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

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/suntec-reit" target="_blank" data-smartkarma-citation="entities:151" rel="noopener">Suntec REIT (SUN SP)</a> divests 30% of 9 Penang Road; Booked 30% development gain</h3><ul><li>SUN has sold its 30% interest in 9 Penang Road, formerly known as Park Mall, to Haiyi Holdings at an agreed property value of S$295.5m or S$2,468psf based on the property’s NLA. Haiyi Holdings, which redeveloped the site together with SUN and SingHaiyi Group (SHG SP), already held a 35% stake in the JV before buying out SUN's interest. The agreed property value represents a 5.7% premium over the latest valuation of S$931.8m and 30.3% higher than the total development cost of S$756.0m</li><li>The ten-storey development consists of two office towers and ancillary retail with a NLA of ~399,000sqft. The committed occupancy was 98.7% as at 31Mar21 with the two office towers fully leased to UBS AG</li><li>After taking into account the divestment related expenses (including the divestment fee payable to the Manager), the net proceeds from the divestment would be ~S$88.2m, resulting in an estimated net gain of ~S$66.5m. This represents a 305% return on investment if calculating net divestment profit as a percentage of cost of investment. The net proceeds of the divestment may be used to pare down bank borrowings and/or fund future acquisitions</li><li>Post divestment, SUN continues to be anchored by resilient office segment, which will contribute more than 80% to the REIT’s total income contribution with Singapore properties constituting ~75% of total AUM</li><li>On a stabilized basis, the NPI yield is 3.3% for this divestment. On a FY20 pro-forma basis, the acquisitions are expected to be +0.15% NAV accretive to unitholders. DPU will remain flattish at S$7.402c. Gearing will decrease to 42.9% from 44.4% as at 31Mar21 on a pro-forma basis. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/614/original/image015.png?1623894864" class="editor-image img-responsive" data-smartkarma-image-id="213614"></figure></section></li></ul>

SingaporeSuntec REIT (SUN SP) divests 30% of 9 Penang Road; Booked 30% development gainSUN has sold its 30% interest in 9 Penang Road, formerly known as Park Mall, to Haiyi Holdings at an agreed property value of S$295.5m or S$2,468psf based on the property’s NLA. Haiyi Holdings, which redeveloped the site together with SUN and SingHaiyi Group (SHG SP), already held a 35% stake in the JV before buying out SUN's interest. The agreed property value represents a 5.7% premium over the latest valuation of S$931.8m and 30.3% higher than the total development cost of S$756.0mThe ten-storey development consists of two office towers and ancillary retail with a NLA of ~399,000sqft. The committed occupancy was 98.7% as at 31Mar21 with the two office towers fully leased to UBS AGAfter taking into account the divestment related expenses (including the divestment fee payable to the Manager), the net proceeds from the divestment would be ~S$88.2m, resulting in an estimated net gain of ~S$66.5m. This represents a 305% return on investment if calculating net divestment profit as a percentage of cost of investment. The net proceeds of the divestment may be used to pare down bank borrowings and/or fund future acquisitionsPost divestment, SUN continues to be anchored by resilient office segment, which will contribute more than 80% to the REIT’s total income contribution with Singapore properties constituting ~75% of total AUMOn a stabilized basis, the NPI yield is 3.3% for this divestment. On a FY20 pro-forma basis, the acquisitions are expected to be +0.15% NAV accretive to unitholders. DPU will remain flattish at S$7.402c. Gearing will decrease to 42.9% from 44.4% as at 31Mar21 on a pro-forma basis. 

