Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> FY21 results boosted by facilities management and logistics services; Maintains S$0.01 DPS</li><li><a href="https://www.smartkarma.com/entities/ireit-global" target="_blank" data-smartkarma-citation="entities:10596" rel="noopener">IREIT Global (IREIT SP)</a> to achieve 100% occupancy rate for Münster Campus by Sep22 onwards</li><li><a href="https://www.smartkarma.com/entities/daiwa-house-logistics-trust" target="_blank" data-smartkarma-citation="entities:35020" rel="noopener">Daiwa House Logistics Trust (DHLT SP)</a> IPO sees healthy demand; Listing on 3Dec</li></ul>

LHN Ltd (LHN SP) FY21 results boosted by facilities management and logistics services; Maintains S$0.01 DPSIREIT Global (IREIT SP) to achieve 100% occupancy rate for Münster Campus by Sep22 onwardsDaiwa House Logistics Trust (DHLT SP) IPO sees healthy demand; Listing on 3Dec

ASEAN Builder's Scoop (29Nov21) - LHN Boosted by Facilities and Logistics Services

<h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> JV acquires Balestier hotel for S$15m; Another expansion on its Co-living business (BUY; TP S$0.42/share)</h3>LHN’s Coliwoo and Four Star have formed a JV to acquire Balestier Hotel for S$15m and intended to run and operate it as a Co-living hotel. Coliwoo will control 40% of the new JV company, while Four Star will control the remaining 60%. The Co-living hotel will operate under Coliwoo brand, a Co-living business that runs more than 800 rooms in Singapore in areas such as Balestier, Boon Lay, and Bukit Timah. Balestier Hotel is at 471 &amp; 473 Balestier Road, and the freehold property has a total GFA of about 10,000sqft. The seller of the hotel is an independent third party. The completion of the transaction is expected to be completed by 22Dec21.Comments: This acquisition adds to 320 Balestier Road (acquired in 16Dec20) and 40 &amp; 42 Amber Road (acquired in 9Jun21), as well as acquisitions of 75 Beach Road and 115 Geylang Road, which are expected to add 166 keys to LHN’s Co-living portfolio in FY22E. These 4 projects with S$61.9m total investments should generate 10-20% return to bottom-line upon stabilization from FY23-24E onwards. We continue to like LHN for its efficient space optimization business as well as its expansion in the Co-living business. We reiterate BUY with TP S$0.42/share. LHN is trading at an attractive 4.4x FY21E P/E and ~4.5% yield.

LHN Ltd (LHN SP) JV acquires Balestier hotel for S$15m; Another expansion on its Co-living business (BUY; TP S$0.42/share)LHN’s Coliwoo and Four Star have formed a JV to acquire Balestier Hotel for S$15m and intended to run and operate it as a Co-living hotel. Coliwoo will control 40% of the new JV company, while Four Star will control the remaining 60%. The Co-living hotel will operate under Coliwoo brand, a Co-living business that runs more than 800 rooms in Singapore in areas such as Balestier, Boon Lay, and Bukit Timah. Balestier Hotel is at 471 &amp; 473 Balestier Road, and the freehold property has a total GFA of about 10,000sqft. The seller of the hotel is an independent third party. The completion of the transaction is expected to be completed by 22Dec21.Comments: This acquisition adds to 320 Balestier Road (acquired in 16Dec20) and 40 &amp; 42 Amber Road (acquired in 9Jun21), as well as acquisitions of 75 Beach Road and 115 Geylang Road, which are expected to add 166 keys to LHN’s Co-living portfolio in FY22E. These 4 projects with S$61.9m total investments should generate 10-20% return to bottom-line upon stabilization from FY23-24E onwards. We continue to like LHN for its efficient space optimization business as well as its expansion in the Co-living business. We reiterate BUY with TP S$0.42/share. LHN is trading at an attractive 4.4x FY21E P/E and ~4.5% yield.

