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: 141.25pt; height: 14.35pt;"><p> </p></td><td style="width: 141.2pt; height: 14.35pt;"><p>PRIME</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>KORE</p></td></tr><tr><td style="width: 141.25pt; height: 14.85pt;"><p>Period</p></td><td style="width: 141.2pt; height: 14.85pt;"><p>1H21</p></td><td style="width: 141.2pt; height: 14.85pt;"><p>1H21</p></td></tr><tr><td style="width: 141.25pt; height: 14.9pt;"><p>Gross Revenue (S$m)</p></td><td style="width: 141.2pt; height: 14.9pt;"><p>72.1 (+1.2% YoY)</p></td><td style="width: 141.2pt; height: 14.9pt;"><p>68.38 (-3% YoY)</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>NPI (S$m)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>46.3 (-2.3% YoY)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>40.58 (-3.1% YoY)</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>DPU (S$ c)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>3.33 (-5.4% YoY)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>3.16 (+1.9% YoY)</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>NAV per Unit (S$)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>0.86</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>0.82</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>P/B (x)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>0.98</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>0.95</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>Occupancy (%)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>91.7</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>90.5</p></td></tr><tr><td style="width: 141.25pt; height: 7.2pt;"><p>Reversion (%)</p></td><td style="width: 141.2pt; height: 7.2pt;"><p>10.5</p></td><td style="width: 141.2pt; height: 7.2pt;"><p>5.4</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>Gearing (%)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>34.4</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>37.1</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>Cost of Debt (%)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>3.2</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>2.82</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>1 Yr Fwd Yield (%)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>8.45</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>7.77</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>Debt Hedged (%)</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>86%</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>84.7</p></td></tr><tr><td style="width: 141.25pt; height: 14.35pt;"><p>Target Price</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>N/A</p></td><td style="width: 141.2pt; height: 14.35pt;"><p>N/A</p></td></tr><tr><td style="width: 141.25pt; height: 14.85pt;"><p>Rating</p></td><td style="width: 141.2pt; height: 14.85pt;"><p>N/A</p></td><td style="width: 141.2pt; height: 14.85pt;"><p>N/A</p></td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) PRIMEKOREPeriod1H211H21Gross Revenue (S$m)72.1 (+1.2% YoY)68.38 (-3% YoY)NPI (S$m)46.3 (-2.3% YoY)40.58 (-3.1% YoY)DPU (S$ c)3.33 (-5.4% YoY)3.16 (+1.9% YoY)NAV per Unit (S$)0.860.82P/B (x)0.980.95Occupancy (%)91.790.5Reversion (%)10.55.4Gearing (%)34.437.1Cost of Debt (%)3.22.821 Yr Fwd Yield (%)8.457.77Debt Hedged (%)86%84.7Target PriceN/AN/ARatingN/AN/A

ASEAN Builder's Scoop (04Aug21) - PRIME High Opex Offset Robust Reversions

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889" rel="noopener">Cromwell European REIT (CERT SP)</a> divests a non-core asset in France at 21% premium to latest valuation</h3><ul><li>CERT has entered into a promissory deed with an affiliate of one of Europe’s leading boutique real estate investment funds, to divest the Parc de Popey asset located at 5 Chemin de Popey in Bar-le-Duc, France. The French Asset consists of a single large warehouse building with ancillary office accommodation totalling 15,724sqm, built in 1995. Currently occupied by a major postal service and logistics company, which is largely owned by the French government, the asset is used as an industrial sorting parcel platform</li><li>CERT will sell the French Asset for a sale consideration of EUR5.8m (~S$9.3m), which would be satisfied fully in cash. It is 53% higher than the IPO purchase price and 21% higher than its most recent valuation. A divestment fee of EUR29,000 (being 0.5% of the sale consideration) is payable to the Manager. The divestment is expected to be completed in 3Q21 and has no material effect on CERT’s NTA.</li></ul>

SingaporeCromwell European REIT (CERT SP) divests a non-core asset in France at 21% premium to latest valuationCERT has entered into a promissory deed with an affiliate of one of Europe’s leading boutique real estate investment funds, to divest the Parc de Popey asset located at 5 Chemin de Popey in Bar-le-Duc, France. The French Asset consists of a single large warehouse building with ancillary office accommodation totalling 15,724sqm, built in 1995. Currently occupied by a major postal service and logistics company, which is largely owned by the French government, the asset is used as an industrial sorting parcel platformCERT will sell the French Asset for a sale consideration of EUR5.8m (~S$9.3m), which would be satisfied fully in cash. It is 53% higher than the IPO purchase price and 21% higher than its most recent valuation. A divestment fee of EUR29,000 (being 0.5% of the sale consideration) is payable to the Manager. The divestment is expected to be completed in 3Q21 and has no material effect on CERT’s NTA.

