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.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934:1" rel="noopener">ESR-REIT (EREIT SP)</a> announced the proposed merger with <a href="https://www.smartkarma.com/entities/ara-logos-logistics-trust" target="_blank" data-smartkarma-citation="entities:937:1" rel="noopener">ARA LOGOS (ALLT SP)</a> by way of a trust scheme of arrangement. Under the scheme consideration, each ALLT unitholder will receive S$0.095 in cash and 1.6765 new EREIT units at an issue price of S$0.510. The total consideration implies a gross exchange ratio of 1.863x and a total scheme consideration of S$0.950 per ALLT unit, which is a 1.6% premium to the ALLT last close price of S$0.935 per unit (on 14 October). </p><p>The merger was widely anticipated to avoid conflicts of interest arising from the proposed acquisition of ARA Asset Management by <a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a> for a total consideration of US$5.2 billion, which was announced on 5 August 2021. ESR Cayman which owns 67% of EREIT’s manager would also own 100% of ALLT’s manager on completion of the acquisition resulting in overlapping investment mandates.</p><p>A key issue is on pricing particularly the EREIT issue price of S$0.510 which is based on EREIT’s 52-week high. Notably, at the last close EREIT price of S$0.465, implies a scheme consideration of S$0.875 per ALLT unit, which is a -6.5% discount to the ALLT last close price of S$0.935 per unit (on 14 October). </p><div class="content-highlight"><p>As the cash consideration represents just 10% of the total scheme consideration, ALLT unitholders have greater exposure to any post-merger share price gains driven by the enlarged REIT’s higher free float, lower cost of capital, cost savings and higher growth potential. While short-term pricing concerns will linger, we note that the scheme consideration even at the last close EREIT price seems reasonable. Consequently, we believe that the merger will get the nod from both sets of unitholders.</p></div>

ESR-REIT (EREIT SP) announced the proposed merger with ARA LOGOS (ALLT SP) by way of a trust scheme of arrangement. Under the scheme consideration, each ALLT unitholder will receive S$0.095 in cash and 1.6765 new EREIT units at an issue price of S$0.510. The total consideration implies a gross exchange ratio of 1.863x and a total scheme consideration of S$0.950 per ALLT unit, which is a 1.6% premium to the ALLT last close price of S$0.935 per unit (on 14 October). The merger was widely anticipated to avoid conflicts of interest arising from the proposed acquisition of ARA Asset Management by ESR Cayman (1821 HK) for a total consideration of US$5.2 billion, which was announced on 5 August 2021. ESR Cayman which owns 67% of EREIT’s manager would also own 100% of ALLT’s manager on completion of the acquisition resulting in overlapping investment mandates.A key issue is on pricing particularly the EREIT issue price of S$0.510 which is based on EREIT’s 52-week high. Notably, at the last close EREIT price of S$0.465, implies a scheme consideration of S$0.875 per ALLT unit, which is a -6.5% discount to the ALLT last close price of S$0.935 per unit (on 14 October). As the cash consideration represents just 10% of the total scheme consideration, ALLT unitholders have greater exposure to any post-merger share price gains driven by the enlarged REIT’s higher free float, lower cost of capital, cost savings and higher growth potential. While short-term pricing concerns will linger, we note that the scheme consideration even at the last close EREIT price seems reasonable. Consequently, we believe that the merger will get the nod from both sets of unitholders.

ESR-REIT’s Proposed Merger with ARA LOGOS

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

<figure>
      <img src='https://api2.sgx.com/sites/default/files/2021-08/Capture_19.PNG' alt='Top 5 S-REITs with largest yoy increase in DPU for 1H2021' />
    </figure>
    <div class='content-caption'>Top 5 S-REITs with largest yoy increase in DPU for 1H2021</div>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd">
<html><body>
<p>As the earnings season conclude, REITs and Property Trusts listed in Singapore have announced financial results or published business updates for the period ending 30 June 2021. Of the S-REITs which declared distributions for the first half of calendar year 2021, average change in distribution per unit (DPU) increased by 36 per cent year-on-year (y-o-y).</p>

<p>The five S-REITs with the highest y-o-y DPU increments for the period Jan to Jun 2021 are: SPH REIT (228 per cent), Sabana Shari'ah Compliant Industrial REIT (215 per cent), Starhill Global REIT (196 per cent), Ascott Residence Trust (95 per cent) and CapitaLand Integrated Commercial Trust (75 per cent).</p>