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> – Strong Start to FY21; Riding on Co-living trend (BUY; TP S$0.42/Unit)</h3><ul><li>1H21 PATMI jumped 3.66x YoY to S$14.8m, boosted by dormitories mgmt. contracts, which added S$22.4m to top line. While the dormitories mgmt. contracts should taper off in 2H22E, LHN’s recent acquisitions spree of S$61.9m investments in 4 co-living assets (additional 166 keys by end-FY22E) should support earnings with 10-20% ROI upon stabilization. We maintain BUY with a higher TP of S$0.42/share.</li><li>Dormitories mgmt. contracts continue to propel FY21E results. 1H21 revenue +24.9% YoY to S$64.5m, primarily due to higher contributions from Facilities Management Business (+225.5% YoY to S$31.6m) and Logistics Services Business (+6.0% YoY to S$13.5m), partially offset by lower revenue from Space Optimisation Business (-33.6% YoY to S$19.4m). 1H21 PATMI +366.3% YoY to S$14.8m on better margins, higher other income and share of results from associates and JVs, as well as lower fair value loss on investment properties. 1H21 Revenue/PATMI form 52%/59% of our full-year FY21E forecasts as we expect higher 1H21 results vs. 2H21E’s due to the frontloading of dormitories mgmt. contracts, which started in 2H20 and added S$22.4m to 1H21 topline. With the resurgence of Covid-19 cases in Singapore, LHN has recently secured renewal of these contracts for another 6-9months into 1H22E, adding S$12.3m and S$3.4m to 2H21E and 1H22E revenues, respectively</li><li>Mixed performance within Space Optimisation Segment. Industrial Properties and Commercial Properties recorded lower revenues (-46.7% YoY to S$12.8m) due to expiry of 6 master leases (avg. NLA -36.4% YoY to 2.2m sqft), negative rent reversion, downtime at 1557 Keppel Road due to AEI works and IFRS 16 impacts. Meanwhile, Residential Properties revenue (+28.9% YoY to S$6.5m) was boosted by contribution from new serviced residence in Cambodia and higher revenue at 1A Lutheran Road. For the remaining of FY21E, we expect non-renewal of 2 expiring Commercial sites (aggregate NLA of c.63k sqft)</li><li>String of acquisitions for Co-living business should propel growth moving forward. The newly acquired 320 Balestier Road (16Dec20) and 40 &amp; 42 Amber Road (9Jun21), as well as proposed acquisitions of 75 Beach Road and 115 Geylang Road (both are expected to be completed by Jul21) are expected to add 166 keys to LHN’s co-living portfolio in FY22E. The 4 projects with S$61.9m total investments should generate 10-20% return to bottom-line upon stabilization from FY23-24E onwards</li><li>Maintain BUY with a higher TP of S$0.42/shr. Taking into account (i) non-renewal of leases; (ii) renewed dormitories mgmt. contract; (iii) better Logistics Services Business; (iv) the new Co-living keys in FY22E; and (v) higher finance costs, our FY21/22E EPS are adjusted by +10%/-13% to S$6.87c/S$4.55c, respectively. EPS should resume growth at 9% CAGR from FY22-25E as new Residential projects ramp up while Industrial and Commercial Properties improve alongside economy recovery. LHN is currently trading at FY21E P/E of 4.9x and 4.1% yield.</li></ul>

