APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/lendlease-group" target="_blank" data-smartkarma-citation="entities:11248:1" rel="noopener">Lendlease Group (LLC AU)</a> is looking to raise A$950m in its fully underwritten institutional placement to strengthen its balance sheet.In this note, we will look at the company's plan to tide through the virus outbreak, deal dynamics and run the deal through our framework.

Lendlease Group (LLC AU) is looking to raise A$950m in its fully underwritten institutional placement to strengthen its balance sheet.In this note, we will look at the company's plan to tide through the virus outbreak, deal dynamics and run the deal through our framework.

Lendlease Group Placement - Big Deal, Different Narrative, but Well-Positioned for a Recovery

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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 <div class='content-caption'>Lendlease </div>
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With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and science in real estate.

“Traditionally, in the area of lease management, the key requirement was just to lease the property out, get a good price, and manage its risks,” said the Chief Executive Officer of the manager of SGX-listed Lendlease Global Commercial REIT.

“But in this day and age, just focusing on the science of the transaction is not enough – there’s an art to it as well, such as finding creative ways to manage an asset, understanding the surrounding demographics, and getting the right tenant mix for the target market.”

Chow, who keeps a notebook by his pillow to jot down ideas that pop into his head during the wee hours, finds his greatest satisfaction in instances when he is able to generate value.

“What inspires me most is solving problems and unlocking potential – improving the REIT’s value proposition, such as boosting cashflow and yields, as well as managing disruptors,” he added.

Chow, who holds a Master of Business Administration from Universitas 21 Global, and is a Fellow of the Association of Chartered Certified Accountants, was appointed CEO of the manager of Lendlease Global REIT in 2019.

Prior to this appointment, he was the Managing Director of Investment Management in Asia in 2018, overseeing the asset management function and performance of the Asia funds platform.

Before joining Lendlease, he held senior financial management roles with Keppel REIT, Soilbuild Business Space REIT and then-Cambridge Industrial Trust, now called ESR-REIT.

Listed on SGX Mainboard on 2 October 2019, Lendlease Global REIT has the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, and used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in the Lendlease-developed 313@somerset retail property in Singapore, and a freehold interest in Milan’s Sky Complex that consists of three Grade A freehold office buildings. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion.

The REIT is managed by Lendlease Global Commercial Trust Management Pte Ltd, an indirect, wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd. The latter is part of the Lendlease Group – an international property and infrastructure group established in 1958 and headquartered in Sydney. Listed on the Australian Securities Exchange, the Group has operations spanning Australia, Asia, Europe and the Americas.

Enhancing Performance

To generate growth, Lendlease Global REIT has adopted a three-pronged strategy – proactive asset management, investments and acquisition growth, as well as prudent capital management.

“We want to drive the performance of our existing assets, enhance our portfolio through suitable acquisitions, and manage our financing to maximise returns to unitholders,” Chow said.

For the REIT’s prime retail asset in Singapore – 313@somerset – which has developed as a differentiated lifestyle destination mall, one focus is maintaining a robust relationship with its high-quality, well-diversified base of tenants.

Leases in the mall are typically structured with three-year tenures, comprising base rent and turnover rent, which is calculated as a percentage of tenants’ gross turnover, with an average rental escalation of 3%.

The REIT is also exploring how to unlock further value for unitholders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority’s (URA) Master Plan 2019, resulting in a potential increase of up to 1,008 square metres of space based on its current gross floor area utilisation.

“We’re conducting feasibility studies on what will generate the highest cashflow possible, such as identifying specific floors in the mall where we can increase footfall or traffic,” he added.

Over in Milan, Sky Complex comprises about a third of Lendlease Global REIT’s IPO portfolio based on its appraised value. It consists of three Grade A, freehold office buildings located in one of the city’s newest and most vibrant office precincts – Milano Santa Giula.

It is 100% leased to Sky Italia, an Italian satellite television platform owned by Comcast Corporation, the world’s largest broadcasting and cable TV company by revenue. The single lease runs until 2032, with a break option in 2026.

“There is no retail component in Sky Complex. This tenant is ranked number one in the broadcasting industry, while the lease has a rental step-up clause that tracks the Italian National Institute of Statistics’ Consumer Price Index variation, and features a triple net structure whereby the tenant is generally responsible for the operating expenses of the property,” Chow said.

“It’s like owning AAA-rated bonds – the asset provides the portfolio with very stable cashflow.”

Resilient Outlook

Meanwhile, the outlook for 313@somerset remains bright. The mall features brands – including Pomelo Fashion and Love, Bonito – with omni-channel offerings that appeal to millennials and the younger generation.

“Singapore’s retail sector will continue to evolve, driven by changing consumer behaviours and the rise of e-commerce,” he added.