<p>SPH REIT declared a DPU of 1.38 Singapore cents for Q3 FY2021 ended 31 May, bringing its DPU for the period of Dec 2020 to May 2021 to 2.62 Singapore cents - a 228 per cent increase y-o-y. In its latest business update for 3Q FY2021, the REIT noted gradual recovery with improvements in gross revenue of 22.2 per cent y-o-y to S$209.6 million. This was led by recovery in performance across all assets while supported by additional quarter of contribution from Westfield Marion compared to the same period last year and a decrease in rent reliefs to Singapore and Australia eligible tenants.</p>

<p>Sabana Shari'ah Compliant Industrial REIT (Sabana REIT) reported DPU of 1.48 Singapore cents for 1H 2021, representing a 215 per cent y-o-y increase. This was mainly due to the temporary retainment of 55.0 per cent of its distributable income in 1H 2020 to conserve capital. The REIT also reported a 14.1 per cent y-o-y increase in gross revenue, mainly due to higher contribution from New Tech Park, 23 Serangoon North Avenue 5 and 10 Changi South Street 2 on higher occupancy. During the period, Sabana REIT announced the removal of its Shari’ah compliance requirement in order to accommodate the changing profile of tenants and enhance its flexibility for the next phase of growth.</p>

<p>Starhill Global REIT (SGREIT) reported 2H FY2020/2021 DPU of 2.07 Singapore cents, representing a y-o-y increase of 196 per cent, mainly due to the release of retained income for working capital requirements. SGREIT noted that gross revenue for the period increased 10.5 per cent y-o-y, resulting in a 20.2 per cent increase in its net property income (NPI). This was mainly attributed to lower rental assistance for eligible tenants affected by the COVID-19 pandemic and the appreciation of the Australian dollar against the Singapore dollar.</p>

<p>Ascott Residence Trust (ART) raised its DPU for 1H 2021 by 95 per cent y-o-y, attributable to active portfolio optimisation. The trust noted that distributable income for 1H 2021 included a one-off partial distribution of divestment gains of S$20 million to share divestment gains with unitholders, replace income loss from divested assets and mitigate the impact of COVID-19 on distributions.</p>

<p>CapitaLand Integrated Commercial Trust (CICT) announced a DPU of 5.18 Singapore cents for 1H 2021, representing a 75 per cent increase y-o-y. The REIT reported a 103 per cent and 118 per cent y-o-y increase in gross revenue and NPI respectively. In 1H 2021, CICT granted S$18.9 million of rental waivers for tenants affected by COVID-19, particularly during Singapore’s first Phase 2 (Heightened Alert) from 16 May to 13 June 2021.<br><br><strong><em>For more research and information on Singapore’s REIT sector, visit <a href="https://www.sgx.com/research-education/sectors">sgx.com/research-education/sectors</a> for the monthly SREITs &amp; Property Trusts Chartbook</em></strong></p>
</body></html>



      
    
    Top 5 S-REITs with largest yoy increase in DPU for 1H2021


As the earnings season conclude, REITs and Property Trusts listed in Singapore have announced financial results or published business updates for the period ending 30 June 2021. Of the S-REITs which declared distributions for the first half of calendar year 2021, average change in distribution per unit (DPU) increased by 36 per cent year-on-year (y-o-y).

The five S-REITs with the highest y-o-y DPU increments for the period Jan to Jun 2021 are: SPH REIT (228 per cent), Sabana Shari'ah Compliant Industrial REIT (215 per cent), Starhill Global REIT (196 per cent), Ascott Residence Trust (95 per cent) and CapitaLand Integrated Commercial Trust (75 per cent).

SPH REIT declared a DPU of 1.38 Singapore cents for Q3 FY2021 ended 31 May, bringing its DPU for the period of Dec 2020 to May 2021 to 2.62 Singapore cents - a 228 per cent increase y-o-y. In its latest business update for 3Q FY2021, the REIT noted gradual recovery with improvements in gross revenue of 22.2 per cent y-o-y to S$209.6 million. This was led by recovery in performance across all assets while supported by additional quarter of contribution from Westfield Marion compared to the same period last year and a decrease in rent reliefs to Singapore and Australia eligible tenants.

