Alpha-Centric ESG Research

Kyle Rudden

<p>Announcements keep on coming from <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the <a href="https://www.smartkarma.com/entities/sgx-nikkei-esg-reit-index-futures" target="_blank" data-smartkarma-citation="entities:33480:1" rel="noopener">SGX Nikkei ESG-REIT Index Futures (JRTA INDEX)</a> contract.</p><p>For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.</p><p>Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.</p><p>Think about it. One billion buildings in the world already, and expected to double by 2060.</p>

Announcements keep on coming from Singapore Exchange (SGX SP) and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the SGX Nikkei ESG-REIT Index Futures (JRTA INDEX) contract.For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.Think about it. One billion buildings in the world already, and expected to double by 2060.

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<p>In 2020, we have so far witnessed 15 follow-on JREIT offerings cumulatively raising JPY463bn (~US$4.5bn). This has been something of a weak year, understandable because of the covid-19 crisis which hit equity market and JREIT prices in March, and keeping them soft for months afterwards.</p>
<p>Historically, January and February are the busiest months, for a variety of reasons.</p>
<p>From 2015-2020, on average, there have been ~7 offerings from the top 40 JREITs announced within the first two months of the calendar year accounting for roughly a third of the total number of offerings in each year during that period. </p>
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Source: Quiddity, Capital IQ (Data)</div>
In this insight, we take a look at the prospective candidates who are most likely to launch follow-on equity offerings near-term, and we look at the performance characteristics of J-REIT follow-on offerings and the likelihood of profit from participating in the event.</section>

In 2020, we have so far witnessed 15 follow-on JREIT offerings cumulatively raising JPY463bn (~US$4.5bn). This has been something of a weak year, understandable because of the covid-19 crisis which hit equity market and JREIT prices in March, and keeping them soft for months afterwards.
Historically, January and February are the busiest months, for a variety of reasons.
From 2015-2020, on average, there have been ~7 offerings from the top 40 JREITs announced within the first two months of the calendar year accounting for roughly a third of the total number of offerings in each year during that period. 









Source: Quiddity, Capital IQ (Data)
In this insight, we take a look at the prospective candidates who are most likely to launch follow-on equity offerings near-term, and we look at the performance characteristics of J-REIT follow-on offerings and the likelihood of profit from participating in the event.

J-REIT Offering Primer: Get Ready for Offering Season 2021

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.

Equity Capital Markets

Daiwa House Reit Investment / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/daiwa-house-reit-investment-cb077099-8006-45e4-83cf-6ac7f19cd384" target="_blank" data-smartkarma-citation="entities:11283:1" rel="noopener">Daiwa House Reit Investment (8984 JP)</a> (DHR) unveiled plans to raise up to JPY34.3 billion ($313 million) through a primary offering (121,000 units), a secondary offering (9,000 units) and third-party allotment (9,000 units). The pricing date is between 19 February and 26 February 2020. </p><div class="content-highlight"><p>The proceeds from the placement will be used to will partly fund the JPY70.8 billion ($645 million) acquisitions of three properties. Overall, we would be tempted to participate in the placement as DHR’s valuation more than compensates for the modest DPU accretion.</p></div>

Daiwa House Reit Investment (8984 JP) (DHR) unveiled plans to raise up to JPY34.3 billion ($313 million) through a primary offering (121,000 units), a secondary offering (9,000 units) and third-party allotment (9,000 units). The pricing date is between 19 February and 26 February 2020. The proceeds from the placement will be used to will partly fund the JPY70.8 billion ($645 million) acquisitions of three properties. Overall, we would be tempted to participate in the placement as DHR’s valuation more than compensates for the modest DPU accretion.

