rates of 6.15-6.75% vs. 6.00-6.75% in FY20. The valuers also project longer rent- free periods of 1-2 years and lower renewal rates. This was partially offset by a slightly higher 10-year average market rental growth rate of 2.85%, up 0.05% from the previous year. Overall, portfolio valuation dipped 1.2%, held up by the Grange Road carpark redevelopment. LREIT was appointed project manager for this site on 18 February 2021.
Outlook 2H21 tenant sales and mall visitors grew 33.7% and 6.2% YoY respectively, from their low bases in 2H20 during Singapore’s circuit breaker. 313’s occupancy inched up QoQ from 98.6% to 99.2%, after LREIT secured three new tenants in 4Q21. To replace Forever 21’s lease which expired in FY21, LREIT brought in Marks and Spencer on a short-term lease of less than a year. M&amp;S is looking to extend its lease while LREIT has a few other prospects interested in the space.
Tenant sales and mall visitors may remain muted even as Singapore resumes economic and community activities in a calibrated way. Demand for retail space is likely to remain soft with continued safe distancing and border closures. Although rental reversions are improving QoQ, they remain negative, in the double digits. Weak demand may continue to weigh on 313’s rentals. Office vacancy in Milan was stable at 9.6% in 1Q21. With a long WALE of 10.9 years, income contributions from Sky Complex are expected to be resilient.














(Non-SGX Report) Lendlease Global Commercial REIT: Weighed Down by Lower Rents

<h2>Singapore</h2>
<h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3>
<table class="table table-striped">
<tbody>
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<td style="width: 136.65pt; height: 14.8pt;">
<p> </p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>ECWREIT</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>DASIN</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>LREIT</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>IREIT (€)</p>
</td>
</tr>
<tr>
<td style="width: 136.65pt; height: 15.3pt;">
<p>Period</p>
</td>
<td style="width: 136.6pt; height: 15.3pt;">
<p>2Q21</p>
</td>
<td style="width: 136.6pt; height: 15.3pt;">
<p>1H21</p>
</td>
<td style="width: 136.6pt; height: 15.3pt;">
<p>2H21</p>
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<td style="width: 136.6pt; height: 15.3pt;">
<p>1H21</p>
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<tr>
<td style="width: 136.65pt; height: 15.35pt;">
<p>Gross Revenue (S$m)</p>
</td>
<td style="width: 136.6pt; height: 15.35pt;">
<p>31.2 (10.6% YoY)</p>
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<td style="width: 136.6pt; height: 15.35pt;">
<p>51.3 (38.5% YoY)</p>
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<td style="width: 136.6pt; height: 15.35pt;">
<p>37 (+8.5%YoY)</p>
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<td style="width: 136.6pt; height: 15.35pt;">
<p>23.6 (+31.6% YoY)</p>
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<td style="width: 136.65pt; height: 14.8pt;">
<p>NPI (S$m)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>27.9 (8.1% YoY)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>38.2 (26.3% YoY)</p>
</td>
<td style="width: 136.6pt; height: 14.8pt;">
<p>26.5 (+10% YoY)</p>
</td>
<td style="width: 136.6pt; height: 14.8pt;">
<p>19.3 (+23.4% YoY)</p>
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<td style="width: 136.65pt; height: 14.8pt;">
<p>DPU (S$ c)</p>
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<p>1.532 (10.5% YoY)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>2.98 (55.2% YoY)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>2.34 (+32.8% YoY)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>1.43 (+14.4% YoY)</p>
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<p>NAV per Unit (S$)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>0.93</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>1.46</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>0.79</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>0.5</p>
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<p>P/B (x)</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>0.88</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>0.34</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>1.08</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>0.81</p>
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<p>Occupancy (%)</p>
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<p>99.1</p>
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<p>95.7</p>
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<p>99.8 (Overall portfolio)</p>
<p>99.2 (313@Somerset)</p>
<p>100 (Sky Complex)</p>
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<p>95.9 (Overall)</p>
<p>99.8 (Germany)</p>
<p>85.2 (Spanish)</p>
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<p>Reversion (%)</p>
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<p>N/A</p>
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<p>N/A</p>
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<td style="width: 136.6pt; height: 7.4pt;">
<p>NA</p>
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<p>NA</p>
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<p>Gearing (%)</p>
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<p>37.6</p>
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<p>36.7</p>
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<p>32</p>
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<p>33.3</p>
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<p>Cost of Debt (%)</p>
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<p>4.2</p>
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<p>N/A</p>
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<p>0.88</p>
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<p>1.8</p>
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<p>1 Yr Fwd Yield (%)</p>
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<p>7.36</p>
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<p>9.59</p>
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<p>5.78</p>
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<p>6.67</p>
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<p>Debt Hedged (%)</p>
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<p>100% of offshore facilities</p>
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<p>N/A</p>
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<td style="width: 136.6pt; height: 14.8pt;">
<p>Not Disclosed</p>
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<p>NA</p>
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<p>Target Price</p>
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<p>Under Review</p>
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<p>Under Review</p>
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<p>NA</p>
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<p>NA</p>
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<p>Rating</p>
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<p>Under Review</p>
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<td style="width: 136.6pt; height: 15.3pt;">
<p>Under Review</p>
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<td style="width: 136.6pt; height: 15.3pt;">
<p>NA</p>
</td>
<td style="width: 136.6pt; height: 15.3pt;">
<p>NA</p>
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Singapore
SREITs results in a glance (see detailed spreadsheet and calendar attached)