Sabana Shari'ah Compliant Industrial REIT (Sabana REIT) reported DPU of 1.48 Singapore cents for 1H 2021, representing a 215 per cent y-o-y increase. This was mainly due to the temporary retainment of 55.0 per cent of its distributable income in 1H 2020 to conserve capital. The REIT also reported a 14.1 per cent y-o-y increase in gross revenue, mainly due to higher contribution from New Tech Park, 23 Serangoon North Avenue 5 and 10 Changi South Street 2 on higher occupancy. During the period, Sabana REIT announced the removal of its Shari’ah compliance requirement in order to accommodate the changing profile of tenants and enhance its flexibility for the next phase of growth.

Starhill Global REIT (SGREIT) reported 2H FY2020/2021 DPU of 2.07 Singapore cents, representing a y-o-y increase of 196 per cent, mainly due to the release of retained income for working capital requirements. SGREIT noted that gross revenue for the period increased 10.5 per cent y-o-y, resulting in a 20.2 per cent increase in its net property income (NPI). This was mainly attributed to lower rental assistance for eligible tenants affected by the COVID-19 pandemic and the appreciation of the Australian dollar against the Singapore dollar.

Ascott Residence Trust (ART) raised its DPU for 1H 2021 by 95 per cent y-o-y, attributable to active portfolio optimisation. The trust noted that distributable income for 1H 2021 included a one-off partial distribution of divestment gains of S$20 million to share divestment gains with unitholders, replace income loss from divested assets and mitigate the impact of COVID-19 on distributions.

CapitaLand Integrated Commercial Trust (CICT) announced a DPU of 5.18 Singapore cents for 1H 2021, representing a 75 per cent increase y-o-y. The REIT reported a 103 per cent and 118 per cent y-o-y increase in gross revenue and NPI respectively. In 1H 2021, CICT granted S$18.9 million of rental waivers for tenants affected by COVID-19, particularly during Singapore’s first Phase 2 (Heightened Alert) from 16 May to 13 June 2021.  For more research and information on Singapore’s REIT sector, visit sgx.com/research-education/sectors for the monthly SREITs &amp; Property Trusts Chartbook



REIT Watch - S-REITs release retained earnings, 1H2021 DPU up 36%

Sabana Industrial REIT / Equity Bottom-Up

<h2>10 Questions for Sabana REIT</h2>
<p><strong>Company Overview</strong><br>Sabana Shari’ah Compliant Industrial REIT1 (Sabana REIT) has a diversified portfolio of 18 quality properties in Singapore, in the high-tech industrial, warehouse and logistics, chemical warehouse and logistics, as well as general industrial sectors. The total assets of the Group amount to more than S$0.9 billion as at 30 Jun 2021. <a href="https://www.sgx.com/securities/equities/M1GU" target="_blank" rel="noopener">Link to StockFacts company page</a></p>
<ol>
<li><strong>Can you share more about Sabana REIT’s portfolio and strategy?</strong></li>
</ol>
<ul>
<li>Sabana REIT has a diversified portfolio of 18 properties in Singapore across four segments, managed by Sabana Real Estate Investment Management Pte. Ltd. (the Manager).</li>
<li>As Manager, we have been executing on our Refreshed Strategy since 2018 to deliver value for our Unitholders. The Refreshed Strategy includes three key pillars – proactive lease and asset management, asset enhancement initiatives (AEI) and rejuvenation of select assets – which are underpinned by prudent risk and capital management as well as ongoing cost rationalisation.</li>
<li>We are seeing the fruits of our labour from the disciplined execution of this strategy over the past three years. In Jul 2021, we announced our progression on the next phase of growth with a strategic update along four key pillars as outlined below:</li>
</ul>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/210/original/image_86927159921629177139154.png?1629177139" class="editor-image img-responsive" data-smartkarma-image-id="224210"></figure>

10 Questions for Sabana REIT
Company Overview Sabana Shari’ah Compliant Industrial REIT1 (Sabana REIT) has a diversified portfolio of 18 quality properties in Singapore, in the high-tech industrial, warehouse and logistics, chemical warehouse and logistics, as well as general industrial sectors. The total assets of the Group amount to more than S$0.9 billion as at 30 Jun 2021. Link to StockFacts company page

Can you share more about Sabana REIT’s portfolio and strategy?


