Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Desperado: The bulk of the Link REIT (823.HK) [Link] franchise continues to contract: negative rental reversion rates persist in Hong Kong; declining tenant sales; and another round of negative property revaluation due to lower rents and/or higher cap rates. That being said, Link management also appears hellbent on destroying shareholder value with  deals that make little financial sense; and *Throwing Good Money After Bad Again: Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou for CNY 3.2 bn. According to management, current annualized NPI yield of 3.3% - barely covering the project’s cost of funding. Management would have investors believe that the opportunity for Link is the shopping mall’s 70% occupancy and that 68% of leases are expiring between now and 2023. In order to improve occupancy, it would appear that Link would likely need to offering significant tenant enticements, and investment massively in asset enhancement.

*Desperado: The bulk of the Link REIT (823.HK) [Link] franchise continues to contract: negative rental reversion rates persist in Hong Kong; declining tenant sales; and another round of negative property revaluation due to lower rents and/or higher cap rates. That being said, Link management also appears hellbent on destroying shareholder value with  deals that make little financial sense; and *Throwing Good Money After Bad Again: Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou for CNY 3.2 bn. According to management, current annualized NPI yield of 3.3% - barely covering the project’s cost of funding. Management would have investors believe that the opportunity for Link is the shopping mall’s 70% occupancy and that 68% of leases are expiring between now and 2023. In order to improve occupancy, it would appear that Link would likely need to offering significant tenant enticements, and investment massively in asset enhancement.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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

<div>SF Real Estate Investment Trust (SFREIT), a logistics-focused REIT, raised around US$333m in its Hong Kong IPO. SF REIT is sponsored by SF Holdings, listed in Shenzhen.</div><div>We have looked at the background of the deal in our previous notes,<a href="https://www.smartkarma.com/insights/sf-reit-pre-ipo-one-trick-pony-who-s-not-doing-the-trick" target="_blank" rel="noopener"> SF REIT Pre-IPO -One trick pony, who’s not doing the trick</a> and <a href="https://www.smartkarma.com/insights/sf-reit-ipo-don-t-see-a-clear-reason-to-buy" target="_blank" rel="noopener">SF REIT IPO - Don’t See a Clear Reason to Buy</a>.</div><div>In this note, we’ll talk about the trading dyanmics.</div>

SF Real Estate Investment Trust (SFREIT), a logistics-focused REIT, raised around US$333m in its Hong Kong IPO. SF REIT is sponsored by SF Holdings, listed in Shenzhen.We have looked at the background of the deal in our previous notes, SF REIT Pre-IPO -One trick pony, who’s not doing the trick and SF REIT IPO - Don’t See a Clear Reason to Buy.In this note, we’ll talk about the trading dyanmics.

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/sf-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:31496:1" rel="noopener">SF Real Estate Investment Trust (SF HK)</a> is a REIT formed with an initial focus on income-generating logistics properties in Hong Kong and China. The sponsor is <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>. SF REIT will be the first logistics-focused REIT to be listed in Hong Kong.SF REIT has launched its IPO with an indicative price range of HK$4.68-5.16 per unit. The total proceeds will be HK$2,433.6-2,683.2 million ($313-345 million) at the price range. Two cornerstone investors will subscribe for $50.0 million of the offer units (15.2% of the offer units at the mid-point of the price range). The cornerstone investors are China Orient International Asset Management and <a href="https://www.smartkarma.com/entities/ci-financial-corp" target="_blank" data-smartkarma-citation="entities:25448:1" rel="noopener">Ci Financial (CIX CN)</a>. <div class="content-highlight">In <a href="https://www.smartkarma.com/insights/sf-reit-ipo-initiation-the-reit-flow-of-things" target="_blank" data-smartkarma-citation="insights:50673" rel="noopener">SF REIT IPO Initiation: The REIT Flow of Things</a>,  we noted that SF REIT offers an attractive proposition for investors willing to invest in a niche segment of the Asian REIT sector. However, our valuation analysis suggests that units are fully priced at the minimum offer price. Consequently, we are inclined to give this IPO a pass and wait for a lower entry point. </div>

SF Real Estate Investment Trust (SF HK) is a REIT formed with an initial focus on income-generating logistics properties in Hong Kong and China. The sponsor is S.F. Holding (002352 CH). SF REIT will be the first logistics-focused REIT to be listed in Hong Kong.SF REIT has launched its IPO with an indicative price range of HK$4.68-5.16 per unit. The total proceeds will be HK$2,433.6-2,683.2 million ($313-345 million) at the price range. Two cornerstone investors will subscribe for $50.0 million of the offer units (15.2% of the offer units at the mid-point of the price range). The cornerstone investors are China Orient International Asset Management and Ci Financial (CIX CN). In SF REIT IPO Initiation: The REIT Flow of Things,  we noted that SF REIT offers an attractive proposition for investors willing to invest in a niche segment of the Asian REIT sector. However, our valuation analysis suggests that units are fully priced at the minimum offer price. Consequently, we are inclined to give this IPO a pass and wait for a lower entry point. 