 


ECWREIT


DASIN


LREIT


IREIT (€)




Period


2Q21


1H21


2H21


1H21




Gross Revenue (S$m)


31.2 (10.6% YoY)


51.3 (38.5% YoY)


37 (+8.5%YoY)


23.6 (+31.6% YoY)




NPI (S$m)


27.9 (8.1% YoY)


38.2 (26.3% YoY)


26.5 (+10% YoY)


19.3 (+23.4% YoY)




DPU (S$ c)


1.532 (10.5% YoY)


2.98 (55.2% YoY)


2.34 (+32.8% YoY)


1.43 (+14.4% YoY)




NAV per Unit (S$)


0.93


1.46


0.79


0.5




P/B (x)


0.88


0.34


1.08


0.81




Occupancy (%)


99.1


95.7


99.8 (Overall portfolio)
99.2 (313@Somerset)
100 (Sky Complex)


95.9 (Overall)
99.8 (Germany)
85.2 (Spanish)




Reversion (%)


N/A


N/A


NA


NA




Gearing (%)


37.6


36.7


32


33.3




Cost of Debt (%)


4.2


N/A


0.88


1.8




1 Yr Fwd Yield (%)


7.36


9.59


5.78


6.67




Debt Hedged (%)


100% of offshore facilities


N/A


Not Disclosed


NA




Target Price


Under Review


Under Review


NA


NA




Rating


Under Review


Under Review


NA


NA





ASEAN Builder's Scoop (10Aug21) - ECWREIT Steady as She Goes

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>Lendlease Global Commercial REIT</h2>
<h2>Recovery gaining traction</h2>
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<ul>
<li>Tenant sales/footfall improved 33.6%/6.2% yoy to S$81.5m/11.4m in Jan-Jun 2021; FY6/21 gross revenue/DPU was in line with our expectations.</li>
<li>We expect further relaxation of restrictions and higher vaccination rates to drive recovery across LREIT’s retail portfolio.</li>
<li>We reiterate our Add call with a higher DDM-based TP of S$0.96 as we ascribe a premium to LREIT on potential Nareit Index inclusion</li>
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<p><strong>Lower rental waivers and stronger forex support FY21 revenue/DPU</strong><br>Lendlease Global Commercial REIT (LREIT) reported FY6/21 gross revenue/DPU of S$78.7m/4.68 Scts, which were 5.6%/14.6% yoy higher on an annualised basis, in line with our expectations, forming 97%/101% of our full-year FY21F forecasts respectively. LREIT’s stronger performance was mainly attributable to 1) lower rental rebates provided to retail tenants at 313@Somerset (313), and 2) stronger euro against the Singapore dollar from the property at Sky Complex. Rental reversions have also improved qoq, albeit still in negative territory according to the manager.</p>
<p><strong>Operating metrics remain robust; recovery gaining traction</strong><br>Overall portfolio remains robust with a high occupancy of 99.8% in FY21 (FY20: 99.5%) and long WALE of 8.8 years by NLA. Committed occupancy at 313 reached 99.2% as of end-Jun 21 which was above the average occupancy rate of 91% along Orchard Road, according to Colliers International. Tenant sales rose 33.6% yoy to S$81.5m while footfall recovered 6.2% to 11.4m visitations in Jan-Jun 21. By trade sectors, fashion and accessories and food and beverage tenants (totalling c.45% of portfolio GRI) saw a strong improvement of 37% yoy in sales over the same period. LREIT expects construction of the Grange Road development to commence by end-2021 and to be completed in 12-18 months’ time. Its anchor tenant Live Nation has committed to about two-thirds of the overall occupancy. We also expect the continued ramp-up in vaccine rollouts and the further relaxation of social-distancing measures to accelerate tenant sales and footfall at 313 to drive recovery across LREIT’s retail portfolio. LREIT is well- capitalised with a gearing ratio of 32% and interest coverage ratio of 8.9x, in our view.</p>
<p><strong>Reiterate Add with a higher TP on potential Nareit Index inclusion</strong><br>We introduce FY24F forecasts and we lower our cost of equity assumptions from 7.7% to 7.3% as we ascribe a premium for LREIT’s potential inclusion into FTSE EPRA Nareit Index. We keep our Add call with a higher TP of S$0.96. Against a backdrop of ongoing Covid-19 uncertainties, we expect LREIT to face rental pressures in FY22F but we believe that annual rental escalations in c.60% of the mall’s NLA, the long lease structure of Sky Complex, and the 44,200 sq ft Grange Road redevelopment should cushion negative rental reversions for renewed leases. Re-rating catalysts/downside risks include inclusion into the Nareit Index and faster/slower-than-expected recovery from the Covid- 19 outbreak.</p>
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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.




