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

Yoma Strategic Holdings / Equity Bottom-Up

Key Singapore Market Moves and Flows in July

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

*Recovery Continues: Oversea Chinese Banking Corp. (OCBC.SP) [OCBC] attended a competitor virtual conference last week, confirming that the positive trends in from 1Q21 are set to continue; and*Credit Improvement Re-Affirmed: We remain optimistic. According to management, credit quality trends remain quite favorable but still expects a gradual deterioration from loans under moratorium. Much of the anticipated deterioration in credit is likely to continue to come from Malaysia and Indonesia. For 1Q21, we calculated that net new NPL growth amounted to a very reasonable SGD 40 mn or 3.6% on an annualized basis for 1Q21 – which remains incredibly low.

*Recovery Continues: Oversea Chinese Banking Corp. (OCBC.SP) [OCBC] attended a competitor virtual conference last week, confirming that the positive trends in from 1Q21 are set to continue; and*Credit Improvement Re-Affirmed: We remain optimistic. According to management, credit quality trends remain quite favorable but still expects a gradual deterioration from loans under moratorium. Much of the anticipated deterioration in credit is likely to continue to come from Malaysia and Indonesia. For 1Q21, we calculated that net new NPL growth amounted to a very reasonable SGD 40 mn or 3.6% on an annualized basis for 1Q21 – which remains incredibly low.

Oversea Chinese Banking Corp. – Affirming Positive Trends

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/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> in talks with WeWork on proposed lease restructuring</h3><ul><li>Co-working space operator WeWork has approached PRIME with a proposal to restructure its lease at the latter's Class-A office property in California, and discussions are ongoing. The tenant occupies 56,977sqft within Tower I at Emeryville, out of the building's NLA of 222,606sqft. The tenant contributes less than 2.5% of PRIME's cash rental income as at end-Mar. It added that the tenant has been current on its rental obligations till mid-Jun21, and the lease terms are currently under evaluation</li><li>PRIME has called on the tenant to continue to meet its rental obligations, and also called upon the existing security package for the payment of such obligations. PRIME's security in relation to that WeWork lease consists of a combination of protections. If the counterparty honours its obligations, such protections will cover the tenant's monthly lease obligations through as much as end-2022. PRIME does not expect the matter to have any impact on the distribution per unit of PRIME for FY21, in light of the security. Based on the independent valuation sought, this will not materially affect the value of PRIME's portfolio as compared to the portfolio appraisal conducted as at last Dec.</li></ul>

SingaporePrime US REIT (PRIME SP) in talks with WeWork on proposed lease restructuringCo-working space operator WeWork has approached PRIME with a proposal to restructure its lease at the latter's Class-A office property in California, and discussions are ongoing. The tenant occupies 56,977sqft within Tower I at Emeryville, out of the building's NLA of 222,606sqft. The tenant contributes less than 2.5% of PRIME's cash rental income as at end-Mar. It added that the tenant has been current on its rental obligations till mid-Jun21, and the lease terms are currently under evaluationPRIME has called on the tenant to continue to meet its rental obligations, and also called upon the existing security package for the payment of such obligations. PRIME's security in relation to that WeWork lease consists of a combination of protections. If the counterparty honours its obligations, such protections will cover the tenant's monthly lease obligations through as much as end-2022. PRIME does not expect the matter to have any impact on the distribution per unit of PRIME for FY21, in light of the security. Based on the independent valuation sought, this will not materially affect the value of PRIME's portfolio as compared to the portfolio appraisal conducted as at last Dec.

ASEAN Builder's Scoop (18Jun21) - PRIME/WeWork Lease Restructuring

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Singapore real estate investment trusts (S-Reits) and property trusts continue to increase assets under management (AUMs).

This year, 15 acquisitions have been announced valued at over S$5 billion. Of these, 11 were industrial and logistics-related properties.

Three of the largest announced were by Mapletree Industrial Trust (MIT), Ascendas Reit and Frasers Logistics &amp; Commercial Trust (FLCT).

