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)

<p>Far East Hospitality Trust (FEHT SP) 2H21 DPU +10.9% YoY; Encouraging signs of recovery on RevPAR and RevPAU QoQ</p><p>Lendlease Global Commercial REIT (LREIT SP) to acquire remaining stake at JEM; DPU accretive by ~10%</p><p>Real estate blockchain firm Fraxtor receives capital markets services (CMS) licence from MAS</p>

Far East Hospitality Trust (FEHT SP) 2H21 DPU +10.9% YoY; Encouraging signs of recovery on RevPAR and RevPAU QoQLendlease Global Commercial REIT (LREIT SP) to acquire remaining stake at JEM; DPU accretive by ~10%Real estate blockchain firm Fraxtor receives capital markets services (CMS) licence from MAS

ASEAN Builder's Scoop (15Feb22) - FEHT Encouraging Signs of Recovery QoQ

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lendlease-group" target="_blank" data-smartkarma-citation="entities:11248" rel="noopener">Lendlease Group (LLC AU)</a> will begin construction on a large-scale Singapore vaccine facility in end-2021</h3><p>Lendlease is commencing construction on a large-scale, greenfield vaccine facility in late-2021. It did not disclose the identity of the client. The move comes as the Republic sees an increase in the number of Covid-19 vaccine-related investments, with three major pharmaceutical companies – BioNTech, Sanofi and Thermo Fisher Scientific – having plans to set up vaccine manufacturing facilities here. LLC has also been appointed to take on additional projects for existing Singapore clients, including expanding existing facilities to enhance their capabilities. The life sciences sector are one of LLC’s key focus areas where it is looking to apply its expertise across the integrated real estate value chain. In Mar21, LLC inked a partnership in the US with institutional investor Ivanhoe Cambridge to develop the 60 Guest Street project in Boston, a 320,000sqft life sciences hub.</p>

SingaporeLendlease Group (LLC AU) will begin construction on a large-scale Singapore vaccine facility in end-2021Lendlease is commencing construction on a large-scale, greenfield vaccine facility in late-2021. It did not disclose the identity of the client. The move comes as the Republic sees an increase in the number of Covid-19 vaccine-related investments, with three major pharmaceutical companies – BioNTech, Sanofi and Thermo Fisher Scientific – having plans to set up vaccine manufacturing facilities here. LLC has also been appointed to take on additional projects for existing Singapore clients, including expanding existing facilities to enhance their capabilities. The life sciences sector are one of LLC’s key focus areas where it is looking to apply its expertise across the integrated real estate value chain. In Mar21, LLC inked a partnership in the US with institutional investor Ivanhoe Cambridge to develop the 60 Guest Street project in Boston, a 320,000sqft life sciences hub.

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

Yoma Strategic Holdings / Equity Bottom-Up

Key Singapore Market Moves and Flows in 3Q21

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> issues S$250m 5.375% perpetual securities</h3><p>AAREIT has priced the S$250m perpetual securities at 5.375%. The Series 003 Perpetual Securities will be issued under the S$750m Multicurrency Debt Issuance programme, expected to be issued on 1Sep21. The net proceeds will be used for the general corporate purposes, finance general working capital, capital expenditure and investments and the partial or full refinancing of existing borrowings. AAREIT has an existing S$125m 5.65% perpetual securities issued in Aug20, bringing its total perps exposure to S$375m (a look-through debt+perps/asset to ~46%).</p><h3>Residential property volume, prices could continue rising for the rest of 2021</h3><p>Residential property demand and prices are expected to tick higher. OrangeTee noted that demand for public and private properties has been rising and listings for both new launches and resale flats are being snapped up on the same day. Buyers are more willing to spend on bigger but older flats due to work-from-home requirements. According to OrangeTee, more than 14,000 resale HDB flats changed hands in 1H21. Prices increased 6% over that period and are just 2% below the peak in 2Q13. Total HDB resales could hit 27,000-29,000 units this year (vs. 24,748 units in 2020 and 23,714 in 2019), while prices of resale flats may rise by 9-11% for the whole of 2021. Meanwhile, a total of 8,449 private homes, including new launches and resale units, were sold in 2Q21, up 4.3% QoQ. Overall home prices may rise by 6-9% this year, possibly driven by resale volumes.</p>