“The government’s proposed plans to rejuvenate Singapore's Orchard Road shopping belt, with the Somerset sub-precinct slated to provide more youth-oriented dining and entertainment offerings, also augurs well for us.”

While acknowledging that the COVID-19 coronavirus outbreak may impact domestic retail sales, Chow remains sanguine about 313@somerset’s performance.

“Yes, regional travel bans may affect foot traffic, but we expect the mall to stay resilient,” he said.

Retail market fundamentals also appear encouraging, with little supply expected over the next two to three years, according to data from real estate consultancy JLL. They point to a tighter vacancy environment that should support modest rental growth, Chow added.

“Our rental rates for 313@somerset are already at the bottom of the cycle, with one-third of our leases due for renewal. The remaining two-thirds will capture the annual rental escalation, and help mitigate any downside.”

Nonetheless, the REIT manager will monitor the impact of COVID-19 and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

And as for Milan – the fourth-largest economy in Europe and one of the continent’s top office sector destinations for investors and businesses – the investment market has remained active through 2019, with strong interest from both domestic and foreign investors for office assets, Chow noted.

“The robust take-up rates for office space led to tighter supply in 2019, and the take-up rate for this year is expected to stay healthy. We’re pretty positive on this asset, and don’t expect much downside risk ahead,” he added.

Earlier this week, Italy imposed a ban on all non-essential travel to and around the country, as well as a temporary ban of public events through 3 April 2020, in a bid to contain the coronavirus spread.

Meanwhile, acquisitions are definitely on the cards. But the REIT, which has a global mandate, isn’t focusing on any specific country or region at the moment. “The potential asset must tick the right boxes – enhance the diversification of the portfolio and deliver the best value proposition to investors,” he noted.

Key criteria include at least 80% occupancy levels, no major asset enhancement initiatives (AEIs) for two years post-acquisition, and prevailing rentals must be at or above market rates. Opportunities may also emerge in Singapore, Italy, or other gateway cities in which its sponsor, Lendlease Corporation, has a presence.

“Current market conditions – whether the office or retail sector in that geography is in an up or downturn – will also play a part,” he added.

Lendlease Corporation has a secured development pipeline of approximately A$112 billion and current funds under management of approximately A$37 billion, each of which includes retail and office assets. These may present future acquisition opportunities for the REIT.

Fully Hedged

Prudence is the watchword as macro challenges continue to abound, ranging from continuing US-Sino trade tensions to the economic fallout generated by the coronavirus epidemic, Chow noted.

Lendlease Global REIT has hedged 100% of its floating-rate debt to fixed-rate via interest rate swaps and options. To mitigate foreign currency risks, it has also substantially hedged its projected euro-denominated income for FY2020 and FY2021.

“We have also protected our cashflows – they are hedged not just for one but two years,” he added.

The REIT has a focus on delivering stable and long-term returns to investors. For example, it has obtained a euro-denominated term loan, which provides a full natural currency hedge against its euro investment in Sky Complex.

“When the euro falls, our asset values will fall in tandem, but our loan amount will also decline, which neutralises the impact on our balance sheet as well as P&amp;L,” he added, referring to the REIT’s profit and loss statement.

An added complexity, however, comes from the nature of retail malls, Chow admitted. “The challenge lies in managing our tenants’ performances and sales, as well as determining the overall mix of stores within the mall.”

“This encompasses a gamut of marketing and promotional activities, which are aimed at forging a clear identity for the mall, targeting specific shopper profiles, and could include using technology to develop apps to reward spending,” he added.

Apart from grappling with the day-to-day operational issues of the REIT, the 48-year-old is also focused on nurturing the next-generation of leaders for the real estate industry.

“REITs as an industry will continue to grow in Singapore, but where will the next-generation of talent come from?” he asked.

“The question I ask myself is: Do I see my job just as a career? Or can I create a legacy by sharing my values, experience and knowledge? The answer is obvious – it’s the latter.”

Lendlease Global Commercial REIT

Listed on SGX on 2 October 2019, Lendlease Global Commercial REIT is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in, 313@somerset, a retail property located in Singapore, and a freehold interest in Sky Complex, which comprises three office buildings located in Milan. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion. LREIT is managed by Lendlease Global Commercial Trust Management Pte. Ltd, an indirect wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd.

The company website is: <a href="http://www.lendleaseglobalcommercialreit.com">www.lendleaseglobalcommercialreit.com</a>. 
Click <a href="https://www2.sgx.com/securities/equities/JYEU">here</a> for the company's StockFacts page. 
For financial results from 2 Oct 2019 to 31 Dec 2019, click <a href="https://links.sgx.com/FileOpen/2QFY2020%20Results%20Press%20Release%20-%20Final..ashx?App=Announcement&amp;FileID=595729">here</a>.
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    Lendlease 


With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and science in real estate.