MIT proposed in May to buy 29 data centres across 18 states in the United States for close to S$1.8 billion. MIT said the acquisition aligns with its strategy to increase its portfolio of data centres, and diversifies MIT's footprint across US data centre markets. Its portfolio of data centres will increase to S$4.6 billion (or 53.6 per cent of its total portfolio) post-acquisition, making MIT one of the largest owners of data centres among Asia-Pacific-listed Reits by AUM. 
Ascendas Reit announced in March the acquisition of 11 data centres across the United Kingdom, the Netherlands, France and Switzerland for S$904.6 million. Ninety-three per cent of the acquired portfolio is located in key European data centre markets that benefit from being close and connected to large population centres. The acquisition expands the Reit's existing data centre portfolio from 4 per cent to 10 per cent.

FLCT proposed in May to buy six properties in Germany, the Netherlands and the UK for S$548.7 million. The six properties include four logistics and industrial properties in Germany and the Netherlands, and a logistics and industrial property as well as a business park in the UK. This marks the Reit's maiden entry into the UK logistics sector.  REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/s-reits-ytd-asset-acquisitions-exceed-s5-billion">read</a> the original version.
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    S-REITs 


Singapore real estate investment trusts (S-Reits) and property trusts continue to increase assets under management (AUMs).

This year, 15 acquisitions have been announced valued at over S$5 billion. Of these, 11 were industrial and logistics-related properties.

Three of the largest announced were by Mapletree Industrial Trust (MIT), Ascendas Reit and Frasers Logistics &amp; Commercial Trust (FLCT).

MIT proposed in May to buy 29 data centres across 18 states in the United States for close to S$1.8 billion. MIT said the acquisition aligns with its strategy to increase its portfolio of data centres, and diversifies MIT's footprint across US data centre markets. Its portfolio of data centres will increase to S$4.6 billion (or 53.6 per cent of its total portfolio) post-acquisition, making MIT one of the largest owners of data centres among Asia-Pacific-listed Reits by AUM.  
Ascendas Reit announced in March the acquisition of 11 data centres across the United Kingdom, the Netherlands, France and Switzerland for S$904.6 million. Ninety-three per cent of the acquired portfolio is located in key European data centre markets that benefit from being close and connected to large population centres. The acquisition expands the Reit's existing data centre portfolio from 4 per cent to 10 per cent.

FLCT proposed in May to buy six properties in Germany, the Netherlands and the UK for S$548.7 million. The six properties include four logistics and industrial properties in Germany and the Netherlands, and a logistics and industrial property as well as a business park in the UK. This marks the Reit's maiden entry into the UK logistics sector.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - S-Reits' YTD asset acquisitions exceed S$5 billion