SF Real Estate Investment Trust (SFREIT), a logistics-focused REIT, aims to raise around US$300m in its Hong Kong IPO. SF REIT is sponsored by SF Holdings, listed in Shenzhen.At the time of listing, SFREIT will own three properties located in Hong Kong, Foshan and Wuhu, all of which are modern logistics properties. The assets have an aggregated gross lettable area of approximately 307,617.5 sqm with an appraised value of HK$6.1bn, as at Mar 2021. The average occupancy of the properties was 95.3%, with a weighted average age of 3.5 years and weighted average remaining land tenure of 37.9 years.

SF Real Estate Investment Trust (SFREIT), a logistics-focused REIT, aims to raise around US$300m in its Hong Kong IPO. SF REIT is sponsored by SF Holdings, listed in Shenzhen.At the time of listing, SFREIT will own three properties located in Hong Kong, Foshan and Wuhu, all of which are modern logistics properties. The assets have an aggregated gross lettable area of approximately 307,617.5 sqm with an appraised value of HK$6.1bn, as at Mar 2021. The average occupancy of the properties was 95.3%, with a weighted average age of 3.5 years and weighted average remaining land tenure of 37.9 years.

SF REIT Pre-IPO - One Trick Pony, Who’s Not Doing the Trick

*Update Confirms Weak Outlook: Negative rental reversion rates persist in Hong Kong, as do negative tenant sales. We continue to await another round of negative revaluation of property due to lower rents and/or higher cap rates; and  *No Serious Capital Management Strategy Exists: Management of Link appears hellbent on destroying shareholder value.As gearing was 19.2% at September 2020, management continues to believe that it has abundant headroom to add debt for acquisition. Instead of weighing a buyback’s return versus new investment ROI, management views share buybacks as a mechanism to defend its shares against short-selling. Maybe a re-re-review of its acquisition strategy will occur by earnings when Link’s new mainland China acquisition strategy truly flops.

*Update Confirms Weak Outlook: Negative rental reversion rates persist in Hong Kong, as do negative tenant sales. We continue to await another round of negative revaluation of property due to lower rents and/or higher cap rates; and  *No Serious Capital Management Strategy Exists: Management of Link appears hellbent on destroying shareholder value.As gearing was 19.2% at September 2020, management continues to believe that it has abundant headroom to add debt for acquisition. Instead of weighing a buyback’s return versus new investment ROI, management views share buybacks as a mechanism to defend its shares against short-selling. Maybe a re-re-review of its acquisition strategy will occur by earnings when Link’s new mainland China acquisition strategy truly flops.

Hong Kong

Link REIT is a real estate investment trust in Hong Kong. The Trust owns and operates shopping centers, parking space facilities and real estate retail space.

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Link REIT (823 HK)

Link REIT – Purchase or Perish

LINK REIT: The Link franchise continues to contract, and management appears hellbent on destroying shareholder value by chasing bad deals - the...

Thomas J. Monaco

SF REIT IPO Trading - Tepid Demand

SF Real Estate Investment Trust (SFREIT), a logistics-focused REIT, raised around US$333m in its Hong Kong IPO. SF REIT is sponsored by SF...

Sumeet Singh

SF REIT IPO: Valuation Insights

SF REIT has launched its IPO to raise $313-345 million at the price range. Our valuation analysis suggests that units are fully priced at the...

Arun George

SF REIT Pre-IPO - One Trick Pony, Who’s Not Doing the Trick

SF Real Estate Investment Trust (SFREIT), a logistics-focused REIT, aims to raise around US$300m in its Hong Kong IPO. SF REIT is sponsored by SF...

Sumeet Singh

Link REIT – Cash Burning Holes

LINK REIT: Negative rental reversion rates and tenant sales persist in Hong Kong, negative revaluation of property continues. Link is hellbent on...

Thomas J. Monaco

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