ASEAN Builder's Scoop (22Jun21) - CERT Divests a Non-Core France Asset

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lendlease-global-commercial-reit" target="_blank" data-smartkarma-citation="entities:28292" rel="noopener">Lendlease Global Commercial REIT (LREIT SP)</a> to increase stake in JEM mall; DPU accretive to be funded by debt and perps</h3><ul><li>LREIT has entered into sale and purchase agreements to increase its stake in Jem. Upon completion of the proposed acquisition, LREIT will hold an effective indirect interest of up to 31.8% interest in JEM. The proposed acquisition includes 1) an acquisition of a 53.0% interest in Lendlease Jem Partners Fund Limited (LLJP) from third party vendors for S$159.1m; and 2) an acquisition of a 5.0% interest in Lendlease Asian Retail Investment Fund 3 Limited (ARIF3) from Lendlease International Pty Limited for S$45.0m. LREIT may also acquire up to 19.8% interest in ARIF3 from other third-party investors for S$178.2m. LLJP/ARIF3 holds a 25%/75% indirect interest, respectively, in JEM mall</li><li>As of 31Mar21, JEM was independently valued at S$2,085m and S$2,061m by JLL and CBRE, respectively. It sits on a 99yr lease land site with total NLA of 892,148sqft and 99.7% occupied. The proposed transaction values JEM at S$2,077m (S$2,238psf on NLA – 4.5% retail cap rate, 3.5% office cap rate) – NPI yield of 3.9%</li><li>Following the acquisition, the enlarged portfolio size of S$1.8bn will have a diversified asset base and an increased exposure to more resilient suburban retail and decentralised office segments. The single largest asset by aggregate value of the enlarged portfolio would also decrease from 67.6% to 55.1% (WALE of 6.5 years by GRI)</li><li>On a 1H21 pro-forma basis, the acquisitions are expected to be DPU accretive to unitholders, with an accretive change of +3.0% (assuming 19.8% of ARIF3 is acquired) and +1.3% if only 5% of ARIF3 is acquired. On the other hand, NAV per unit (31Dec20 pro-forma) will slightly decline to S$0.84 and gearing will improve to 34.1% after the acquisition of 19.8% stake in ARIF3. NAV per unit will remain flat at S$0.85 if only 5% of ARIF3 is acquired and gearing will improve to 32.4%</li><li>LREIT will leverage its strong balance sheet to fund this acquisition through debt or a combination of debt and proceeds from the issuance of perpetual securities. The acquisition, which is conditional upon LREIT unitholders’ approval, is expected to complete by 30Sep21. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/211/591/original/image003.png?1623030785" class="editor-image img-responsive" data-smartkarma-image-id="211591"></figure></section></li></ul>