Lendlease Global Commercial REIT
Recovery gaining traction





Tenant sales/footfall improved 33.6%/6.2% yoy to S$81.5m/11.4m in Jan-Jun 2021; FY6/21 gross revenue/DPU was in line with our expectations.
We expect further relaxation of restrictions and higher vaccination rates to drive recovery across LREIT’s retail portfolio.
We reiterate our Add call with a higher DDM-based TP of S$0.96 as we ascribe a premium to LREIT on potential Nareit Index inclusion





Lower rental waivers and stronger forex support FY21 revenue/DPU Lendlease Global Commercial REIT (LREIT) reported FY6/21 gross revenue/DPU of S$78.7m/4.68 Scts, which were 5.6%/14.6% yoy higher on an annualised basis, in line with our expectations, forming 97%/101% of our full-year FY21F forecasts respectively. LREIT’s stronger performance was mainly attributable to 1) lower rental rebates provided to retail tenants at 313@Somerset (313), and 2) stronger euro against the Singapore dollar from the property at Sky Complex. Rental reversions have also improved qoq, albeit still in negative territory according to the manager.
Operating metrics remain robust; recovery gaining traction Overall portfolio remains robust with a high occupancy of 99.8% in FY21 (FY20: 99.5%) and long WALE of 8.8 years by NLA. Committed occupancy at 313 reached 99.2% as of end-Jun 21 which was above the average occupancy rate of 91% along Orchard Road, according to Colliers International. Tenant sales rose 33.6% yoy to S$81.5m while footfall recovered 6.2% to 11.4m visitations in Jan-Jun 21. By trade sectors, fashion and accessories and food and beverage tenants (totalling c.45% of portfolio GRI) saw a strong improvement of 37% yoy in sales over the same period. LREIT expects construction of the Grange Road development to commence by end-2021 and to be completed in 12-18 months’ time. Its anchor tenant Live Nation has committed to about two-thirds of the overall occupancy. We also expect the continued ramp-up in vaccine rollouts and the further relaxation of social-distancing measures to accelerate tenant sales and footfall at 313 to drive recovery across LREIT’s retail portfolio. LREIT is well- capitalised with a gearing ratio of 32% and interest coverage ratio of 8.9x, in our view.
Reiterate Add with a higher TP on potential Nareit Index inclusion We introduce FY24F forecasts and we lower our cost of equity assumptions from 7.7% to 7.3% as we ascribe a premium for LREIT’s potential inclusion into FTSE EPRA Nareit Index. We keep our Add call with a higher TP of S$0.96. Against a backdrop of ongoing Covid-19 uncertainties, we expect LREIT to face rental pressures in FY22F but we believe that annual rental escalations in c.60% of the mall’s NLA, the long lease structure of Sky Complex, and the 44,200 sq ft Grange Road redevelopment should cushion negative rental reversions for renewed leases. Re-rating catalysts/downside risks include inclusion into the Nareit Index and faster/slower-than-expected recovery from the Covid- 19 outbreak.













(Non-SGX Report) Lendlease Global Commercial REIT: Recovery Gaining Traction

Singapore

Lendlease Global Commercial REIT operates as a real estate investment trust. The Company invests in diversified portfolio of real estate assets. Lendlease Global Commercial REIT serves customers worldwide.

Lendlease Global Commercial REIT (LREIT SP)

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Lendlease Global Commercial REIT (LREIT SP)

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