Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Three plus months ago I wrote about <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a>'s proposed restructuring Scheme in <a href="https://www.smartkarma.com/insights/capitaland-capl-sp-restructuring-is-big-but-still-vague-lots-of-fine-print-to-read" target="_blank" data-smartkarma-citation="insights:49463" rel="noopener">Capitaland (CAPL SP) Restructuring Is Big But Still Vague. Lots of Fine Print to Read.</a></p><p>The proposed construct was complicated, and difficult to value, and required reading a lot of fine print, only some of which we had available. Little did I know how much fine print there would be. </p><p>Late Friday night Capitaland <a href="https://investor.capitaland.com/newsroom/20210716_203319_C31_W6Z3Q02B78EAPQP3.1.pdf" target="_blank" rel="noopener">announced</a> it had received SGX-ST approval to list <strong><a href="https://www.smartkarma.com/entities/capitaland-investment-management" target="_blank" data-smartkarma-citation="entities:33774:1" rel="noopener">Capitaland Investment Management (CAPINVEST SP)</a></strong>. Saturday night, Capitaland released its <a href="https://investor.capitaland.com/misc/20210717_1143_SchemeDocument.pdf" target="_blank" rel="noopener">Scheme Document</a>. It is 922 pages of fine print. There is an <a href="https://links.sgx.com/FileOpen/SCR21050093AmazonIntroDoc.ashx?App=Announcement&amp;FileID=675106" target="_blank" rel="noopener">Introductory Document</a> which is shorter. It is 744 pages. There is also a brief 8-page <a href="https://links.sgx.com/FileOpen/17072021CapitaLand%20to%20seek%20Shareholders%20approval%20of%20proposed%20restructuring.ashx?App=Announcement&amp;FileID=675108" target="_blank" rel="noopener">press release</a> and an <a href="https://links.sgx.com/FileOpen/CL_Despatch_Notices_Announcement.ashx?App=Announcement&amp;FileID=675107" target="_blank" rel="noopener">Announcement of the Scheme Meeting</a>.</p><p>The deal as announced at the time is the same now. We have more timing details. </p><p>The restructuring involves the controlling holder of <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a> (CLA Real Estate Holdings - ultimately that is Temasek) buying out the real estate development business of Capitaland in return for S$0.951/share of cash and 0.155* units/share of <a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105:1" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> where the parent's stake will fall. </p><div class="content-remarks"><p>* the CICT distribution is actually 0.1546727 shares of CICT per share of Capitaland, but fractional entitlements will be disregarded so using 0.155 is probably fine</p></div><p>Investors who own CAPL, assuming that the 10 August EGM approves the deal, will get shares in Capitaland Investment ("CLI") which is a kind of SpinCo, the cash, and the CICT units. The <em>Value</em> of that consideration as per the Scheme Document is S$4.102/share with the idea that the CLI portion itself will have a per-share Value of 1.0x NAV which will be S$2.823/share. Importantly, that is a pro-forma NAV as per 31 December 2020. </p><p>The Scheme Document itself contains an Independent Financial Advisor letter to the Independent Directors which comes to the conclusion that the Assessed Value of the Consideration was S$4.56-4.99/share, which was well above the S$4.102/share in the document, coming to the conclusion that it is "fair and reasonable". Given that the value of the 0.155 shares of is S$0.3248 per Capitaland share (though assessed value is slightly higher), and the cash is unchanging at S$0.951/share, that means the major difference between S$4.102/share and S$4.56-4.99/share is the idea that CLI is worth S$3.19-S$3.62/share rather than S$2.823/share (the difference here is the FY20 dividend).</p><p>That's where the rubber hits the road. </p><p>So we take a closer look below the fold. </p>