SingaporeLendlease Global Commercial REIT (LREIT SP) to increase stake in JEM mall; DPU accretive to be funded by debt and perpsLREIT has entered into sale and purchase agreements to increase its stake in Jem. Upon completion of the proposed acquisition, LREIT will hold an effective indirect interest of up to 31.8% interest in JEM. The proposed acquisition includes 1) an acquisition of a 53.0% interest in Lendlease Jem Partners Fund Limited (LLJP) from third party vendors for S$159.1m; and 2) an acquisition of a 5.0% interest in Lendlease Asian Retail Investment Fund 3 Limited (ARIF3) from Lendlease International Pty Limited for S$45.0m. LREIT may also acquire up to 19.8% interest in ARIF3 from other third-party investors for S$178.2m. LLJP/ARIF3 holds a 25%/75% indirect interest, respectively, in JEM mallAs of 31Mar21, JEM was independently valued at S$2,085m and S$2,061m by JLL and CBRE, respectively. It sits on a 99yr lease land site with total NLA of 892,148sqft and 99.7% occupied. The proposed transaction values JEM at S$2,077m (S$2,238psf on NLA – 4.5% retail cap rate, 3.5% office cap rate) – NPI yield of 3.9%Following the acquisition, the enlarged portfolio size of S$1.8bn will have a diversified asset base and an increased exposure to more resilient suburban retail and decentralised office segments. The single largest asset by aggregate value of the enlarged portfolio would also decrease from 67.6% to 55.1% (WALE of 6.5 years by GRI)On a 1H21 pro-forma basis, the acquisitions are expected to be DPU accretive to unitholders, with an accretive change of +3.0% (assuming 19.8% of ARIF3 is acquired) and +1.3% if only 5% of ARIF3 is acquired. On the other hand, NAV per unit (31Dec20 pro-forma) will slightly decline to S$0.84 and gearing will improve to 34.1% after the acquisition of 19.8% stake in ARIF3. NAV per unit will remain flat at S$0.85 if only 5% of ARIF3 is acquired and gearing will improve to 32.4%LREIT will leverage its strong balance sheet to fund this acquisition through debt or a combination of debt and proceeds from the issuance of perpetual securities. The acquisition, which is conditional upon LREIT unitholders’ approval, is expected to complete by 30Sep21. 