“Traditionally, in the area of lease management, the key requirement was just to lease the property out, get a good price, and manage its risks,” said the Chief Executive Officer of the manager of SGX-listed Lendlease Global Commercial REIT.

“But in this day and age, just focusing on the science of the transaction is not enough – there’s an art to it as well, such as finding creative ways to manage an asset, understanding the surrounding demographics, and getting the right tenant mix for the target market.”

Chow, who keeps a notebook by his pillow to jot down ideas that pop into his head during the wee hours, finds his greatest satisfaction in instances when he is able to generate value.

“What inspires me most is solving problems and unlocking potential – improving the REIT’s value proposition, such as boosting cashflow and yields, as well as managing disruptors,” he added.

Chow, who holds a Master of Business Administration from Universitas 21 Global, and is a Fellow of the Association of Chartered Certified Accountants, was appointed CEO of the manager of Lendlease Global REIT in 2019.

Prior to this appointment, he was the Managing Director of Investment Management in Asia in 2018, overseeing the asset management function and performance of the Asia funds platform.

Before joining Lendlease, he held senior financial management roles with Keppel REIT, Soilbuild Business Space REIT and then-Cambridge Industrial Trust, now called ESR-REIT.

Listed on SGX Mainboard on 2 October 2019, Lendlease Global REIT has the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, and used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in the Lendlease-developed 313@somerset retail property in Singapore, and a freehold interest in Milan’s Sky Complex that consists of three Grade A freehold office buildings. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion.

The REIT is managed by Lendlease Global Commercial Trust Management Pte Ltd, an indirect, wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd. The latter is part of the Lendlease Group – an international property and infrastructure group established in 1958 and headquartered in Sydney. Listed on the Australian Securities Exchange, the Group has operations spanning Australia, Asia, Europe and the Americas.

Enhancing Performance

To generate growth, Lendlease Global REIT has adopted a three-pronged strategy – proactive asset management, investments and acquisition growth, as well as prudent capital management.

“We want to drive the performance of our existing assets, enhance our portfolio through suitable acquisitions, and manage our financing to maximise returns to unitholders,” Chow said.

For the REIT’s prime retail asset in Singapore – 313@somerset – which has developed as a differentiated lifestyle destination mall, one focus is maintaining a robust relationship with its high-quality, well-diversified base of tenants.

Leases in the mall are typically structured with three-year tenures, comprising base rent and turnover rent, which is calculated as a percentage of tenants’ gross turnover, with an average rental escalation of 3%.

The REIT is also exploring how to unlock further value for unitholders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority’s (URA) Master Plan 2019, resulting in a potential increase of up to 1,008 square metres of space based on its current gross floor area utilisation.

“We’re conducting feasibility studies on what will generate the highest cashflow possible, such as identifying specific floors in the mall where we can increase footfall or traffic,” he added.

Over in Milan, Sky Complex comprises about a third of Lendlease Global REIT’s IPO portfolio based on its appraised value. It consists of three Grade A, freehold office buildings located in one of the city’s newest and most vibrant office precincts – Milano Santa Giula.

It is 100% leased to Sky Italia, an Italian satellite television platform owned by Comcast Corporation, the world’s largest broadcasting and cable TV company by revenue. The single lease runs until 2032, with a break option in 2026.

“There is no retail component in Sky Complex. This tenant is ranked number one in the broadcasting industry, while the lease has a rental step-up clause that tracks the Italian National Institute of Statistics’ Consumer Price Index variation, and features a triple net structure whereby the tenant is generally responsible for the operating expenses of the property,” Chow said.

“It’s like owning AAA-rated bonds – the asset provides the portfolio with very stable cashflow.”

Resilient Outlook

Meanwhile, the outlook for 313@somerset remains bright. The mall features brands – including Pomelo Fashion and Love, Bonito – with omni-channel offerings that appeal to millennials and the younger generation.

“Singapore’s retail sector will continue to evolve, driven by changing consumer behaviours and the rise of e-commerce,” he added.

“The government’s proposed plans to rejuvenate Singapore's Orchard Road shopping belt, with the Somerset sub-precinct slated to provide more youth-oriented dining and entertainment offerings, also augurs well for us.”

While acknowledging that the COVID-19 coronavirus outbreak may impact domestic retail sales, Chow remains sanguine about 313@somerset’s performance.

“Yes, regional travel bans may affect foot traffic, but we expect the mall to stay resilient,” he said.