Three plus months ago I wrote about Capitaland (CAPL SP)'s proposed restructuring Scheme in Capitaland (CAPL SP) Restructuring Is Big But Still Vague. Lots of Fine Print to Read.The proposed construct was complicated, and difficult to value, and required reading a lot of fine print, only some of which we had available. Little did I know how much fine print there would be. Late Friday night Capitaland announced it had received SGX-ST approval to list Capitaland Investment Management (CAPINVEST SP). Saturday night, Capitaland released its Scheme Document. It is 922 pages of fine print. There is an Introductory Document which is shorter. It is 744 pages. There is also a brief 8-page press release and an Announcement of the Scheme Meeting.The deal as announced at the time is the same now. We have more timing details. The restructuring involves the controlling holder of Capitaland (CAPL SP) (CLA Real Estate Holdings - ultimately that is Temasek) buying out the real estate development business of Capitaland in return for S$0.951/share of cash and 0.155* units/share of Capitaland Integrated Commercial Trust (CICT SP) where the parent's stake will fall. * the CICT distribution is actually 0.1546727 shares of CICT per share of Capitaland, but fractional entitlements will be disregarded so using 0.155 is probably fineInvestors who own CAPL, assuming that the 10 August EGM approves the deal, will get shares in Capitaland Investment ("CLI") which is a kind of SpinCo, the cash, and the CICT units. The Value of that consideration as per the Scheme Document is S$4.102/share with the idea that the CLI portion itself will have a per-share Value of 1.0x NAV which will be S$2.823/share. Importantly, that is a pro-forma NAV as per 31 December 2020. The Scheme Document itself contains an Independent Financial Advisor letter to the Independent Directors which comes to the conclusion that the Assessed Value of the Consideration was S$4.56-4.99/share, which was well above the S$4.102/share in the document, coming to the conclusion that it is "fair and reasonable". Given that the value of the 0.155 shares of is S$0.3248 per Capitaland share (though assessed value is slightly higher), and the cash is unchanging at S$0.951/share, that means the major difference between S$4.102/share and S$4.56-4.99/share is the idea that CLI is worth S$3.19-S$3.62/share rather than S$2.823/share (the difference here is the FY20 dividend).That's where the rubber hits the road. So we take a closer look below the fold. 

Capitaland Restructuring - Be Careful Not to Price In the NEXT Restructuring Too Soon

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><p><a href="https://www.smartkarma.com/entities/filinvest-reit" target="_blank" data-smartkarma-citation="entities:33764:1" rel="noopener">Filinvest Reit (FILRT PM)</a> (FREIT), a subsidiary of Filinvest, aims to raise up to US$240m in its Philippines listing. The REIT is sponsored by <a href="https://www.smartkarma.com/entities/filinvest-land-inc" target="_blank" data-smartkarma-citation="entities:23026:1" rel="noopener">Filinvest Land (FLI PM)</a>. </p></div><div><p>FREIT’s initial property portfolio consists of 16 office towers located in Northgate Cyberzone, Alabang, and one office tower in Cebu City with an aggregate office space GLA of 299,158 sqm and 2,204 sqm of retail GLA. The portfolio will have a weighted average lease expiry (WALE) of 3.8 years with an occupancy of 89.7% as of Mar 2021. The Properties were valued at PHP48,547.4m (US$965m).</p></div><div><p>Given the recent restructuring of the REITs assets, its past financials aren’t of much use. However, looking at the operational data of its existing portfolio, FREIT doesn’t appear to have had a very good FY20 and even FY21 doesn’t appear to be shaping up well.</p></div><div>
<p>We looked at the background of the REIT in our earlier note, <a href="https://www.smartkarma.com/insights/filinvest-reit-ipo-almost-like-a-single-asset-reit-covid-hasn-t-been-kind" target="_blank" rel="noopener">Filinvest REIT IPO - Almost like a single asset REIT, COVID hasn’t been kind</a>.</p>
<p>In this note, we will comment on valuation and run the deal through our ECM framework.</p>
<p><br><br></p>
</div>

Filinvest Reit (FILRT PM) (FREIT), a subsidiary of Filinvest, aims to raise up to US$240m in its Philippines listing. The REIT is sponsored by Filinvest Land (FLI PM). FREIT’s initial property portfolio consists of 16 office towers located in Northgate Cyberzone, Alabang, and one office tower in Cebu City with an aggregate office space GLA of 299,158 sqm and 2,204 sqm of retail GLA. The portfolio will have a weighted average lease expiry (WALE) of 3.8 years with an occupancy of 89.7% as of Mar 2021. The Properties were valued at PHP48,547.4m (US$965m).Given the recent restructuring of the REITs assets, its past financials aren’t of much use. However, looking at the operational data of its existing portfolio, FREIT doesn’t appear to have had a very good FY20 and even FY21 doesn’t appear to be shaping up well.
We looked at the background of the REIT in our earlier note, Filinvest REIT IPO - Almost like a single asset REIT, COVID hasn’t been kind.
In this note, we will comment on valuation and run the deal through our ECM framework.
  