ASEAN Builder's Scoop (7Jun21) - LREIT Increases Stake in JEM Mall

<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: 167.45pt;"><p> </p></td><td style="width: 129.85pt;"><p>CERT (€)</p></td><td style="width: 117.6pt;"><p>MUST (US$)</p></td><td style="width: 117.6pt;"><p>KORE (US$)</p></td></tr><tr><td style="width: 167.45pt;"><p>Period</p></td><td style="width: 129.85pt;"><p>1Q21</p></td><td style="width: 117.6pt;"><p>1Q21</p></td><td style="width: 117.6pt;"><p>1Q21</p></td></tr><tr><td style="width: 167.45pt;"><p>Gross Revenue (S$ m)</p></td><td style="width: 129.85pt;"><p>48.5 (-0.1% YoY)</p></td><td style="width: 117.6pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>34.6 (-2.1% YoY)</p></td></tr><tr><td style="width: 167.45pt;"><p>NPI (S$ m)</p></td><td style="width: 129.85pt;"><p>30.8 (-0.4% YoY)</p></td><td style="width: 117.6pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>20.4 (-2.8% YoY)</p></td></tr><tr><td style="width: 167.45pt;"><p>DPU (S$ c)</p></td><td style="width: 129.85pt;"><p>0.827 (-9.1% YoY)</p></td><td style="width: 117.6pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>Not Disclosed</p></td></tr><tr><td style="width: 167.45pt;"><p>NAV per Unit (S$)</p></td><td style="width: 129.85pt;"><p>2.445</p></td><td style="width: 117.6pt;"><p>0.730</p></td><td style="width: 117.6pt;"><p>Not Disclosed</p></td></tr><tr><td style="width: 167.45pt;"><p>P/B (x)</p></td><td style="width: 129.85pt;"><p>0.978</p></td><td style="width: 117.6pt;"><p>1.030 (Based on 4Q20 NAV)</p></td><td style="width: 117.6pt;"><p>0.90 (Based on 4Q20 NAV)</p></td></tr><tr><td style="width: 167.45pt;"><p>Occupancy (%)</p></td><td style="width: 129.85pt;"><p>94.6</p></td><td style="width: 117.6pt;"><p>92.0</p></td><td style="width: 117.6pt;"><p>91.6</p></td></tr><tr><td style="width: 167.45pt;"><p>Reversion (%)</p></td><td style="width: 129.85pt;"><p>-1.3</p></td><td style="width: 117.6pt;"><p>2.1</p></td><td style="width: 117.6pt;"><p>5.7</p></td></tr><tr><td style="width: 167.45pt;"><p>Gearing (%)</p></td><td style="width: 129.85pt;"><p>38.5</p></td><td style="width: 117.6pt;"><p>41.3</p></td><td style="width: 117.6pt;"><p>37.5</p></td></tr><tr><td style="width: 167.45pt;"><p>Cost of Debt (%)</p></td><td style="width: 129.85pt;"><p>1.72</p></td><td style="width: 117.6pt;"><p>3.18</p></td><td style="width: 117.6pt;"><p>2.82</p></td></tr><tr><td style="width: 167.45pt;"><p>1 Yr Fwd Yield (%)</p></td><td style="width: 129.85pt;"><p>7.95</p></td><td style="width: 117.6pt;"><p>8.00</p></td><td style="width: 117.6pt;"><p>8.3</p></td></tr><tr><td style="width: 167.45pt;"><p>Debt Hedged (%)</p></td><td style="width: 129.85pt;"><p>100</p></td><td style="width: 117.6pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>84.7</p></td></tr><tr><td style="width: 167.45pt;"><p>Target Price</p></td><td style="width: 129.85pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>NA</p></td></tr><tr><td style="width: 167.45pt;"><p>Rating</p></td><td style="width: 129.85pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>NA</p></td><td style="width: 117.6pt;"><p>NA</p></td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889" rel="noopener">Cromwell European REIT (CERT SP)</a> 1Q21 Business Update – Weakening operational metrics with negative reversions and falling occupancies</h3><ul><li>1Q21 revenue and NPI decreased by 0.1% and 0.4% YoY, respectively, to €48.5m (28.4% BB est) and €30.8m. Prolonged COVID-19 lockdowns impacted 1Q21 gross revenue and NPI, notably reducing carpark income in the mixed-use Central Plaza in Rotterdam, the Netherlands and resulting in some vacancy in certain light industrial/logistics assets in France and Denmark. The disposal of 12 higher-yielding and higher-risk assets in the Netherlands, France and Denmark also affected gross revenue, though this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia</li><li>1Q21 DPU decreased 9.1% YoY to €0.827c (21.8% BB est). This due to the same factors impacting DI as well as the timing of the investment of the €100m private placement proceeds to offset the additional weighted average units on issue in Mar21. 