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/ascendas-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:39" rel="noopener">Ascendas Real Estate Investment Trust (AREIT SP)</a> to divest three properties in Australia for ~4.1% NPI yield (BUY; TP S$3.55/unit)</h3>AREIT will divest three logistics properties in Australia for a total of AUD125.1m (S$128.7m). The sale price is ~16.8% higher than the total market valuations of the properties of AUD101.1m as at 31Dec20. The divestments are expected to be completed by 3Q21. AREIT had entered into two separate agreements with unrelated purchasers for the sale of two logistics properties (82 Noosa Street and 62 Stradbroke Street) in Brisbane; and one logistics property (1314 Ferntree Gully Road) in Melbourne. Assuming the divestments were completed on 1Jan20, the annualised proforma impact on AREIT’s NPI would have been a decrease of S$5.1m and DPU would have fallen by S$0.075c for FY20. Net proceeds after divestment costs are expected to be S$124.0m. If the net proceeds were used to repay AREIT’s borrowings as at 31Mar, its gearing will be reduced from 38% to around 37.5%. Post-divestment, AREIT will own 95 properties in Singapore, 34 properties in Australia, 30 properties in the US and 49 properties in the UK/Europe. <table class="table table-striped"><tbody><tr><td style="width: 59.3438px;">Asset</td><td style="width: 48.4375px;">Asset Type</td><td style="width: 45.9375px;">FY20 Gross Revenue</td><td style="width: 59.5781px;">NLA as at 31Dec20</td><td style="width: 59.5625px;">Occupancy as at 31Dec20</td><td style="width: 60.6406px;">Acquisition Date</td><td style="width: 60.6406px;">Acquisition Price</td><td style="width: 101.734px;">Valuation as at 31Dec20(A$1.000:S$0.980)</td><td style="width: 94.9219px;">Sale Price(A$1.00:S$1.029)</td><td style="width: 63.7188px;">Buyer</td></tr><tr><td style="width: 59.3438px;">82 Noosa Street, Brisbane, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$3.3m</td><td style="width: 59.5781px;">38,000sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Oct15</td><td style="width: 60.6406px;">S$66.0m</td><td style="width: 101.734px;">A$53.0m (S$51.9m)</td><td rowspan="2" style="width: 94.9219px;">A$101.6m (S$104.5m)or A$1,624psqm</td><td rowspan="2" style="width: 63.7188px;">SIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners</td></tr><tr><td style="width: 59.3438px;">62 Stradbroke Street, Brisbane, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$2.6m</td><td style="width: 59.5781px;">24,555sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Oct15</td><td style="width: 60.6406px;">S$35.9m</td><td style="width: 101.734px;">A$37.4m (S$36.7m)</td></tr><tr><td style="width: 59.3438px;">1314 Ferntree Gully Road, Melbourne, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$0.5m</td><td style="width: 59.5781px;">16,134sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Jun18</td><td style="width: 60.6406px;">S$16.4m</td><td style="width: 101.734px;">A$16.6m (S$16.3m)</td><td style="width: 94.9219px;">A$23.5m (S$24.2m)or A$1,500psqm</td><td style="width: 63.7188px;">China Tube Pty Ltd and Haelram Pty Ltd</td></tr><tr><td colspan="2" style="width: 128.781px;">TOTAL</td><td style="width: 45.9375px;">S$6.4m</td><td style="width: 59.5781px;"> </td><td style="width: 59.5625px;"> </td><td style="width: 60.6406px;"> </td><td style="width: 60.6406px;">S$118.3m</td><td style="width: 101.734px;">A$107.1m (S$104.9m)</td><td style="width: 94.9219px;">A$125.1m (S$128.7m)</td><td style="width: 63.7188px;"> </td></tr></tbody></table>Comments:<ul><li>Taking reference from FY20 AUS Portfolio NPI Margin of 79.0%, the blended NPI yield based on S$128.7m Sale Price would be ~3.9%. Note that comparing the exchange rate adopted for Sale Price vs. Valuation as at 31Dec20, the AUD has strengthen ~5%. Using the 31Dec20 exchange rate, the blended NPI yield would be ~4.1%. Together with its recent divestment of 11 Changi North Way (at S$16.0m), AREIT would have a total divestment proceeds S$144.7m and booking total S$33.8m divestment gain</li><li>Moving forward, we expect AREIT’s DPU to be propelled by both organic and inorganic growth while it reconstitute its portfolio. Notwithstanding the S$1.19bn worth of acquisitions in 1Q21 (estimated to be 1.5% DPU accretive) and the acquisition of remaining 75% of Galaxis (estimated to be 0.40% DPU accretive), the new BTS business park development for Grab as well as UBIX redevelopment (formerly 25 &amp; 27 Ubi Road 4) should start contributing by 2H21 (expected to add S$14.2m to NPI on a full-year basis at 6.4%-7.5% NPI yields)</li><li>We believe AREIT remains in a virtuous cycle of growth. The S$420.0m EFR exercise in 4May21 as well as repayment debt utilizing the divestment proceeds should lower its gearing. With greater financial flexibility, relatively low cost of equity and low interest rate environment, AREIT has further scope for inorganic growth. We have a BUY rating with TP of S$3.55/Unit.</li></ul>