SingaporeAIMS APAC REIT (AAREIT SP) issues S$250m 5.375% perpetual securitiesAAREIT has priced the S$250m perpetual securities at 5.375%. The Series 003 Perpetual Securities will be issued under the S$750m Multicurrency Debt Issuance programme, expected to be issued on 1Sep21. The net proceeds will be used for the general corporate purposes, finance general working capital, capital expenditure and investments and the partial or full refinancing of existing borrowings. AAREIT has an existing S$125m 5.65% perpetual securities issued in Aug20, bringing its total perps exposure to S$375m (a look-through debt+perps/asset to ~46%).Residential property volume, prices could continue rising for the rest of 2021Residential property demand and prices are expected to tick higher. OrangeTee noted that demand for public and private properties has been rising and listings for both new launches and resale flats are being snapped up on the same day. Buyers are more willing to spend on bigger but older flats due to work-from-home requirements. According to OrangeTee, more than 14,000 resale HDB flats changed hands in 1H21. Prices increased 6% over that period and are just 2% below the peak in 2Q13. Total HDB resales could hit 27,000-29,000 units this year (vs. 24,748 units in 2020 and 23,714 in 2019), while prices of resale flats may rise by 9-11% for the whole of 2021. Meanwhile, a total of 8,449 private homes, including new launches and resale units, were sold in 2Q21, up 4.3% QoQ. Overall home prices may rise by 6-9% this year, possibly driven by resale volumes.

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/ec-world-reit" target="_blank" data-smartkarma-citation="entities:22842" rel="noopener">EC World Reit (ECWREIT SP)</a> – Cushioned by retained DI (BUY; TP S$0.87/Unit)</h3><p>ECWREIT has released partial of previously retained DI in 2Q21, and is likely to continue to do so in the coming quarters. Meanwhile, acquisition offer from Forchn-led consortium is still live and likely to reach a verdict by end-2021. Reiterate BUY with higher TP of S$0.87/unit, after adjusting for stronger Port Logistics revenue and RMB, as well as higher OpEx and tax in FY21E. We expect ECWREIT to fully release FY19-20 retained DI while retaining 10% of DI in FY21E, and payout ratio to normalize to 99.5% in FY22E and onwards.</p><p>Stable performance; Cushioned by retained DI. After adjusting for effective rent, security deposit accretion and other relevant distribution adjustments, 2Q21 Revenue and NPI were up 5.3% and 2.7% YoY, respectively. However, 2Q21 DI decreased 6.4% YoY on higher finance costs and withholding tax. ECWREIT has thus released S$1.951m (or S$0.242c/unit) of previously retained DI, propping 2Q21 DPU up to S$1.532c, 10.5% YoY higher or the same as 1Q21. Meanwhile, ECWREIT continued to retain 10% of DI in 2Q21. There are S$5.34m of retained DI (or S$0.662c/unit) remaining for ECWREIT to stabilise or boost future DPU. 1H21 Revenue/ NPI/ DPU formed ~51% of our full-year FY21E forecasts</p><p>Built-in rental escalations to sustain organic growth. Stronger performances from Port Logistics and E-commerce Logistics portfolios have offset the weaker Specialised Logistics portfolio. Notably, we have seen sustained revenue growth for its Port Logistics portfolio, from low of S$9.06m in 1Q20 to S$13.12m in 2Q21, despite the minor disruption at Chongxian Port Investment. Following a major lease renewal at Hengde Logistics on 7May21, only 5.8% of NLA will be due for renewal for the remaining of FY21E. Out of which, c.5.0% of GRI will be from Chongxian Port Logistics and the remaining c.0.8% are from Wuhan Meiluote (dormitory site). Mgmt. is optimistic to renew the CXPL leases at similar terms and short-term tenure. On a separate note, insurance claim assessment in relation to the incident at Chongxian Port Investment is still ongoing and repair work is expected to start from end-Aug21</p><p>Potential privatisation by Forchn-led consortium is still on the table. Whilst there has been no update since Forchn International Pte. Ltd. first disclosed its interest to acquire ECWREIT’s interests in all of its properties on 17May21, mgmt. hopes for a conclusion to be reached by end-2021</p><p>Reiterate BUY with higher TP of S$0.87/unit. Organic growth should continue to underpin DPU growth. 4 of its master leases (contributed ~73% of FY20 revenue) with effective annual escalations should offer ~1.8% revenue growth pa. Potential re-rating catalyst in near term would be DPU accretive acquisition, in view of its current low gearing at 37.6%. ECWREIT is currently trading at 0.87x P/B and 7.3% FY21E yield.</p>