1Q21 DI was €21.7m, 6.5% lower YoY, due to the same factors affecting gross revenue and NPI. It was further impacted by €0.8m of higher interest expenses from the €500m longer-tenured bond issuances and certain one-off trust expenses of €0.4m</li><li>Overall portfolio occupancy decreased slightly to 94.6% in 1Q21 (vs. 95.1% in 4Q20 and 94.3% in 3Q20), mainly due to vacancies in office assets in France and Finland and the departure of an anchor tenant-customer (Nilfisk), which relocated its operations to Belgium from the Priorparken 700 / 800 asset in Copenhagen, Denmark. CERT recorded 37 new leases and 21 renewals for 19,735sqm and 13,428sqm of space, respectively. Portfolio WALE stood at 4.8 years. Rental reversions came in at -1.3% in 1Q21 (vs +2.1% in 4Q20 and +2.8% in 3Q20)</li><li>Office – Occupancy of 94.5% (vs 95.1% in 4Q20 and 94.9% in 3Q20). CERT recorded 9 new leases and 7 renewals for 1,180sqm and 2,189sqm of space, respectively. 34% tenant retention rate, 21% of expiries and breaks up to 30Sep21 have been de-risked. Office WALE stood at 4.4 years. Rental reversions came in at -1.0% in 1Q21 (vs +1.7% in 4Q20 and -1.4% in 3Q20)   </li><li>Industrial/logistics – Occupancy of 93.8% (vs 94.1% in 4Q20 and 92.3% in 3Q20). CERT recorded 28 new leases and 13 renewals for 18,556sqm and 10,381sqm of space, respectively. 26% tenant retention rate, 79% of expiries and breaks up to 30Sep21 have been de-risked. Industrial WALE stood at 4.8 years. Rental reversions came in at +1.5% in 1Q21 (vs +3.8% in 4Q20 and +14.4% in 3Q20)   </li><li>Portfolio gearing stands at 38.5% (vs. 38.1% in 4Q20 and 35.9% in 3Q20) with average cost of debt of 1.72% pa. (vs. 1.66% in 4Q20 and 1.5% in 3Q20) with 100% of debt hedged. CERT maintained a strong cash position of €75.8m</li><li>CERT currently trades at 7.95% FY21E yield and 0.978x P/B.</li></ul><h3><a href="https://www.smartkarma.com/entities/manulife-us-reit" target="_blank" data-smartkarma-citation="entities:567" rel="noopener">Manulife US REIT (MUST SP)</a> 1Q21 Business Updates – US office market remains muted, mitigated by limited supply and expiry in MUST’s markets</h3><ul><li>Revenue, NPI and DI were not disclosed in 1Q21</li><li>Overall portfolio occupancy dipped further to 92.0% in 1Q21 (vs. 93.4% in 4Q20 and 94.3% in 3Q20), but is still above the US Class-A average of ~82%</li><li>MUST signed 270,000sqft (~5.8% of NLA) of leases in 1Q21 with +2.1% rental reversions (vs. +0.1% in full-year FY20 and +7.9% in 9M20). These leases are mainly from renewals (93.6%), followed by expansion (5.3%) and new leases (1.1%), supported by finance and insurance, administrative, advertising and legal sectors. It has a long WALE of 5.3 years with ~4.4% (by GRI) or 4.3% (by NLA) of leases up for renewal for the remaining of FY21E. Nonetheless, its current portfolio has a 2.1% in-place rental escalations. Given limited supply in MUST’s markets over the next 12 months, these markets is expected to see a 2.5% rent growth, in line with the overall US average</li><li>Tenants’ collection rate remains healthy (98% collection), but challenges for 2021 include: 1) Low physical occupancy at 5-25% (low carpark income), and 2) existing vacancies remain a challenge to fill (larger space takes longer to fill and it’s still a tenant’s market with higher incentive and rent free)</li><li>Portfolio gearing stands at 41.3% (vs. 41.0% in 4Q20 and 39.9% in 3Q20) with average cost of debt of 3.18% pa. (vs. 3.18% in 4Q20 and 3.21% in 3Q20). In Apr21, MUST has refinanced its loans due FY21E at lower interest rate, bringing weighted average interest rate to 3.0% and increasing weighted average debt maturity to 3.4 years</li><li>MUST currently trades at 8.00% FY21E yield and 1.03x P/B. </li></ul><figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=03e35791bb&amp;attid=0.0.3&amp;permmsgid=msg-f:1699422834728702566&amp;th=1795901073311266&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8sEKl6WDAe8N9__qHKBNe6-08vbrc8QfHwJamRBTAaR_dON_UK1yOULc7lIYoAqOLnG1bIt-bZRfkFUmsv6mNgGuwGup4IAMyZuiuu1S3HH7pcwGFiu6yseig&amp;disp=emb" width="403" height="199" class="editor-image img-responsive" data-image-whitelisted=""></figure><figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=03e35791bb&amp;attid=0.0.4&amp;permmsgid=msg-f:1699422834728702566&amp;th=1795901073311266&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_0APJf80bwv3E2S_EiRYN8qcm-reP1OQ2z06j7ZbYooytHl5IJJso0tnZEZ2wCt-YWmA-nXxQk1VnMuNtz5DfMAf0FyvFj2bW9VWWOmPzOeJvwjpGsNdafsus&amp;disp=emb" width="364" height="196" class="editor-image img-responsive" data-image-whitelisted=""></figure><h3><a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209" rel="noopener">Propnex Ltd (PROP SP)</a> 1Q21 PATMI almost doubled to S$16.2m; Debt free balance sheet  </h3><p>PROP