SingaporeLHN Ltd (LHN SP) – Strong Start to FY21; Riding on Co-living trend (BUY; TP S$0.42/Unit)1H21 PATMI jumped 3.66x YoY to S$14.8m, boosted by dormitories mgmt. contracts, which added S$22.4m to top line. While the dormitories mgmt. contracts should taper off in 2H22E, LHN’s recent acquisitions spree of S$61.9m investments in 4 co-living assets (additional 166 keys by end-FY22E) should support earnings with 10-20% ROI upon stabilization. We maintain BUY with a higher TP of S$0.42/share.Dormitories mgmt. contracts continue to propel FY21E results. 1H21 revenue +24.9% YoY to S$64.5m, primarily due to higher contributions from Facilities Management Business (+225.5% YoY to S$31.6m) and Logistics Services Business (+6.0% YoY to S$13.5m), partially offset by lower revenue from Space Optimisation Business (-33.6% YoY to S$19.4m). 1H21 PATMI +366.3% YoY to S$14.8m on better margins, higher other income and share of results from associates and JVs, as well as lower fair value loss on investment properties. 1H21 Revenue/PATMI form 52%/59% of our full-year FY21E forecasts as we expect higher 1H21 results vs. 2H21E’s due to the frontloading of dormitories mgmt. contracts, which started in 2H20 and added S$22.4m to 1H21 topline. With the resurgence of Covid-19 cases in Singapore, LHN has recently secured renewal of these contracts for another 6-9months into 1H22E, adding S$12.3m and S$3.4m to 2H21E and 1H22E revenues, respectivelyMixed performance within Space Optimisation Segment. Industrial Properties and Commercial Properties recorded lower revenues (-46.7% YoY to S$12.8m) due to expiry of 6 master leases (avg. NLA -36.4% YoY to 2.2m sqft), negative rent reversion, downtime at 1557 Keppel Road due to AEI works and IFRS 16 impacts. Meanwhile, Residential Properties revenue (+28.9% YoY to S$6.5m) was boosted by contribution from new serviced residence in Cambodia and higher revenue at 1A Lutheran Road. For the remaining of FY21E, we expect non-renewal of 2 expiring Commercial sites (aggregate NLA of c.63k sqft)String of acquisitions for Co-living business should propel growth moving forward. The newly acquired 320 Balestier Road (16Dec20) and 40 &amp; 42 Amber Road (9Jun21), as well as proposed acquisitions of 75 Beach Road and 115 Geylang Road (both are expected to be completed by Jul21) are expected to add 166 keys to LHN’s co-living portfolio in FY22E. The 4 projects with S$61.9m total investments should generate 10-20% return to bottom-line upon stabilization from FY23-24E onwardsMaintain BUY with a higher TP of S$0.42/shr. Taking into account (i) non-renewal of leases; (ii) renewed dormitories mgmt. contract; (iii) better Logistics Services Business; (iv) the new Co-living keys in FY22E; and (v) higher finance costs, our FY21/22E EPS are adjusted by +10%/-13% to S$6.87c/S$4.55c, respectively. EPS should resume growth at 9% CAGR from FY22-25E as new Residential projects ramp up while Industrial and Commercial Properties improve alongside economy recovery. LHN is currently trading at FY21E P/E of 4.9x and 4.1% yield.