SingaporeEC World Reit (ECWREIT SP) – Cushioned by retained DI (BUY; TP S$0.87/Unit)ECWREIT has released partial of previously retained DI in 2Q21, and is likely to continue to do so in the coming quarters. Meanwhile, acquisition offer from Forchn-led consortium is still live and likely to reach a verdict by end-2021. Reiterate BUY with higher TP of S$0.87/unit, after adjusting for stronger Port Logistics revenue and RMB, as well as higher OpEx and tax in FY21E. We expect ECWREIT to fully release FY19-20 retained DI while retaining 10% of DI in FY21E, and payout ratio to normalize to 99.5% in FY22E and onwards.Stable performance; Cushioned by retained DI. After adjusting for effective rent, security deposit accretion and other relevant distribution adjustments, 2Q21 Revenue and NPI were up 5.3% and 2.7% YoY, respectively. However, 2Q21 DI decreased 6.4% YoY on higher finance costs and withholding tax. ECWREIT has thus released S$1.951m (or S$0.242c/unit) of previously retained DI, propping 2Q21 DPU up to S$1.532c, 10.5% YoY higher or the same as 1Q21. Meanwhile, ECWREIT continued to retain 10% of DI in 2Q21. There are S$5.34m of retained DI (or S$0.662c/unit) remaining for ECWREIT to stabilise or boost future DPU. 1H21 Revenue/ NPI/ DPU formed ~51% of our full-year FY21E forecastsBuilt-in rental escalations to sustain organic growth. Stronger performances from Port Logistics and E-commerce Logistics portfolios have offset the weaker Specialised Logistics portfolio. Notably, we have seen sustained revenue growth for its Port Logistics portfolio, from low of S$9.06m in 1Q20 to S$13.12m in 2Q21, despite the minor disruption at Chongxian Port Investment. Following a major lease renewal at Hengde Logistics on 7May21, only 5.8% of NLA will be due for renewal for the remaining of FY21E. Out of which, c.5.0% of GRI will be from Chongxian Port Logistics and the remaining c.0.8% are from Wuhan Meiluote (dormitory site). Mgmt. is optimistic to renew the CXPL leases at similar terms and short-term tenure. On a separate note, insurance claim assessment in relation to the incident at Chongxian Port Investment is still ongoing and repair work is expected to start from end-Aug21Potential privatisation by Forchn-led consortium is still on the table. Whilst there has been no update since Forchn International Pte. Ltd. first disclosed its interest to acquire ECWREIT’s interests in all of its properties on 17May21, mgmt. hopes for a conclusion to be reached by end-2021Reiterate BUY with higher TP of S$0.87/unit. Organic growth should continue to underpin DPU growth. 4 of its master leases (contributed ~73% of FY20 revenue) with effective annual escalations should offer ~1.8% revenue growth pa. Potential re-rating catalyst in near term would be DPU accretive acquisition, in view of its current low gearing at 37.6%. ECWREIT is currently trading at 0.87x P/B and 7.3% FY21E yield.

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.

Lendlease Group (LLC AU)

ASEAN Builder's Scoop (15Feb22) - FEHT Encouraging Signs of Recovery QoQ

LREIT buys remaining JEM stake; RE blockchain Fraxtor obtains CMS license; DD Hotel to expand outside Phils; LLC acquires another plot at TRX City KL

SCCM Asia Research

ASEAN Builder's Scoop (8Oct21)

LLC begins SG vaccine facility in end-2021; OUECT S$540m green loan at 3.2%; HDB resale prices new record; Ascott expands Co-living biz; FPT...

SCCM Asia Research

Key Singapore Market Moves and Flows in 3Q21

In 3Q21, the STI saw its narrowest quarterly trading range since 3Q17, generating a 0.2% decline in total return, while the FTSE APAC Index...

Singapore Exchange Ltd (SGX)

ASEAN Builder's Scoop (24Aug21)

AAREIT issues S$250m perps; SG resi prices, volume continue rising; RCR offers IPO at 8% premium to NAV; CLI raises stake in reclamation firm MMDC;...

SCCM Asia Research

ASEAN Builder's Scoop (18Aug21)

ECWREIT cushioned by retained DI; Lendlease launches first DC project in Japan; KLCCSS 2Q21 net income rose 3% YoY; Indo expansive 2022 Bugdet Bill

SCCM Asia Research