reported a 96.7% YoY growth in net profit after tax for 1Q21 to S$16.2m(vs S$8.2m in 1Q20), on the back of a 63.3% YoY growth in revenue to S$220.6m (vs S$135.1m in 1Q20). The performance was driven by higher number of transactions completed in 1Q21 following the recovery of private residential market from the property cooling measures in Jul18. Revenue growth was mainly driven due to the increase in commission income from agency services of ~S$47.5m and increase in project marketing services of ~S$38.0m. The results translate to an EPS growth of 95.6% YoY to S$4.01c in 1Q21. PROP remained debt free, and its balance sheet remained robust with cash and cash equivalents of S$118.9m as at 31Mar21, compared to S$105.8m as at 31Dec20. PROP has also taken 70% interest in Ovvy, The People Marketplace, a technology platform that connects service providers to consumers.</p><h3><a href="https://www.smartkarma.com/entities/lh-group-ltd" target="_blank" data-smartkarma-citation="entities:4397" rel="noopener">Pacific Star Development (PSTAR SP)</a> 3Q21 net loss increases, identified uncertainty over operating as going concern</h3><p>PSTAR, whose management is voicing uncertainty over its ability to operate as a going concern, sank further into the red in 3Q21. Net loss widened to S$8.2m as revenue came in 81% YoY lower at S$674,000 due to lower number of Puteri Cove Residences units sold. Gross profit plunged 90% YoY to S$56,000. The group booked an increase of S$1.28m in other expenses largely due to an increase in trade receivables written off as a result of cancellation of sales and purchase agreements for Puteri Cove Residences units. Loss per share was S$1.64c, higher than S$1.6c the year before. As at 31Mar, the group's net liability position was S$69.3m. PSTAR said there is uncertainty as to whether the group is able to meet its contractual obligations in the next 12 months as and when they fall due, and hence there is uncertainty over its ability to operate as a going concern for the next 12 months.</p>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) CERT (€)MUST (US$)KORE (US$)Period1Q211Q211Q21Gross Revenue (S$ m)48.5 (-0.1% YoY)NA34.6 (-2.1% YoY)NPI (S$ m)30.8 (-0.4% YoY)NA20.4 (-2.8% YoY)DPU (S$ c)0.827 (-9.1% YoY)NANot DisclosedNAV per Unit (S$)2.4450.730Not DisclosedP/B (x)0.9781.030 (Based on 4Q20 NAV)0.90 (Based on 4Q20 NAV)Occupancy (%)94.692.091.6Reversion (%)-1.32.15.7Gearing (%)38.541.337.5Cost of Debt (%)1.723.182.821 Yr Fwd Yield (%)7.958.008.3Debt Hedged (%)100NA84.7Target PriceNANANARatingNANANACromwell European REIT (CERT SP) 1Q21 Business Update – Weakening operational metrics with negative reversions and falling occupancies1Q21 revenue and NPI decreased by 0.1% and 0.4% YoY, respectively, to €48.5m (28.4% BB est) and €30.8m. Prolonged COVID-19 lockdowns impacted 1Q21 gross revenue and NPI, notably reducing carpark income in the mixed-use Central Plaza in Rotterdam, the Netherlands and resulting in some vacancy in certain light industrial/logistics assets in France and Denmark. The disposal of 12 higher-yielding and higher-risk assets in the Netherlands, France and Denmark also affected gross revenue, though this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia1Q21 DPU decreased 9.1% YoY to €0.827c (21.8% BB est). This due to the same factors impacting DI as well as the timing of the investment of the €100m private placement proceeds to offset the additional weighted average units on issue in Mar21. 1Q21 DI was €21.7m, 6.5% lower YoY, due to the same factors affecting gross revenue and NPI. It was further impacted by €0.8m of higher interest expenses from the €500m longer-tenured bond issuances and certain one-off trust expenses of €0.4mOverall portfolio occupancy decreased slightly to 94.6% in 1Q21 (vs. 95.1% in 4Q20 and 94.3% in 3Q20), mainly due to vacancies in office assets in France and Finland and the departure of an anchor tenant-customer (Nilfisk), which relocated its operations to Belgium from the Priorparken 700 / 800 asset in Copenhagen, Denmark. CERT recorded 37 new leases and 21 renewals for 19,735sqm and 13,428sqm of space, respectively. Portfolio WALE stood at 4.8 years. Rental reversions came in at -1.3% in 1Q21 (vs +2.1% in 4Q20 and +2.8% in 3Q20)Office – Occupancy of 94.5% (vs 95.1% in 4Q20 and 94.9% in 3Q20). CERT recorded 9 new leases and 7 renewals for 1,180sqm and 2,189sqm of space, respectively. 