Sabana REIT has a diversified portfolio of 18 properties in Singapore across four segments, managed by Sabana Real Estate Investment Management Pte. Ltd. (the Manager).
As Manager, we have been executing on our Refreshed Strategy since 2018 to deliver value for our Unitholders. The Refreshed Strategy includes three key pillars – proactive lease and asset management, asset enhancement initiatives (AEI) and rejuvenation of select assets – which are underpinned by prudent risk and capital management as well as ongoing cost rationalisation.
We are seeing the fruits of our labour from the disciplined execution of this strategy over the past three years. In Jul 2021, we announced our progression on the next phase of growth with a strategic update along four key pillars as outlined below:



10 in 10 with Sabana REIT - Refreshing for the Future

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>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 242.047px;"><p> </p></td><td style="width: 241.969px;"><p>FCT</p></td><td style="width: 241.984px;"><p>EREIT</p></td></tr><tr><td style="width: 242.047px;"><p>Period</p></td><td style="width: 241.969px;"><p>3Q21</p></td><td style="width: 241.984px;"><p>2Q21</p></td></tr><tr><td style="width: 242.047px;"><p>Gross Revenue (S$ m)</p></td><td style="width: 241.969px;"><p>Not Disclosed</p></td><td style="width: 241.984px;"><p>59.5 (+6.25% YoY)</p></td></tr><tr><td style="width: 242.047px;"><p>NPI (S$ m)</p></td><td style="width: 241.969px;"><p>Not Disclosed</p></td><td style="width: 241.984px;"><p>42.9 (+9.4% YoY)</p></td></tr><tr><td style="width: 242.047px;"><p>DPU (S$ c)</p></td><td style="width: 241.969px;"><p>Not Disclosed</p></td><td style="width: 241.984px;"><p>0.754 (13.9% YoY)</p></td></tr><tr><td style="width: 242.047px;"><p>NAV per Unit (S$)</p></td><td style="width: 241.969px;"><p>2.31 (Based on 1H21 NAV)</p></td><td style="width: 241.984px;"><p>0.398</p></td></tr><tr><td style="width: 242.047px;"><p>P/B (x)</p></td><td style="width: 241.969px;"><p>1.04 (Based on 1H21 NAV)</p></td><td style="width: 241.984px;"><p>1.1</p></td></tr><tr><td style="width: 242.047px;"><p>Occupancy (%)</p></td><td style="width: 241.969px;"><p>96.4</p></td><td style="width: 241.984px;"><p>91.7</p></td></tr><tr><td style="width: 242.047px;"><p>Reversion (%)</p></td><td style="width: 241.969px;"><p>Not Disclosed</p></td><td style="width: 241.984px;"><p>-0.2</p></td></tr><tr><td style="width: 242.047px;"><p>Gearing (%)</p></td><td style="width: 241.969px;"><p>33.9</p></td><td style="width: 241.984px;"><p>42.9</p></td></tr><tr><td style="width: 242.047px;"><p>Cost of Debt (%)</p></td><td style="width: 241.969px;"><p>2.2</p></td><td style="width: 241.984px;"><p>3.24</p></td></tr><tr><td style="width: 242.047px;"><p>1 Yr Fwd Yield (%)</p></td><td style="width: 241.969px;"><p>5.02</p></td><td style="width: 241.984px;"><p>7.05</p></td></tr><tr><td style="width: 242.047px;"><p>Debt Hedged (%)</p></td><td style="width: 241.969px;"><p>59</p></td><td style="width: 241.984px;"><p>75</p></td></tr><tr><td style="width: 242.047px;"><p>Target Price</p></td><td style="width: 241.969px;"><p>S$2.89</p></td><td style="width: 241.984px;"><p>N/A</p></td></tr><tr><td style="width: 242.047px;"><p>Rating</p></td><td style="width: 241.969px;"><p>BUY</p></td><td style="width: 241.984px;"><p>Under Review</p></td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) FCTEREITPeriod3Q212Q21Gross Revenue (S$ m)Not Disclosed59.5 (+6.25% YoY)NPI (S$ m)Not Disclosed42.9 (+9.4% YoY)DPU (S$ c)Not Disclosed0.754 (13.9% YoY)NAV per Unit (S$)2.31 (Based on 1H21 NAV)0.398P/B (x)1.04 (Based on 1H21 NAV)1.1Occupancy (%)96.491.7Reversion (%)Not Disclosed-0.2Gearing (%)33.942.9Cost of Debt (%)2.23.241 Yr Fwd Yield (%)5.027.05Debt Hedged (%)5975Target PriceS$2.89N/ARatingBUYUnder Review