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 221.25px;"> </td><td style="width: 170.797px;">SUN</td><td style="width: 166.969px;">ALLT</td><td style="width: 166.984px;">SSREIT</td></tr><tr><td style="width: 221.25px;">Period</td><td style="width: 170.797px;">1H21</td><td style="width: 166.969px;">2Q21</td><td style="width: 166.984px;">1H21</td></tr><tr><td style="width: 221.25px;">Gross Revenue (S$ m)</td><td style="width: 170.797px;">166.8 (+11.6% YoY)</td><td style="width: 166.969px;">35.4 (+22.1% YoY)</td><td style="width: 166.984px;">39.1 (+14.1% YoY)</td></tr><tr><td style="width: 221.25px;">NPI (S$ m)</td><td style="width: 170.797px;">112.6 (+23.9% YoY)</td><td style="width: 166.969px;">30.5 (+39.2% YoY)</td><td style="width: 166.984px;">25.7 (+23.2% YoY)</td></tr><tr><td style="width: 221.25px;">DPU (S$ c)</td><td style="width: 170.797px;">4.154 (+26.1% YoY)</td><td style="width: 166.969px;">1.217 (-8.2% YoY)</td><td style="width: 166.984px;">1.48 (+214.9% YoY)</td></tr><tr><td style="width: 221.25px;">NAV per Unit (S$)</td><td style="width: 170.797px;">2.062</td><td style="width: 166.969px;">0.67</td><td style="width: 166.984px;">0.52</td></tr><tr><td style="width: 221.25px;">P/B (x)</td><td style="width: 170.797px;">0.71</td><td style="width: 166.969px;">1.30</td><td style="width: 166.984px;">0.82</td></tr><tr><td style="width: 221.25px;">Occupancy (%)</td><td style="width: 170.797px;">2Q21:93.8 (SG Retail)92.1 (SG Office)93.9 (AU Office)100 (UK Office)</td><td style="width: 166.969px;">2Q21:98.2</td><td style="width: 166.984px;">1H21:83.4</td></tr><tr><td style="width: 221.25px;">Reversion (%)</td><td style="width: 170.797px;">2Q21:+2.1 (Suntec City Office)-7.2 (Suntec City Mall)</td><td style="width: 166.969px;">1H21:+2.4</td><td style="width: 166.984px;">1H21:+11.8</td></tr><tr><td style="width: 221.25px;">Gearing (%)</td><td style="width: 170.797px;">43.1</td><td style="width: 166.969px;">39.5</td><td style="width: 166.984px;">34.9</td></tr><tr><td style="width: 221.25px;">Cost of Debt (%)</td><td style="width: 170.797px;">2.41</td><td style="width: 166.969px;">2.92</td><td style="width: 166.984px;">3.4</td></tr><tr><td style="width: 221.25px;">1 Yr Fwd Yield (%)</td><td style="width: 170.797px;">5.85</td><td style="width: 166.969px;">5.98</td><td style="width: 166.984px;">6.74</td></tr><tr><td style="width: 221.25px;">Debt Hedged (%)</td><td style="width: 170.797px;">64</td><td style="width: 166.969px;">65.8</td><td style="width: 166.984px;">60.4</td></tr><tr><td style="width: 221.25px;">Target Price</td><td style="width: 170.797px;">N/A</td><td style="width: 166.969px;">N/A</td><td style="width: 166.984px;">N/A</td></tr><tr><td style="width: 221.25px;">Rating</td><td style="width: 170.797px;">N/A</td><td style="width: 166.969px;">N/A</td><td style="width: 166.984px;">N/A</td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) SUNALLTSSREITPeriod1H212Q211H21Gross Revenue (S$ m)166.8 (+11.6% YoY)35.4 (+22.1% YoY)39.1 (+14.1% YoY)NPI (S$ m)112.6 (+23.9% YoY)30.5 (+39.2% YoY)25.7 (+23.2% YoY)DPU (S$ c)4.154 (+26.1% YoY)1.217 (-8.2% YoY)1.48 (+214.9% YoY)NAV per Unit (S$)2.0620.670.52P/B (x)0.711.300.82Occupancy (%)2Q21:93.8 (SG Retail)92.1 (SG Office)93.9 (AU Office)100 (UK Office)2Q21:98.21H21:83.4Reversion (%)2Q21:+2.1 (Suntec City Office)-7.2 (Suntec City Mall)1H21:+2.41H21:+11.8Gearing (%)43.139.534.9Cost of Debt (%)2.412.923.41 Yr Fwd Yield (%)5.855.986.74Debt Hedged (%)6465.860.4Target PriceN/AN/AN/ARatingN/AN/AN/A

ASEAN Builder's Scoop (22Jul21) - SUN Office Portfolio Offset Retail Weakness

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> to acquire an industrial property at Tuas South for S$21m; Expanding its Space Optimisation Business</h3><ul><li>LHN has accepted the OTP for the purchase of Tuas South Property for S$21m. The acquisition is expected to complete by 1Oct21 and will be financed by a mix of internal sources of funding and bank borrowings</li><li>The Tuas South Property is located at 55 Tuas South Avenue 1, with a land area of 51,655sqft and a remaining lease of ~39 years. The property has GFA of 129,138sqft and consists of (i) an 11-storey industrial building with a basement carpark; (ii) a part single-storey industrial factory; and (iii) a part single-storey industrial factory with two storey workers’ dormitory. This property is a foreclosed property and DBS Bank is selling it as the mortgagee of the property exercising its power of sale</li><li>LHN intends to operate the property under the industrial segment of its Space Optimisation Business to provide business spaces under the Business 2 zone for industrial developments as well as a range of value-added logistics support services to its tenants</li></ul>Comments: The Tuas South Property will add 2.9% of Industrial Space to LHN’s Space Optimisation Business, bringing total Industrial space to 1.83m sqft. LHN has been rationalizing its Industrial Space in FY20/21 by not renewing expired leases that are deemed underperforming. Including the 2 new JVs at 202 Kallang Bahru and 5 Toa Payoh, Industrial Space registered a net decline of -1.10m sqft (or -38.3%) over the last two years. We are positive on the acquisition given the strategic location and favorable price. The Consideration of S$21m translates to S$163psf, which is lower than the last two industrial property transactions along Tuas South Avenue 1 in 2020 at S$194psf and S$222psf, respectively (source: edgeprop). We expect future CapEx should be small as the property’s existing GFA of 129,138sqf is already at its maximum allowable plot ratio of 2.5 under the URA’s Master Plan 2019.