Retail market fundamentals also appear encouraging, with little supply expected over the next two to three years, according to data from real estate consultancy JLL. They point to a tighter vacancy environment that should support modest rental growth, Chow added.

“Our rental rates for 313@somerset are already at the bottom of the cycle, with one-third of our leases due for renewal. The remaining two-thirds will capture the annual rental escalation, and help mitigate any downside.”

Nonetheless, the REIT manager will monitor the impact of COVID-19 and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

And as for Milan – the fourth-largest economy in Europe and one of the continent’s top office sector destinations for investors and businesses – the investment market has remained active through 2019, with strong interest from both domestic and foreign investors for office assets, Chow noted.

“The robust take-up rates for office space led to tighter supply in 2019, and the take-up rate for this year is expected to stay healthy. We’re pretty positive on this asset, and don’t expect much downside risk ahead,” he added.

Earlier this week, Italy imposed a ban on all non-essential travel to and around the country, as well as a temporary ban of public events through 3 April 2020, in a bid to contain the coronavirus spread.

Meanwhile, acquisitions are definitely on the cards. But the REIT, which has a global mandate, isn’t focusing on any specific country or region at the moment. “The potential asset must tick the right boxes – enhance the diversification of the portfolio and deliver the best value proposition to investors,” he noted.

Key criteria include at least 80% occupancy levels, no major asset enhancement initiatives (AEIs) for two years post-acquisition, and prevailing rentals must be at or above market rates. Opportunities may also emerge in Singapore, Italy, or other gateway cities in which its sponsor, Lendlease Corporation, has a presence.

“Current market conditions – whether the office or retail sector in that geography is in an up or downturn – will also play a part,” he added.

Lendlease Corporation has a secured development pipeline of approximately A$112 billion and current funds under management of approximately A$37 billion, each of which includes retail and office assets. These may present future acquisition opportunities for the REIT.

Fully Hedged

Prudence is the watchword as macro challenges continue to abound, ranging from continuing US-Sino trade tensions to the economic fallout generated by the coronavirus epidemic, Chow noted.

Lendlease Global REIT has hedged 100% of its floating-rate debt to fixed-rate via interest rate swaps and options. To mitigate foreign currency risks, it has also substantially hedged its projected euro-denominated income for FY2020 and FY2021.

“We have also protected our cashflows – they are hedged not just for one but two years,” he added.

The REIT has a focus on delivering stable and long-term returns to investors. For example, it has obtained a euro-denominated term loan, which provides a full natural currency hedge against its euro investment in Sky Complex.

“When the euro falls, our asset values will fall in tandem, but our loan amount will also decline, which neutralises the impact on our balance sheet as well as P&amp;L,” he added, referring to the REIT’s profit and loss statement.

An added complexity, however, comes from the nature of retail malls, Chow admitted. “The challenge lies in managing our tenants’ performances and sales, as well as determining the overall mix of stores within the mall.”

“This encompasses a gamut of marketing and promotional activities, which are aimed at forging a clear identity for the mall, targeting specific shopper profiles, and could include using technology to develop apps to reward spending,” he added.

Apart from grappling with the day-to-day operational issues of the REIT, the 48-year-old is also focused on nurturing the next-generation of leaders for the real estate industry.

“REITs as an industry will continue to grow in Singapore, but where will the next-generation of talent come from?” he asked.

“The question I ask myself is: Do I see my job just as a career? Or can I create a legacy by sharing my values, experience and knowledge? The answer is obvious – it’s the latter.”

Lendlease Global Commercial REIT

Listed on SGX on 2 October 2019, Lendlease Global Commercial REIT is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in, 313@somerset, a retail property located in Singapore, and a freehold interest in Sky Complex, which comprises three office buildings located in Milan. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion. LREIT is managed by Lendlease Global Commercial Trust Management Pte. Ltd, an indirect wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd.

The company website is: www.lendleaseglobalcommercialreit.com.  
Click here for the company's StockFacts page.  
For financial results from 2 Oct 2019 to 31 Dec 2019, click here.



Lendlease Global REIT: Unlocking Value, Driving Growth

Lendlease Global Commercial REIT / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/lendlease-global-commercial-reit" target="_blank" data-smartkarma-citation="entities:28292:1" rel="noopener">Lendlease Global REIT (1745226D SP)</a> (LGR) is looking to raise about US$540m in its upcoming Singapore IPO. 
LGR have two properties in its porfolio, 313@Somerset and Sky Complex, a office complex fully let by Sky Italia. The two properties in the portfolio have high occupancy rate and built-in rental escalation for FY2020. 313, in particular, is the prized asset of the REIT and seemed to have a track record of attracting interesting tenants to mall which appeals to the younger crowd.
However, the lack of historical operating and financial data is a disappointment.