ASEAN Builder's Scoop (23Jul21) - FCT Resilient Amidst Phase-2 Setback

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<div>
<div>
<div>
<p>Singapore Company Update</p>
<h2>Sabana Shari'ah Compliant REIT</h2>
<div>
<div>
<div>
<h3>Raising TP as NTP+ shines</h3>
<div>
<div>
<div>
<h3>Investment Thesis</h3>
<p><strong>NTP+ completion to deliver boost to FY21F and FY22F earnings.</strong> The completion of NTP+ could add c.S$3.5m to Sabana REIT’s revenue and boost occupancies and rental reversions at the REIT’s “Crown Jewel”. We are hence forecasting for FY21F and FY22F net property income to rise 18.4% and 5.3% y-o-y respectively, helped by NTP+.</p>
<p><strong>Targeted asset enhancements to drive growth.</strong> Rejuvenation works at 23 Serangoon North Ave 5, 8 Commonwealth Lane and 10 Changi South Street 2 have supported tenant acquisition efforts. Studies are now being conducted on possible and further enhancements at 1 Tuas Ave 4, 10 Changi South Street 2, and 151 Lorong Chuan Phase 3.</p>
<p><strong>Conversion to unsecured borrowings to raise debt headroom.</strong> New unsecured credit facility of up to S$225.0m could free up an estimated c.S$700m in investment properties from encumberment and raise Sabana’s debt headroom to pursue accretive asset enhancements or acquisitions.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



Singapore Company Update
Sabana Shari'ah Compliant REIT



Raising TP as NTP+ shines



Investment Thesis
NTP+ completion to deliver boost to FY21F and FY22F earnings. The completion of NTP+ could add c.S$3.5m to Sabana REIT’s revenue and boost occupancies and rental reversions at the REIT’s “Crown Jewel”. We are hence forecasting for FY21F and FY22F net property income to rise 18.4% and 5.3% y-o-y respectively, helped by NTP+.
Targeted asset enhancements to drive growth. Rejuvenation works at 23 Serangoon North Ave 5, 8 Commonwealth Lane and 10 Changi South Street 2 have supported tenant acquisition efforts. Studies are now being conducted on possible and further enhancements at 1 Tuas Ave 4, 10 Changi South Street 2, and 151 Lorong Chuan Phase 3.
Conversion to unsecured borrowings to raise debt headroom. New unsecured credit facility of up to S$225.0m could free up an estimated c.S$700m in investment properties from encumberment and raise Sabana’s debt headroom to pursue accretive asset enhancements or acquisitions.










(Non-SGX Report)  Sabana Shari'ah Compliant REIT: Raising TP as NTP+ Shines

Singapore

Sabana Industrial Real Estate Investment Trust is a real estate investment trust. The Trust focuses on investments in income-producing real estate used for industrial purposes in Asia, as well as real estate-related assets, in line with Sabana investment principles.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Sabana Industrial REIT (SSREIT SP)

ESR-REIT’s Proposed Merger with ARA LOGOS

A key issue is on pricing particularly the EREIT issue price of S$0.510, based on EREIT’s 52-week high. While short-term pricing concerns will...

Arun George

REIT Watch - S-REITs release retained earnings, 1H2021 DPU up 36%

As the earnings season conclude, REITs and Property Trusts listed in Singapore have announced financial results or published...

Singapore Exchange Ltd (SGX)

10 in 10 with Sabana REIT - Refreshing for the Future

10 Questions for Sabana REIT Company OverviewSabana Shari’ah Compliant Industrial REIT1 (Sabana REIT) has a diversified portfolio of 18 quality...

Singapore Exchange Ltd (SGX)

ASEAN Builder's Scoop (23Jul21) - FCT Resilient Amidst Phase-2 Setback

FCT resilient amidst phase-2 setback; EREIT operations remain healthy; SSREIT removing syariah compliance; 2Q21 Industrial rents, prices up; APLN...

SCCM Asia Research

(Non-SGX Report) Sabana Shari'ah Compliant REIT: Raising TP as NTP+ Shines

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)