SingaporeLHN Ltd (LHN SP) to acquire an industrial property at Tuas South for S$21m; Expanding its Space Optimisation BusinessLHN has accepted the OTP for the purchase of Tuas South Property for S$21m. The acquisition is expected to complete by 1Oct21 and will be financed by a mix of internal sources of funding and bank borrowingsThe Tuas South Property is located at 55 Tuas South Avenue 1, with a land area of 51,655sqft and a remaining lease of ~39 years. The property has GFA of 129,138sqft and consists of (i) an 11-storey industrial building with a basement carpark; (ii) a part single-storey industrial factory; and (iii) a part single-storey industrial factory with two storey workers’ dormitory. This property is a foreclosed property and DBS Bank is selling it as the mortgagee of the property exercising its power of saleLHN intends to operate the property under the industrial segment of its Space Optimisation Business to provide business spaces under the Business 2 zone for industrial developments as well as a range of value-added logistics support services to its tenantsComments: The Tuas South Property will add 2.9% of Industrial Space to LHN’s Space Optimisation Business, bringing total Industrial space to 1.83m sqft. LHN has been rationalizing its Industrial Space in FY20/21 by not renewing expired leases that are deemed underperforming. Including the 2 new JVs at 202 Kallang Bahru and 5 Toa Payoh, Industrial Space registered a net decline of -1.10m sqft (or -38.3%) over the last two years. We are positive on the acquisition given the strategic location and favorable price. The Consideration of S$21m translates to S$163psf, which is lower than the last two industrial property transactions along Tuas South Avenue 1 in 2020 at S$194psf and S$222psf, respectively (source: edgeprop). We expect future CapEx should be small as the property’s existing GFA of 129,138sqf is already at its maximum allowable plot ratio of 2.5 under the URA’s Master Plan 2019.

ASEAN Builder's Scoop (15Jul21) - LHN Expands Its Space Optimization Biz

Singapore

LHN is a real estate management services group that specializes in space optimization, property development, facilities management, and energy businesses. The company transforms under-utilized properties into productive spaces, including co-living residences under its Coliwoo brand, and provides integrated facilities management and renewable energy solutions. LHN Group was established in 1991 and is headquartered in Singapore.

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LHN (LHN SP)

ASEAN Builder's Scoop (29Nov21) - LHN Boosted by Facilities and Logistics Services

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ASEAN Builder's Scoop (27Sep21)

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ASEAN Builder's Scoop (19Aug21)

LHN riding on Co-living uptrend; TSH bags Dunearn Rd freehold site; LMRT obtains S$30m credit facility; SPSB backed by 47 projects worth RM125bn

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ASEAN Builder's Scoop (22Jul21) - SUN Office Portfolio Offset Retail Weakness

SUN office portfolio offset retail weakness; ALLT boosted by AUS acquisitions; SSREIT robust operational metrics; CIT extends tenant support; FILRT...

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ASEAN Builder's Scoop (15Jul21) - LHN Expands Its Space Optimization Biz

LHN expands its Space Optimization biz; PLIFE/IHH extends lease agreement; Condo rents flattish in Jun21; Aboitiz builds Batangas office complex;...

SCCM Asia Research

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