Filinvest REIT IPO - Hard to Get Excited, Despite the Yield

Mapletree Industrial Trust / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/mapletree-industrial-trust" target="_blank" data-smartkarma-citation="entities:40:1" rel="noopener">Mapletree Industrial Trust (MINT SP)</a> plans to raise around US$385m (S$513m) to partly fund the acquisition of 29 data centres located in the United States.</p><p>We have covered three of the past placements for MINT:</p><ul>
<li dir="ltr" aria-level="1"><p><a href="https://www.smartkarma.com/insights/mint-placement-known-asset-more-data-centres-less-sme-exposure-heading-in-the-right-direction" target="_blank" rel="noopener">MINT Placement - Known Asset, More Data Centres, Less SME Exposure -&gt; Heading in the Right Direction</a></p></li>
<li dir="ltr" aria-level="1"><p><a href="https://www.smartkarma.com/insights/mint-placement-accretive-acquisition-but-look-out-for-the-rising-leverage" target="_blank" rel="noopener">MINT Placement - Accretive Acquisition but Look Out for the Rising Leverage</a></p></li>
<li dir="ltr" aria-level="1"><p><a href="https://www.smartkarma.com/insights/mint-placement-well-flagged-placement-but-only-marginally-accretive-past-deals-have-done-well" target="_blank" rel="noopener">MINT Placement - Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well</a></p></li>
</ul><p>In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.</p>

Mapletree Industrial Trust (MINT SP) plans to raise around US$385m (S$513m) to partly fund the acquisition of 29 data centres located in the United States.We have covered three of the past placements for MINT:
MINT Placement - Known Asset, More Data Centres, Less SME Exposure -&gt; Heading in the Right Direction
MINT Placement - Accretive Acquisition but Look Out for the Rising Leverage
MINT Placement - Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well
In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Mapletree Industrial (MINT SP) Placement - Large but Accretive Deal, Becoming More like Keppel DC

CapitaLand Ascendas REIT / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/ascendas-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:39:1" rel="noopener">Ascendas Real Estate Investment Trust (AREIT SP)</a> aims to raise around US$320m (S$430m) to acquire the balance 75% stake in Galaxis. </p></div><div><p>This will be the second placement in under six months. Links to our previous coverage are below:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/areit-placement-expected-to-be-dpu-accretive-but-the-acquisition-might-take-a-while" target="_blank" rel="noopener">AREIT Placement - Expected to Be DPU Accretive but the Acquisition Might Take a While</a></li>
<li><a href="https://www.smartkarma.com/insights/areit-paying-for-acquisition-with-only-equity-doesn-t-add-up-dpu-to-fall-by-3-4" target="_blank" rel="noopener">AREIT - Paying for Acquisition with Only Equity Doesn’t Add Up, DPU to Fall by 3-4%</a></li>
<li><a href="https://www.smartkarma.com/insights/ascendas-reit-placement-multiple-acquisitions-to-be-made-starting-from-us-office-properties" target="_blank" rel="noopener">Ascendas REIT Placement - Multiple Acquisitions to Be Made, Starting From US Office Properties</a></li>
</ul></div>

Ascendas Real Estate Investment Trust (AREIT SP) aims to raise around US$320m (S$430m) to acquire the balance 75% stake in Galaxis. This will be the second placement in under six months. Links to our previous coverage are below:
AREIT Placement - Expected to Be DPU Accretive but the Acquisition Might Take a While
AREIT - Paying for Acquisition with Only Equity Doesn’t Add Up, DPU to Fall by 3-4%
Ascendas REIT Placement - Multiple Acquisitions to Be Made, Starting From US Office Properties


Ascendas REIT Placement - Smaller than the Last Deal, Should Be Accretive as Well

David Blennerhassett

Last Week in Event SPACE: Capitaland, Languang Justbon, Fast Retailing, Crown Resorts, Adani Power

Singapore

Capitaland Integrated Commercial Trust operates as a retail estate investment trust. The Compnay invests in retail and office properties and integrated developments. Capitaland Integrated Commercial Trust serves clients in Asia Pacific.

Capitaland Integrated Commercial Trust (CICT SP)

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Capitaland Integrated Commercial Trust (CICT SP)

Capitaland Restructuring - Be Careful Not to Price In the NEXT Restructuring Too Soon

Capitaland proposed a restructuring where parent CLA will buy the development biz, and spin out to investors a kind of large virtually-stapled...

Travis Lundy

Filinvest REIT IPO - Hard to Get Excited, Despite the Yield

Filinvest Reit (FILRT PM) (FREIT), a subsidiary of Filinvest, aims to raise up to US$240m in its Philippines listing. The REIT is sponsored...

Sumeet Singh

Mapletree Industrial (MINT SP) Placement - Large but Accretive Deal, Becoming More like Keppel DC

Mapletree Industrial Trust (MINT SP) plans to raise around US$385m (S$513m) to partly fund the acquisition of 29 data centres located in the United...

Sumeet Singh

Ascendas REIT Placement - Smaller than the Last Deal, Should Be Accretive as Well

Ascendas Real Estate Investment Trust (AREIT SP) aims to raise around US$320m (S$430m) to acquire the balance 75% stake in Galaxis.

Sumeet Singh

Last Week in Event SPACE: Capitaland, Languang Justbon, Fast Retailing, Crown Resorts, Adani Power

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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