ASEAN Builder's Scoop (17Jun21) - SUN Booked 30% Devt Gain on 9 Penang Rd Sale

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/suntec-reit" target="_blank" data-smartkarma-citation="entities:151" rel="noopener">Suntec REIT (SUN SP)</a> issues 5yrs S$150m perpetual securities at 4.25% pa; Perps are back this year as funding alternatives</h3><p>SUN has priced S$150m of subordinated perpetual securities at 4.25% pa for five years. After the first reset date of 15Jun26, the new rate will be equivalent to the Swap Offer Rate, its successor rate, or if there is no successor rate, an alternative reference rate, with respect to the reset date plus the initial spread of 3.29%. The net proceeds from the issue will be used for refinancing its existing borrowings, financing or refinancing its acquisitions or investments and financing any asset enhancement works. The perpetuals will be issued under its US$2bn Euro Medium Term Securities Programme. Distributions under the perpetuals shall be payable semi-annually in arrears on 15Jun and 15Dec in each year, commencing on 15Dec21.</p><p>Comments: Perps are back and we have seen 3 SREITs issuing perps so far this year with an average coupon of 3.2-4.2%. We think perps are good funding alternatives for SREITs on top of traditional bank loan, bond, or equity – as long as they are not utilized as “financial engineering” to make deals look accretive on acquisitions. However, important metrics to look at 1) perps as % equity – anything above 10% can be perceived as “high” by the market; and 2) look-through gearing – preferably remains below the statutory limit of 50%.  </p><table class="table table-striped"><tbody><tr><td style="width: 154.422px;"><p> </p></td><td style="width: 165.188px;"><p>SUN</p></td><td style="width: 161.375px;"><p>LREIT</p></td><td style="width: 163.016px;"><p>MINT</p></td></tr><tr><td style="width: 154.422px;"><p>Date of Issue</p></td><td style="width: 165.188px;"><p>7-Jun-21</p></td><td style="width: 161.375px;"><p>27-May-21</p></td><td style="width: 163.016px;"><p>3-May-21</p></td></tr><tr><td style="width: 154.422px;"><p>Size</p></td><td style="width: 165.188px;"><p>S$150,000,000</p></td><td style="width: 161.375px;"><p>S$200,000,000</p></td><td style="width: 163.016px;"><p>S$300,000,000</p></td></tr><tr><td style="width: 154.422px;"><p>Rate</p></td><td style="width: 165.188px;"><p>15Jun21 - 15Jun26: 4.25%<br>31Jan23 onwards : 3.290% + Swap Offer Rate/Successor Rate/Alternative Reference Rate</p></td><td style="width: 161.375px;"><p>4.2% Pa</p></td><td style="width: 163.016px;"><p>3.15% Fixed Rate Pa</p></td></tr><tr><td style="width: 154.422px;"><p>Financial  </p><p>Calendar Referenced</p></td><td style="width: 165.188px;"><p>FY20</p></td><td style="width: 161.375px;"><p>1H21</p></td><td style="width: 163.016px;"><p>FY21</p></td></tr><tr><td style="width: 154.422px;"><p>Total Perps as % of Equity</p></td><td style="width: 165.188px;"><p>6.0</p></td><td style="width: 161.375px;"><p>16.7</p></td><td style="width: 163.016px;"><p>7.2</p></td></tr><tr><td style="width: 154.422px;"><p>Total Perps as % of Debt</p></td><td style="width: 165.188px;"><p>7.3</p></td><td style="width: 161.375px;"><p>36.6</p></td><td style="width: 163.016px;"><p>13.2</p></td></tr><tr><td style="width: 154.422px;"><p>(Debt + Perps) (S$ '000)</p></td><td style="width: 165.188px;"><p>4,976,461</p></td><td style="width: 161.375px;"><p>745,769</p></td><td style="width: 163.016px;"><p>2,571,100</p></td></tr><tr><td style="width: 154.422px;"><p>Total Asset (S$ ‘000)</p></td><td style="width: 165.188px;"><p>11,227,408</p></td><td style="width: 161.375px;"><p>1,577,523</p></td><td style="width: 163.016px;"><p>6,391,619</p></td></tr><tr><td style="width: 154.422px;"><p>Look-through Gearing Ratio</p></td><td style="width: 165.188px;"><p>44.3%</p></td><td style="width: 161.375px;"><p>47.3%</p></td><td style="width: 163.016px;"><p>40.2%</p></td></tr></tbody></table>

SingaporeSuntec REIT (SUN SP) issues 5yrs S$150m perpetual securities at 4.25% pa; Perps are back this year as funding alternativesSUN has priced S$150m of subordinated perpetual securities at 4.25% pa for five years. After the first reset date of 15Jun26, the new rate will be equivalent to the Swap Offer Rate, its successor rate, or if there is no successor rate, an alternative reference rate, with respect to the reset date plus the initial spread of 3.29%. The net proceeds from the issue will be used for refinancing its existing borrowings, financing or refinancing its acquisitions or investments and financing any asset enhancement works. The perpetuals will be issued under its US$2bn Euro Medium Term Securities Programme. Distributions under the perpetuals shall be payable semi-annually in arrears on 15Jun and 15Dec in each year, commencing on 15Dec21.Comments: Perps are back and we have seen 3 SREITs issuing perps so far this year with an average coupon of 3.2-4.2%. We think perps are good funding alternatives for SREITs on top of traditional bank loan, bond, or equity – as long as they are not utilized as “financial engineering” to make deals look accretive on acquisitions. However, important metrics to look at 1) perps as % equity – anything above 10% can be perceived as “high” by the market; and 2) look-through gearing – preferably remains below the statutory limit of 50%.   SUNLREITMINTDate of Issue7-Jun-2127-May-213-May-21SizeS$150,000,000S$200,000,000S$300,000,000Rate15Jun21 - 15Jun26: 4.25% 31Jan23 onwards : 3.290% + Swap Offer Rate/Successor Rate/Alternative Reference Rate4.2% Pa3.15% Fixed Rate PaFinancial  Calendar ReferencedFY201H21FY21Total Perps as % of Equity6.016.77.2Total Perps as % of Debt7.336.613.2(Debt + Perps) (S$ '000)4,976,461745,7692,571,100Total Asset (S$ ‘000)11,227,4081,577,5236,391,619Look-through Gearing Ratio44.3%47.3%40.2%