SingaporeAscendas Real Estate Investment Trust (AREIT SP) to divest three properties in Australia for ~4.1% NPI yield (BUY; TP S$3.55/unit)AREIT will divest three logistics properties in Australia for a total of AUD125.1m (S$128.7m). The sale price is ~16.8% higher than the total market valuations of the properties of AUD101.1m as at 31Dec20. The divestments are expected to be completed by 3Q21. AREIT had entered into two separate agreements with unrelated purchasers for the sale of two logistics properties (82 Noosa Street and 62 Stradbroke Street) in Brisbane; and one logistics property (1314 Ferntree Gully Road) in Melbourne. Assuming the divestments were completed on 1Jan20, the annualised proforma impact on AREIT’s NPI would have been a decrease of S$5.1m and DPU would have fallen by S$0.075c for FY20. Net proceeds after divestment costs are expected to be S$124.0m. If the net proceeds were used to repay AREIT’s borrowings as at 31Mar, its gearing will be reduced from 38% to around 37.5%. Post-divestment, AREIT will own 95 properties in Singapore, 34 properties in Australia, 30 properties in the US and 49 properties in the UK/Europe. AssetAsset TypeFY20 Gross RevenueNLA as at 31Dec20Occupancy as at 31Dec20Acquisition DateAcquisition PriceValuation as at 31Dec20(A$1.000:S$0.980)Sale Price(A$1.00:S$1.029)Buyer82 Noosa Street, Brisbane, AustraliaLogisticsS$3.3m38,000sqm100%Oct15S$66.0mA$53.0m (S$51.9m)A$101.6m (S$104.5m)or A$1,624psqmSIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners62 Stradbroke Street, Brisbane, AustraliaLogisticsS$2.6m24,555sqm100%Oct15S$35.9mA$37.4m (S$36.7m)1314 Ferntree Gully Road, Melbourne, AustraliaLogisticsS$0.5m16,134sqm100%Jun18S$16.4mA$16.6m (S$16.3m)A$23.5m (S$24.2m)or A$1,500psqmChina Tube Pty Ltd and Haelram Pty LtdTOTALS$6.4m   S$118.3mA$107.1m (S$104.9m)A$125.1m (S$128.7m) Comments:Taking reference from FY20 AUS Portfolio NPI Margin of 79.0%, the blended NPI yield based on S$128.7m Sale Price would be ~3.9%. Note that comparing the exchange rate adopted for Sale Price vs. Valuation as at 31Dec20, the AUD has strengthen ~5%. Using the 31Dec20 exchange rate, the blended NPI yield would be ~4.1%. Together with its recent divestment of 11 Changi North Way (at S$16.0m), AREIT would have a total divestment proceeds S$144.7m and booking total S$33.8m divestment gainMoving forward, we expect AREIT’s DPU to be propelled by both organic and inorganic growth while it reconstitute its portfolio. Notwithstanding the S$1.19bn worth of acquisitions in 1Q21 (estimated to be 1.5% DPU accretive) and the acquisition of remaining 75% of Galaxis (estimated to be 0.40% DPU accretive), the new BTS business park development for Grab as well as UBIX redevelopment (formerly 25 &amp; 27 Ubi Road 4) should start contributing by 2H21 (expected to add S$14.2m to NPI on a full-year basis at 6.4%-7.5% NPI yields)We believe AREIT remains in a virtuous cycle of growth. The S$420.0m EFR exercise in 4May21 as well as repayment debt utilizing the divestment proceeds should lower its gearing. With greater financial flexibility, relatively low cost of equity and low interest rate environment, AREIT has further scope for inorganic growth. We have a BUY rating with TP of S$3.55/Unit.

ASEAN Builder's Scoop (4Jun21) - AREIT Divesting 3 AUS Props for ~4.1% Yield

Singapore

CapitaLand Ascendas REIT is an industrial real estate investment trust. The Trust invests in business and science park properties, integrated development, amenities, and retail (IDAR) properties, high-specifications industrial properties and data centers, light industrial and flatted factories, and logistics and distribution centers.

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CapitaLand Ascendas REIT (CLAR SP)

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