Lendlease Global REIT (1745226D SP) (LGR) is looking to raise about US$540m in its upcoming Singapore IPO. 
LGR have two properties in its porfolio, 313@Somerset and Sky Complex, a office complex fully let by Sky Italia. The two properties in the portfolio have high occupancy rate and built-in rental escalation for FY2020. 313, in particular, is the prized asset of the REIT and seemed to have a track record of attracting interesting tenants to mall which appeals to the younger crowd.
However, the lack of historical operating and financial data is a disappointment.

Lendlease REIT IPO Early Thoughts - Looking Forward Without Historical Data

Macro and Australian equity strategist, Macro Strategy Advisors

Shane Lee

Macro and Australian equity strategist

Macro Strategy Advisors

Cross Asset Strategy

<ul>
<li>
Reporting season has been relatively disappointing with only 45% of stocks able to either meet or beat FY19 expectations. Analyst expectations in FY20 still look too optimistic with 8.3% EPS growth expected down from 9.8% at the start of reporting season.  </li>
<li>
Trade tensions between the US and China have provided a relatively sombre backdrop, with the ASX 200 4% below its peak just before reporting season kicked off. Materials have been the key underperforming sector, with both BHP and RIO trading lower on the back of weaker iron ore prices and global growth concerns.  The RIO result was broadly in line with expectations, while the BHP result was a little weaker.  The result of the other market heavy-weight, CBA, was a little disappointing mainly because cash from the CFSGAM business sale remains on the balance sheet, but industry structural headwinds relating to remediation costs, low short rates and weak credit growth remain.</li>
<li>
Capital management has been a key area of focus. SUN, ABP and SCG announced buybacks after selling assets, while CCL preferred to hand the cashback as a special dividend after its SPC  QAN and CPU also announced buybacks, while WHC, SPK and ASX announced special dividends.  Several Miners including EVN and SAR announced changes to payout policy, while AMC decided to pay shareholders dividends on a quarterly basis.</li>
<li>
Some management teams (SUL, JBH, MGR, DHG, REA and CAR) in industries with headwinds such as housing and consumer spending are clearly taking up the challenge. CGF and MFG are taking up the fight in financial services and NEC is successfully repositioning itself away from broadcasting.  GFG is exposed to global trade issues like AMC and BXB, but management remains cautiously optimistic about the outlook.  BXB is facing structural headwinds from online retailing, but recessionary forces in Europe are a more immediate threat.  AMC is combating global weakness by focusing on integrating the Bemis acquisition.  Similarly, TCL is benefiting from the integration of its new asset (M4 East Tunnel).  Natural disasters were a dampener on the insurance results, while weakness in the High-roller market is again a clear negative for SKC and CWN. </li>
<li>
Green shoots are appearing in turnaround stories such as CCL, LLC and COL, but the market thinks it’s too early to add stocks such as VOC, CTD, PGH, BKL and CGC to that list. JHX could also be added as lower mortgage rates in both Australia and the US gain traction to support better industry conditions.</li>
<li>
CSL and COH were both standout positive results because their longer-term growth models are payoff and they are sticking to the winning strategy going forward. We thought A2M was dealt with a little harshly, but TWE seemed to silence some of its critics.</li>
<li>
We will update our model portfolio in a few weeks, but at this stage, we are likely to pull back our resources exposure after we receive the benefit of dividends. Clearly, the iron ore price cycle has turned, but we expect gold will remain well bid and would look to taking up positions in these stocks.  We think it’s too early to go fully defensive, but de-risking the portfolio more seems prudent.  Even lower global interest rates will make it difficult to be positive on Banks and some financials, but market volatility could create some opportunities.</li>
</ul>



Reporting season has been relatively disappointing with only 45% of stocks able to either meet or beat FY19 expectations. Analyst expectations in FY20 still look too optimistic with 8.3% EPS growth expected down from 9.8% at the start of reporting season.  

Trade tensions between the US and China have provided a relatively sombre backdrop, with the ASX 200 4% below its peak just before reporting season kicked off. Materials have been the key underperforming sector, with both BHP and RIO trading lower on the back of weaker iron ore prices and global growth concerns.  The RIO result was broadly in line with expectations, while the BHP result was a little weaker.  The result of the other market heavy-weight, CBA, was a little disappointing mainly because cash from the CFSGAM business sale remains on the balance sheet, but industry structural headwinds relating to remediation costs, low short rates and weak credit growth remain.

Capital management has been a key area of focus. SUN, ABP and SCG announced buybacks after selling assets, while CCL preferred to hand the cashback as a special dividend after its SPC  QAN and CPU also announced buybacks, while WHC, SPK and ASX announced special dividends.  Several Miners including EVN and SAR announced changes to payout policy, while AMC decided to pay shareholders dividends on a quarterly basis.