ASEAN Builder's Scoop (8Jun21) - SREITs Perps Are Back as Funding Alternatives

<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> revamps 1557 Keppel Road into office and Co-living spaces</h3><p>Once the nine-years lease was up in Dec19 for 1557 Keppel Road, LHN, the master tenant of the state land, decided to repurpose the place on a fresh term of lease into an integrated space comprising office and co-living spaces, occupying over 96,299sqft. The renovations took about 10 months, with delays due to the pandemic. The co-living business at the development runs under LHN’s brand Coliwoo, which has a total of over 800 rooms in the city-state. Coliwoo also operates in other areas like Balestier, Boon Lay and Bukit Timah. To date, LHN says 50% of its office spaces are already leased out. Confirmed tenants include a digital media and financial consultancy firm, while arrangements are still pending with three other businesses: an architectural firm, a digital media consultancy and a FinTech company. There will also be a gym operated by Anytime Fitness, and an F&amp;B eatery catering to the office and residential tenants within the development. At Coliwoo 1557 Keppel Road, LHN has also carved out 47 co-living units ranging from 180-260sqft across two residential blocks. Due to pandemic-led lockdowns, Coliwoo has seen demand from locals increase to 30% from 10% previously.</p>

SingaporeLHN Ltd (LHN SP) revamps 1557 Keppel Road into office and Co-living spacesOnce the nine-years lease was up in Dec19 for 1557 Keppel Road, LHN, the master tenant of the state land, decided to repurpose the place on a fresh term of lease into an integrated space comprising office and co-living spaces, occupying over 96,299sqft. The renovations took about 10 months, with delays due to the pandemic. The co-living business at the development runs under LHN’s brand Coliwoo, which has a total of over 800 rooms in the city-state. Coliwoo also operates in other areas like Balestier, Boon Lay and Bukit Timah. To date, LHN says 50% of its office spaces are already leased out. Confirmed tenants include a digital media and financial consultancy firm, while arrangements are still pending with three other businesses: an architectural firm, a digital media consultancy and a FinTech company. There will also be a gym operated by Anytime Fitness, and an F&amp;B eatery catering to the office and residential tenants within the development. At Coliwoo 1557 Keppel Road, LHN has also carved out 47 co-living units ranging from 180-260sqft across two residential blocks. Due to pandemic-led lockdowns, Coliwoo has seen demand from locals increase to 30% from 10% previously.

ASEAN Builder's Scoop (21May21) - LHN unveils 1557KR Co-living and office space

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

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

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

Singapore

Suntec Real Estate Investment Trust invests in income-producing real estate primarily used for office and retail purposes. Its portfolio includes prime commercial properties in Singapore, Australia, and the United Kingdom. The company is headquartered in Singapore and was founded in 2004.

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Suntec (SUN SP)

ASEAN Builder's Scoop (17Jun21) - SUN Booked 30% Devt Gain on 9 Penang Rd Sale

SUN booked 30% devt gain on 9 Penang Rd sale; Rising online F&B sales could benefit industrial prop vs prime malls; MEG details REIT plans; PH...

SCCM Asia Research

ASEAN Builder's Scoop (8Jun21) - SREITs Perps Are Back as Funding Alternatives

SREITs Perps are back as funding alternatives; EAGLEHT sold 11 properties under Chapter 11; LMC vs UOB dispute on inflated ASP; HK buyers buy SG...

SCCM Asia Research

ASEAN Builder's Scoop (21May21) - LHN unveils 1557KR Co-living and office space

LHN unveils 1557KR Co-living and office space; SUN rolls out tenant supports; HK starts REIT subsidy to rival SG, Japan; AGI weak 1Q21 results; LBS...

SCCM Asia Research

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

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

SCCM Asia Research

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