Daiwa House REIT Placement: Valuation Rather Accretion Is the Key Positive

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

<p><a href="https://www.smartkarma.com/entities/daiwa-house-reit-investment-cb077099-8006-45e4-83cf-6ac7f19cd384" target="_blank" data-smartkarma-citation="entities:11283:1" rel="noopener">Daiwa House Reit Investment (8984 JP)</a> announced a placement to raise USD 312 million to fund the acquisition of trust beneficiary interests in three properties. </p>
<p>We have previously covered Daiwa House Reit's placements in:</p>
<ul>
<li>March 2018: <a href="https://www.smartkarma.com/insights/daiwa-house-reit-placement-dpu-accretive-but-fundamentals-unexciting" target="_blank" rel="noopener">Daiwa House REIT Placement: DPU Accretive but Fundamentals Unexciting</a>
</li>
<li>Feb 2019: <a href="https://www.smartkarma.com/insights/daiwa-house-reit-placement-well-flagged-but-barely-accretive-to-dpu" target="_blank" rel="noopener">Daiwa House REIT Placement - Well-Flagged but Barely Accretive to DPU</a>
</li>
</ul>
<p>Our analysis of the acquisition show that the acquisition is barely at fair value. Having said that, the deal is DPU accretive and it scores well on our framework.</p>

Daiwa House Reit Investment (8984 JP) announced a placement to raise USD 312 million to fund the acquisition of trust beneficiary interests in three properties. 
We have previously covered Daiwa House Reit's placements in:

March 2018: Daiwa House REIT Placement: DPU Accretive but Fundamentals Unexciting

Feb 2019: Daiwa House REIT Placement - Well-Flagged but Barely Accretive to DPU


Our analysis of the acquisition show that the acquisition is barely at fair value. Having said that, the deal is DPU accretive and it scores well on our framework.

Daiwa House REIT Placement: Accretive DPU with Acquisition at Fair Value

APAC IPOs & Placements

Zhen Zhou, Toh

<p><a href="https://www.smartkarma.com/entities/11283" target="_blank" data-smartkarma-citation="entities:11283:1">Daiwa House Reit Investment (8984 JP)</a> (DHR) is raising about US$329m in its placement to fund the acquisition of properties.</p><p>The deal scores well on our framework owing to strong price and earnings momentum. The assets to be acquired are a good mix of logistics, retail, and hotel. </p><p>However, the properties to be acquired mostly have an NOI yield lower than the average NOI yield of DHR's existing assets in the respective asset classes. Despite increasing the portfolio value by almost 10%, the ten properties are only expected to be 1.37% accretive to DPU. </p><p>That said, DHR's acquisition has been well-flagged as it was highlighted in its September presentation.</p>

Daiwa House Reit Investment (8984 JP) (DHR) is raising about US$329m in its placement to fund the acquisition of properties.The deal scores well on our framework owing to strong price and earnings momentum. The assets to be acquired are a good mix of logistics, retail, and hotel. However, the properties to be acquired mostly have an NOI yield lower than the average NOI yield of DHR's existing assets in the respective asset classes. Despite increasing the portfolio value by almost 10%, the ten properties are only expected to be 1.37% accretive to DPU. That said, DHR's acquisition has been well-flagged as it was highlighted in its September presentation.

Daiwa House REIT Placement - Well-Flagged but Barely Accretive to DPU

Japan

Daiwa House REIT Investment Corp. is a real estate investment trust (REIT) which invests in securitized real estate products. The Company mainly invests in residential rental properties and commercial properties.

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Daiwa House Reit Investment (8984 JP)

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

Singapore Exchange just launched the SGX Nikkei ESG-REIT Index futures contract. A multi-win for SGX, but it also serves as a reminder of how...

Kyle Rudden

J-REIT Offering Primer: Get Ready for Offering Season 2021

JREIT Follow-On Offerings - A Primer: January and February are the busiest times of the year for a variety of reasons and there are multiple...

Janaghan Jeyakumar, CFA

Daiwa House REIT Placement: Valuation Rather Accretion Is the Key Positive

Daiwa House Reit Investment (8984 JP) (DHR) unveiled plans to raise up to JPY34.3 billion ($313 million) through a primary offering (121,000...

Arun George

Daiwa House REIT Placement: Accretive DPU with Acquisition at Fair Value

Daiwa House Reit Investment (8984 JP) announced a placement to raise USD 312 million to fund the acquisition of trust beneficiary interests in...

Ke Yan, CFA, FRM

Daiwa House REIT Placement - Well-Flagged but Barely Accretive to DPU

Daiwa House Reit Investment (8984 JP) (DHR) is raising about US$329m in its placement to fund the acquisition of properties.The deal scores well on...

Zhen Zhou, Toh

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