Some management teams (SUL, JBH, MGR, DHG, REA and CAR) in industries with headwinds such as housing and consumer spending are clearly taking up the challenge. CGF and MFG are taking up the fight in financial services and NEC is successfully repositioning itself away from broadcasting.  GFG is exposed to global trade issues like AMC and BXB, but management remains cautiously optimistic about the outlook.  BXB is facing structural headwinds from online retailing, but recessionary forces in Europe are a more immediate threat.  AMC is combating global weakness by focusing on integrating the Bemis acquisition.  Similarly, TCL is benefiting from the integration of its new asset (M4 East Tunnel).  Natural disasters were a dampener on the insurance results, while weakness in the High-roller market is again a clear negative for SKC and CWN. 

Green shoots are appearing in turnaround stories such as CCL, LLC and COL, but the market thinks it’s too early to add stocks such as VOC, CTD, PGH, BKL and CGC to that list. JHX could also be added as lower mortgage rates in both Australia and the US gain traction to support better industry conditions.

CSL and COH were both standout positive results because their longer-term growth models are payoff and they are sticking to the winning strategy going forward. We thought A2M was dealt with a little harshly, but TWE seemed to silence some of its critics.

We will update our model portfolio in a few weeks, but at this stage, we are likely to pull back our resources exposure after we receive the benefit of dividends. Clearly, the iron ore price cycle has turned, but we expect gold will remain well bid and would look to taking up positions in these stocks.  We think it’s too early to go fully defensive, but de-risking the portfolio more seems prudent.  Even lower global interest rates will make it difficult to be positive on Banks and some financials, but market volatility could create some opportunities.