34% tenant retention rate, 21% of expiries and breaks up to 30Sep21 have been de-risked. Office WALE stood at 4.4 years. Rental reversions came in at -1.0% in 1Q21 (vs +1.7% in 4Q20 and -1.4% in 3Q20)   Industrial/logistics – Occupancy of 93.8% (vs 94.1% in 4Q20 and 92.3% in 3Q20). CERT recorded 28 new leases and 13 renewals for 18,556sqm and 10,381sqm of space, respectively. 26% tenant retention rate, 79% of expiries and breaks up to 30Sep21 have been de-risked. Industrial WALE stood at 4.8 years. Rental reversions came in at +1.5% in 1Q21 (vs +3.8% in 4Q20 and +14.4% in 3Q20)   Portfolio gearing stands at 38.5% (vs. 38.1% in 4Q20 and 35.9% in 3Q20) with average cost of debt of 1.72% pa. (vs. 1.66% in 4Q20 and 1.5% in 3Q20) with 100% of debt hedged. CERT maintained a strong cash position of €75.8mCERT currently trades at 7.95% FY21E yield and 0.978x P/B.Manulife US REIT (MUST SP) 1Q21 Business Updates – US office market remains muted, mitigated by limited supply and expiry in MUST’s marketsRevenue, NPI and DI were not disclosed in 1Q21Overall portfolio occupancy dipped further to 92.0% in 1Q21 (vs. 93.4% in 4Q20 and 94.3% in 3Q20), but is still above the US Class-A average of ~82%MUST signed 270,000sqft (~5.8% of NLA) of leases in 1Q21 with +2.1% rental reversions (vs. +0.1% in full-year FY20 and +7.9% in 9M20). These leases are mainly from renewals (93.6%), followed by expansion (5.3%) and new leases (1.1%), supported by finance and insurance, administrative, advertising and legal sectors. It has a long WALE of 5.3 years with ~4.4% (by GRI) or 4.3% (by NLA) of leases up for renewal for the remaining of FY21E. Nonetheless, its current portfolio has a 2.1% in-place rental escalations. Given limited supply in MUST’s markets over the next 12 months, these markets is expected to see a 2.5% rent growth, in line with the overall US averageTenants’ collection rate remains healthy (98% collection), but challenges for 2021 include: 1) Low physical occupancy at 5-25% (low carpark income), and 2) existing vacancies remain a challenge to fill (larger space takes longer to fill and it’s still a tenant’s market with higher incentive and rent free)Portfolio gearing stands at 41.3% (vs. 41.0% in 4Q20 and 39.9% in 3Q20) with average cost of debt of 3.18% pa. (vs. 3.18% in 4Q20 and 3.21% in 3Q20). In Apr21, MUST has refinanced its loans due FY21E at lower interest rate, bringing weighted average interest rate to 3.0% and increasing weighted average debt maturity to 3.4 yearsMUST currently trades at 8.00% FY21E yield and 1.03x P/B. Propnex Ltd (PROP SP) 1Q21 PATMI almost doubled to S$16.2m; Debt free balance sheet  PROP reported a 96.7% YoY growth in net profit after tax for 1Q21 to S$16.2m(vs S$8.2m in 1Q20), on the back of a 63.3% YoY growth in revenue to S$220.6m (vs S$135.1m in 1Q20). The performance was driven by higher number of transactions completed in 1Q21 following the recovery of private residential market from the property cooling measures in Jul18. Revenue growth was mainly driven due to the increase in commission income from agency services of ~S$47.5m and increase in project marketing services of ~S$38.0m. The results translate to an EPS growth of 95.6% YoY to S$4.01c in 1Q21. PROP remained debt free, and its balance sheet remained robust with cash and cash equivalents of S$118.9m as at 31Mar21, compared to S$105.8m as at 31Dec20. PROP has also taken 70% interest in Ovvy, The People Marketplace, a technology platform that connects service providers to consumers.Pacific Star Development (PSTAR SP) 3Q21 net loss increases, identified uncertainty over operating as going concernPSTAR, whose management is voicing uncertainty over its ability to operate as a going concern, sank further into the red in 3Q21. Net loss widened to S$8.2m as revenue came in 81% YoY lower at S$674,000 due to lower number of Puteri Cove Residences units sold. Gross profit plunged 90% YoY to S$56,000. The group booked an increase of S$1.28m in other expenses largely due to an increase in trade receivables written off as a result of cancellation of sales and purchase agreements for Puteri Cove Residences units. Loss per share was S$1.64c, higher than S$1.6c the year before. As at 31Mar, the group's net liability position was S$69.3m. PSTAR said there is uncertainty as to whether the group is able to meet its contractual obligations in the next 12 months as and when they fall due, and hence there is uncertainty over its ability to operate as a going concern for the next 12 months.

