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

SCCM Asia Research

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.

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

Myanmar Real estate / Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> expands into AUS, buys SG logistics asset for ~S$180m</h3><ul><li>EREIT is looking to raise about S$150m via a private placement and preferential offering to fund its S$119.2m acquisition of a Tanjong Penjuru logistics facility, as well as asset enhancement initiatives for properties in Tai Seng and Ang Mo Kio. The real estate investment trust has also obtained a S$68.5m unsecured loan to finance the acquisition of a 10% interest in a GIC-majority-owned Australian logistics investment for AUD60.5m (S$62.4m). The investment indirectly holds 33 income-producing properties, two land parcels for future development and two properties, which are currently under development</li><li>GIC holds an 80% stake in the fund, while ESR Queensland Hold Trust, holds the remaining 20%. The private fund is managed by an indirect subsidiary of ESR Cayman, the REIT’s sponsor. The fund's portfolio comprises properties in five Australia states – New South Wales, Victoria, Queensland, South Australia and Western Australia. These have a total land area of about 1.3m sqm, an occupancy rate of 95.9% and a WALE of 4.87 years as at 31Mar. The Australian acquisition will cost an estimated AUD64.9m, comprising the AUD60.5m purchase price and S$2.5m in fees to be incurred in connection with the deal. This whole amount will be financed fully through debt. The Australia acquisition is expected to be completed in May21</li><li>The Singapore acquisition, meanwhile, saw EREIT's trustee entering into a put and call option agreement with seller Montview Investments for 46A Tanjong Penjuru, a five-storey modern ramp-up logistics facility within the Jurong Industrial Estate. The proposed acquisition will cost EREIT about S$124.7m, comprising a S$112m purchase consideration, an estimated S$7.6m upfront land premium payable to JTC for the balance of the first 30-year lease term, S$3.6m in stamp duties, and S$1.5m in other transaction costs</li><li>EREIT is proposing a private placement of between 195.3-201.6m units to institutional investors and other investors at an issue price of between S$37.2-38.4c, to raise at least S$75m. The private placement is subject to an upsize option which brings the amount raised to a maximum of S$100m. EREIT's also plans to undertake a non-renounceable preferential offering of new units to raise no more than S$50m. The preferential offering will not be underwritten. Details of the offering have not been determined as at the date of the announcement but the manager stated the issue price of the offering may differ from the private placement's issue price</li><li>About S$71.8m, or nearly half, of the gross proceeds from the fundraising exercise will partially finance the Tanjong Penjuru acquisition. Some S$43.5m will be used to partially finance the asset enhancement initiatives (AEIs) of two industrial buildings at 16 Tai Seng Street and 7000 Ang Mo Kio Avenue 5, which will cost about S$25.9-53.3m, respectively. EREIT will use around S$31m of gross proceeds to repay existing indebtedness, while S$3.8m will be used to pay for estimated fees and expenses incurred in connection with the equity fundraising.</li></ul><p>Comments: While the overall investments and debt repayment offers a low single-digit 1.0-2.3% accretion to FY20 DPU and -1.5% dilution to FY20 NAV, we are positive on the two investments given their complementary potential upside from AEI/development. The SG asset, 46A Tanjong Penjuru, will enhance EREIT’s exposure in the resilient and highly sought-after quality logistics assets, while the strategic investment on the AU Fund demonstrates EREIT’s ability to access Sponsor’s pipeline of assets. The acquisition at a Fund NAV cap rate of 5.5% (vs. the current market range of 4+%) signals Sponsor’s commitment and support to grow EREIT. Despite having only a minor stake, it allows EREIT to be privy to the portfolio performance, thus offering an edge in acquisition opportunities. On the other hand, the continuous AEI/development efforts with 7% yield to cost would provide EREIT a stable organic growth. We have a BUY rating and TP of S$0.47/unit.</p>

SingaporeESR-REIT (EREIT SP) expands into AUS, buys SG logistics asset for ~S$180mEREIT is looking to raise about S$150m via a private placement and preferential offering to fund its S$119.2m acquisition of a Tanjong Penjuru logistics facility, as well as asset enhancement initiatives for properties in Tai Seng and Ang Mo Kio. The real estate investment trust has also obtained a S$68.5m unsecured loan to finance the acquisition of a 10% interest in a GIC-majority-owned Australian logistics investment for AUD60.5m (S$62.4m). The investment indirectly holds 33 income-producing properties, two land parcels for future development and two properties, which are currently under developmentGIC holds an 80% stake in the fund, while ESR Queensland Hold Trust, holds the remaining 20%. The private fund is managed by an indirect subsidiary of ESR Cayman, the REIT’s sponsor. The fund's portfolio comprises properties in five Australia states – New South Wales, Victoria, Queensland, South Australia and Western Australia. These have a total land area of about 1.3m sqm, an occupancy rate of 95.9% and a WALE of 4.87 years as at 31Mar. The Australian acquisition will cost an estimated AUD64.9m, comprising the AUD60.5m purchase price and S$2.5m in fees to be incurred in connection with the deal. This whole amount will be financed fully through debt. The Australia acquisition is expected to be completed in May21The Singapore acquisition, meanwhile, saw EREIT's trustee entering into a put and call option agreement with seller Montview Investments for 46A Tanjong Penjuru, a five-storey modern ramp-up logistics facility within the Jurong Industrial Estate. The proposed acquisition will cost EREIT about S$124.7m, comprising a S$112m purchase consideration, an estimated S$7.6m upfront land premium payable to JTC for the balance of the first 30-year lease term, S$3.6m in stamp duties, and S$1.5m in other transaction costsEREIT is proposing a private placement of between 195.3-201.6m units to institutional investors and other investors at an issue price of between S$37.2-38.4c, to raise at least S$75m. The private placement is subject to an upsize option which brings the amount raised to a maximum of S$100m. EREIT's also plans to undertake a non-renounceable preferential offering of new units to raise no more than S$50m. The preferential offering will not be underwritten. Details of the offering have not been determined as at the date of the announcement but the manager stated the issue price of the offering may differ from the private placement's issue priceAbout S$71.8m, or nearly half, of the gross proceeds from the fundraising exercise will partially finance the Tanjong Penjuru acquisition. Some S$43.5m will be used to partially finance the asset enhancement initiatives (AEIs) of two industrial buildings at 16 Tai Seng Street and 7000 Ang Mo Kio Avenue 5, which will cost about S$25.9-53.3m, respectively. EREIT will use around S$31m of gross proceeds to repay existing indebtedness, while S$3.8m will be used to pay for estimated fees and expenses incurred in connection with the equity fundraising.Comments: While the overall investments and debt repayment offers a low single-digit 1.0-2.3% accretion to FY20 DPU and -1.5% dilution to FY20 NAV, we are positive on the two investments given their complementary potential upside from AEI/development. The SG asset, 46A Tanjong Penjuru, will enhance EREIT’s exposure in the resilient and highly sought-after quality logistics assets, while the strategic investment on the AU Fund demonstrates EREIT’s ability to access Sponsor’s pipeline of assets. The acquisition at a Fund NAV cap rate of 5.5% (vs. the current market range of 4+%) signals Sponsor’s commitment and support to grow EREIT. Despite having only a minor stake, it allows EREIT to be privy to the portfolio performance, thus offering an edge in acquisition opportunities. On the other hand, the continuous AEI/development efforts with 7% yield to cost would provide EREIT a stable organic growth. We have a BUY rating and TP of S$0.47/unit.

Lendlease Global Commercial REIT (LREIT SP)

ASEAN Builder's Scoop (7May21) - EREIT Maiden Expansion into AUS