ASX Reporting Season Update: Misses and Downgrades Amongst Bright Spots

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

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This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
This week's highlights include comments from CrossASEAN Economist <a href="https://www.smartkarma.com/profiles/prasenjit-k-basu" target="_blank" data-smartkarma-citation="accounts:612" rel="noopener">Prasenjit K. Basu</a> on the Global Economy, an update from <a href="https://www.smartkarma.com/profiles/dr-jim-walker" target="_blank" data-smartkarma-citation="accounts:1628" rel="noopener">Dr. Jim Walker</a> on the Philippines economy post some "ugly" numbers, two small-cap updates from CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> on <a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM Holdings (AEM SP)</a> and <a href="https://www.smartkarma.com/entities/sunpower-group-ltd" target="_blank" data-smartkarma-citation="entities:18395:1" rel="noopener">Sunpower Group (SPWG SP),</a> a negative Insight from <a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> on <a href="https://www.smartkarma.com/entities/bank-danamon-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:135:1" rel="noopener">Bank Danamon Indonesia (BDMN IJ),</a> and an update from<a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> on <a href="https://www.smartkarma.com/entities/tipco-asphalt-pub-co-ltd" target="_blank" data-smartkarma-citation="entities:5336:1" rel="noopener">Tipco Asphalt (TASCO TB).</a> Also included in the detailed section some highlights from discussion streams in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a> over the last week. 
</div><h2>Macro Insights</h2>In <a href="https://www.smartkarma.com/insights/recession-watch-fluctuating-trade-war-on-the-verge-of-tripping-up-the-world-economy" target="_blank" data-smartkarma-citation="insights:31620" rel="noopener">Recession Watch: Fluctuating Trade War on the Verge of Tripping up the World Economy,</a> CrossASEAN Chief Economist <a href="https://www.smartkarma.com/profiles/prasenjit-k-basu" target="_blank" data-smartkarma-citation="accounts:612" rel="noopener">Prasenjit K. Basu</a> zeros in on the latest manifestation of the US-China trade war. In <a href="https://www.smartkarma.com/insights/expect-more-rate-cuts-in-the-philippines-growth-and-inflation-supports-cuts" target="_blank" data-smartkarma-citation="insights:31685" rel="noopener">Expect More Rate Cuts in the Philippines: Growth and Inflation Support Cuts,</a><a href="https://www.smartkarma.com/profiles/dr-jim-walker" target="_blank" data-smartkarma-citation="accounts:1628" rel="noopener">Dr. Jim Walker</a> comments on the Philippine economy post recent "ugly" economic numbers. In <a href="https://www.smartkarma.com/insights/thai-macro-watch-china-devalues-thailand-cut-rates" target="_blank" data-smartkarma-citation="insights:31660" rel="noopener">Thai Macro Watch: China Devalues, Thailand Cut Rates</a>, our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> zeros in on these two important developments in China and Thailand. In <a href="https://www.smartkarma.com/insights/singapore-macro-negative" target="_blank" data-smartkarma-citation="insights:31681" rel="noopener">Singapore Macro Negative,</a> Technical specialist <a href="https://www.smartkarma.com/profiles/thomas-schroeder" target="_blank" data-smartkarma-citation="accounts:381" rel="noopener">Thomas Schroeder</a> casts his eye over the Singapore <a href="https://www.smartkarma.com/entities/straits-times-index-sti" target="_blank" data-smartkarma-citation="entities:22902:1" rel="noopener">Straits Times Index Sti (STI INDEX)</a>, where he sees some bearish signals. <h2>Equity Bottom-Up Insights</h2>In <a href="https://www.smartkarma.com/insights/aem-aem-sp-strong-1h19-and-increased-fy19-guidance-leave-aem-trading-at-less-than-1x-fy19-sales" target="_blank" data-smartkarma-citation="insights:31700" rel="noopener">AEM (AEM SP): Strong 1H19 and Increased FY19 Guidance Leave AEM Trading at Less than 1x FY19 Sales</a>, CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> revisits this IT testing player company post results. In <a href="https://www.smartkarma.com/insights/sunpower-spwg-sp-1h19-growth-continues-stronger-2h19-expected-fair-value-0-97-sgd-122-upside" target="_blank" data-smartkarma-citation="insights:31792" rel="noopener">Sunpower (SPWG SP): 1H19 Growth Continues; Stronger 2H19 Expected; Fair Value 0.97 SGD (122% Upside),</a><a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> revisits the company post results. In <a href="https://www.smartkarma.com/insights/bank-danamon-credit-quality-failing-fast" target="_blank" data-smartkarma-citation="insights:31769" rel="noopener">Bank Danamon – Credit Quality, Failing Fast,</a> banking specialist <a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> circles back to this Indonesian bank recently acquired by <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-gro" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi Ufj Financial (8306 JP)</a>.In <a href="https://www.smartkarma.com/insights/kasikornbank-pcl-kbank-tb-can-kbank-earn-a-high-roe-again" target="_blank" data-smartkarma-citation="insights:31670" rel="noopener">Kasikornbank PCL (KBANK TB): Can KBANK Earn A High ROE Again?,</a><a href="https://www.smartkarma.com/profiles/emile-farsoun" target="_blank" data-smartkarma-citation="accounts:4470" rel="noopener">Emile Farsoun</a> looks at this leading Thai bank.In <a href="https://www.smartkarma.com/insights/tipco-asphalt-rising-like-a-phoenix" target="_blank" data-smartkarma-citation="insights:30724" rel="noopener">Tipco Asphalt: Rising Like a Phoenix,</a> Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> circles back to this asphalt play. In <a href="https://www.smartkarma.com/insights/city-developments-latest-offer-for-m-c-is-a-done-deal" target="_blank" data-smartkarma-citation="insights:31745" rel="noopener">City Developments' Latest Offer For M&amp;C Is A Done Deal,</a><a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> takes a look at this privatisation offer.In <a href="https://www.smartkarma.com/insights/uob-china-bank-investment-nationalised-soaring-building-construction-npls" target="_blank" data-smartkarma-citation="insights:31698" rel="noopener">UOB – China Bank Investment Nationalised, Soaring Building, Construction NPLs</a>, <a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> revisits this Singapore bank in light of its exposure to a recently nationalised Chinese Bank. In <a href="https://www.smartkarma.com/insights/singtel-1q20-result-shows-tough-trends-but-guidance-retained-needs-a-2h-recovery" target="_blank" data-smartkarma-citation="insights:31788" rel="noopener">Singtel 1Q20 Result Shows Tough Trends but Guidance Retained. Needs a 2H Recovery,</a> our friends at <a href="https://www.smartkarma.com/companies/new-street-research" target="_blank" data-smartkarma-citation="companies:151" rel="noopener">New Street Research</a> revisit Singapore'sleading Telco post its recent numbers. In <a href="https://www.smartkarma.com/insights/planb-record-high-earnings-supported-by-digital-media-revenue" target="_blank" data-smartkarma-citation="insights:31764" rel="noopener">PLANB: Record High Earnings Supported by Digital Media Revenue</a>, <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> revisits this leading Thai media player post some impressive numbers.<h2>Sector and Thematic Insights</h2>In <a href="https://www.smartkarma.com/insights/singapore-real-deals-issue-8-high-profile-projects-boost-july-ura-private-home-sales-data" target="_blank" data-smartkarma-citation="insights:31817" rel="noopener">Singapore Real Deals (Issue 8): High-Profile Projects Boost July URA Private Home Sales Data</a>, property specialist <a href="https://www.smartkarma.com/profiles/anni-kum" target="_blank" data-smartkarma-citation="accounts:1786" rel="noopener">Anni Kum</a> publishes her fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, she analyzes the data on property developers’ private home sales for the month of July 2019 released by the Urban Redevelopment Authority (URA) on 15th August 2019.In <a href="https://www.smartkarma.com/insights/singapore-reit-chasing-the-next-global-reit-ipo" target="_blank" data-smartkarma-citation="insights:31823" rel="noopener">Singapore REIT: Chasing the Next Global REIT IPO,</a><a href="https://www.smartkarma.com/profiles/anni-kum" target="_blank" data-smartkarma-citation="accounts:1786" rel="noopener">Anni Kum</a> takes a look at the next potential global REIT IPO to list in Singapore.