ASEAN Builder's Scoop (11May21) - CERT weakening operational metrics

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

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Cromwell European REIT / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889:1" rel="noopener">Cromwell European REIT (CERT SP)</a> announced a Euro90m private placement earlier this week to plenish working capital following a recently completed acquisition in Italy and to partially fund the acquisition of properties based in the Czech Republic and Slovakia.</p><p>After the completion of this placement, the company should be eligible for inclusion in FTSE EPRA NAREIT Developed Asia Index, which will make the company more accessible for a broader investor base.</p><section class="figure"><section class="figure">The company released a resilient set of results earlier this week with a net property income (NPI) slightly above FY2019, mainly due to the positive impact from acquisitions.</section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure">Despite the pandemic, it announced a DPU only -3% lower than FY2019 with strong positive operating cash flow.</section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section></section><section class="figure"></section><section class="figure">The company demonstrated its resilience during FY2020 with an overall occupancy rate across all its properties of 95.1%  and +2.1% positive rental reversions across all sectors. </section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889:1" rel="noopener">Cromwell European REIT (CERT SP)</a> has transformed its capital management over 2020 with the establishment of a Euro1.5bn euro medium-term note program during the year. It was also given a BBB- Investment Grade rating by Fitch Ratings and succeeded in launching an inaugural  Euro300m 5-year bond issue, followed by a Euro200m tap issue in Janaury 2021. </section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure">2020 was a year of two halves for <a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889:1" rel="noopener">Cromwell European REIT (CERT SP)</a> with 1H2020 all about cash preservation and prudent provisioning, 2H2020 saw a gradual return to normal operations, with a significant resumption of transactions, an improved customer retention rate.</section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889:1" rel="noopener">Cromwell European REIT (CERT SP)</a> looks attractive from a yield perspective but there is also scope for further upside to the value of its portfolio. Inflows from an index inclusion should provide strong support for the share price and potentially a higher premium on valuation. </section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"><p></p></section>

Cromwell European REIT (CERT SP) announced a Euro90m private placement earlier this week to plenish working capital following a recently completed acquisition in Italy and to partially fund the acquisition of properties based in the Czech Republic and Slovakia.After the completion of this placement, the company should be eligible for inclusion in FTSE EPRA NAREIT Developed Asia Index, which will make the company more accessible for a broader investor base.The company released a resilient set of results earlier this week with a net property income (NPI) slightly above FY2019, mainly due to the positive impact from acquisitions.Despite the pandemic, it announced a DPU only -3% lower than FY2019 with strong positive operating cash flow.The company demonstrated its resilience during FY2020 with an overall occupancy rate across all its properties of 95.1%  and +2.1% positive rental reversions across all sectors. Cromwell European REIT (CERT SP) has transformed its capital management over 2020 with the establishment of a Euro1.5bn euro medium-term note program during the year. It was also given a BBB- Investment Grade rating by Fitch Ratings and succeeded in launching an inaugural  Euro300m 5-year bond issue, followed by a Euro200m tap issue in Janaury 2021. 2020 was a year of two halves for Cromwell European REIT (CERT SP) with 1H2020 all about cash preservation and prudent provisioning, 2H2020 saw a gradual return to normal operations, with a significant resumption of transactions, an improved customer retention rate.Cromwell European REIT (CERT SP) looks attractive from a yield perspective but there is also scope for further upside to the value of its portfolio. Inflows from an index inclusion should provide strong support for the share price and potentially a higher premium on valuation. 

Cromwell European REIT (CERT SP) - Opportunity Knocks?

Singapore

Cromwell Real Estate Investment Trust is a real estate investment trust with a commercial portfolio of offices and light industrial /  logistics assets across Europe.

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Cromwell European REIT (CERT SP)

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Cromwell European REIT (CERT SP) - Opportunity Knocks?

Cromwell European REIT (CERT SP) looks attractive from a yield perspective but there is also scope for further upside to the value of its portfolio...

Angus Mackintosh

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