This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
This week's highlights include comments from CrossASEAN Economist Prasenjit K. Basu on the Global Economy, an update from Dr. Jim Walker on the Philippines economy post some "ugly" numbers, two small-cap updates from CrossASEAN Insight Provider Nicolas Van Broekhoven on AEM Holdings (AEM SP) and Sunpower Group (SPWG SP), a negative Insight from Daniel Tabbush on Bank Danamon Indonesia (BDMN IJ), and an update fromAthaporn Arayasantiparb, CFA on Tipco Asphalt (TASCO TB). Also included in the detailed section some highlights from discussion streams in ASEAN@Smartkarma over the last week. 
Macro InsightsIn Recession Watch: Fluctuating Trade War on the Verge of Tripping up the World Economy, CrossASEAN Chief Economist Prasenjit K. Basu zeros in on the latest manifestation of the US-China trade war. In Expect More Rate Cuts in the Philippines: Growth and Inflation Support Cuts,Dr. Jim Walker comments on the Philippine economy post recent "ugly" economic numbers. In Thai Macro Watch: China Devalues, Thailand Cut Rates, our Thai guru Athaporn Arayasantiparb, CFA zeros in on these two important developments in China and Thailand. In Singapore Macro Negative, Technical specialist Thomas Schroeder casts his eye over the Singapore Straits Times Index Sti (STI INDEX), where he sees some bearish signals. Equity Bottom-Up InsightsIn AEM (AEM SP): Strong 1H19 and Increased FY19 Guidance Leave AEM Trading at Less than 1x FY19 Sales, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits this IT testing player company post results. In Sunpower (SPWG SP): 1H19 Growth Continues; Stronger 2H19 Expected; Fair Value 0.97 SGD (122% Upside),Nicolas Van Broekhoven revisits the company post results. In Bank Danamon – Credit Quality, Failing Fast, banking specialist Daniel Tabbush circles back to this Indonesian bank recently acquired by Mitsubishi Ufj Financial (8306 JP).In Kasikornbank PCL (KBANK TB): Can KBANK Earn A High ROE Again?,Emile Farsoun looks at this leading Thai bank.In Tipco Asphalt: Rising Like a Phoenix, Thai guru Athaporn Arayasantiparb, CFA circles back to this asphalt play. In City Developments' Latest Offer For M&amp;C Is A Done Deal,David Blennerhassett takes a look at this privatisation offer.In UOB – China Bank Investment Nationalised, Soaring Building, Construction NPLs, Daniel Tabbush revisits this Singapore bank in light of its exposure to a recently nationalised Chinese Bank. In Singtel 1Q20 Result Shows Tough Trends but Guidance Retained. Needs a 2H Recovery, our friends at New Street Research revisit Singapore'sleading Telco post its recent numbers. In PLANB: Record High Earnings Supported by Digital Media Revenue, Country Group revisits this leading Thai media player post some impressive numbers.Sector and Thematic InsightsIn Singapore Real Deals (Issue 8): High-Profile Projects Boost July URA Private Home Sales Data, property specialist Anni Kum publishes her fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, she analyzes the data on property developers’ private home sales for the month of July 2019 released by the Urban Redevelopment Authority (URA) on 15th August 2019.In Singapore REIT: Chasing the Next Global REIT IPO,Anni Kum takes a look at the next potential global REIT IPO to list in Singapore. 

The Week That Was in ASEAN@Smartkarma - Philippines Economy, Small Cap Singapore, and Bank Danamon

Australia

Lendlease Group designs, develops, and manages property and infrastructure assets. The Company constructs apartments, commercial buildings, government offices, retirement living, and educational facilities. Lendlease serves customers worldwide.

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Lendlease Group (LLC AU)

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Singapore Exchange Ltd (SGX)

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The Week That Was in ASEAN@Smartkarma - Philippines Economy, Small Cap Singapore, and Bank Danamon

This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable...

Angus Mackintosh

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