Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/mapletree-commercial-trust" target="_blank" data-smartkarma-citation="entities:106" rel="noopener">Mapletree Commercial Trust (MCT SP)</a> and <a href="https://www.smartkarma.com/entities/mapletree-north-asia-commercial-trust" target="_blank" data-smartkarma-citation="entities:5127" rel="noopener">Mapletree North Asia Commercial Trust (MAGIC SP)</a> proposed merger to form Mapletree Pan Asia Commercial Trust (MPACT); DPU and NAV accretive to MCT unitholders</li><li>The transaction will be ~8.9% and ~6.5% of accretive to DPU and NAV, respectively, on a pro forma basis to MCT unitholders. As for MAGIC unitholders, total consideration is at an attractive premium over trading prices and implies a 1.0x P/NAV, translating into a 1-year total return of ~32.2%</li><li><a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> acquires 50% interest in Sydney office building for ~S$410m; DPU accretive by ~1%</li></ul>

Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) proposed merger to form Mapletree Pan Asia Commercial Trust (MPACT); DPU and NAV accretive to MCT unitholdersThe transaction will be ~8.9% and ~6.5% of accretive to DPU and NAV, respectively, on a pro forma basis to MCT unitholders. As for MAGIC unitholders, total consideration is at an attractive premium over trading prices and implies a 1.0x P/NAV, translating into a 1-year total return of ~32.2%Capitaland Integrated Commercial Trust (CICT SP) acquires 50% interest in Sydney office building for ~S$410m; DPU accretive by ~1%

ASEAN Builder's Scoop (3Jan22) - MCT/MAGIC Merger

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

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    <div class='content-caption'>Top 10 performing SREITs since Nov 1, 2021</div>
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<p>Global Reit markets dipped over the last 3 sessions of November, as investors grappled with the unknowns of the Covid Omicron variant.</p>

<p>Similarly, the 3 sessions saw the iEdge S-Reit Index shave off 3.8 per cent in total returns, ending November with a 2.4 per cent decline.<br><br>
The top five performers over the month of November were firstly, S-REITs with healthcare assets – First REIT (12.2 per cent in total returns) and ParkwayLife REIT (6.6 per cent) – and secondly, S-REITs with assets located in China – Sasseur REIT (4.7 per cent), EC World REIT (3.1 per cent) and BHG Retail REIT (2.9 per cent).<br><br>
As uncertainty over the Omicron variant eased gradually, the iEdge S-Reit Index regained 1.2 per cent over the first 7 sessions of December, bringing its total returns since the start of November to a decline of 1.2 per cent.</p>

<p>S-Reits with healthcare and China-based assets continued to be the top performers over the extended period from the start of November to Dec 9, 2021.<br><br>
These S-REITs were: First REIT (18.0 per cent in total returns), BHG Retail REIT (15.4 per cent), ParkwayLife REIT (8.9 per cent), Sasseur REIT (4.7 per cent) and Mapletree North Asia Commercial Trust (4.5 per cent).<br><br>
First Reit, in its third quarter business update ended Sep 30, 2021, noted that it continued to see performance stabilising, following the restructuring of the master lease agreements for 14 Indonesia hospitals in January 2021 and its recapitalisation efforts in Q12021.</p>

<p>Last week, the trust also unveiled its 2.0 Growth Strategy, which includes diversifying into developed markets, strengthening of capital structure, reshaping of portfolio for capital-efficient growth as well as a pivoting to ride megatrends like ESG (environmental, social and governance).<br><br>
In line with its 2.0 Growth Strategy, First REIT announced the proposed acquisition of 12 nursing homes in Japan from its sponsor, OUE Lippo Healthcare for JPY 24.2 billion.<br><br>
Post-acquisition, First Reit will increase its exposure to developed markets, from 3.6 per cent of its asset value as at H12021, to 27.1 per cent on a pro forma basis.</p>

<p>Sasseur Reit declared distribution per unit (DPU) of 1.831 Singapore cents for Q32021, an increase of 13.4 per cent year on year.</p>

<p>The Reit manager noted that despite strict government regulations, the Reit's outlet sales grew 12.0 per cent quarter on quarter to 996.6 million yuan.</p>

<p>For the 9-month period ended Sep 30, 2021, Sasseur Reit's four outlets registered total sales of 3.02 billion yuan, representing an increase of 21.8 per cent compared to a year ago.</p>

<p>Similarly, EC World Reit announced higher DPU of 1.662 Singapore cents for Q32021, an increase of 19.7 per cent year on year.</p>

<p>Four out of EC World Reit's portfolio of 8 properties cater to the e-commerce logistics sector. The occupancy rate of its Wuhan Meiluote property increased from 79.4 per cent to 84.5 per cent, as it secured a 3-month lease starting Oct 1, 2021, in anticipation of the annual Singles Day sales.</p>

<p>As at Oct 31, 2021, EC World Reit's portfolio occupancy is 99.2 per cent. <br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/pure-play-data-centre-digital-core-reit-to-start-trading-on-monday"> </a><a href="https://www.businesstimes.com.sg/companies-markets/s-reits-with-healthcare-and-china-assets-outshine-in-november">read </a>the original version.</em></strong></p>
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    Top 10 performing SREITs since Nov 1, 2021


Global Reit markets dipped over the last 3 sessions of November, as investors grappled with the unknowns of the Covid Omicron variant.

Similarly, the 3 sessions saw the iEdge S-Reit Index shave off 3.8 per cent in total returns, ending November with a 2.4 per cent decline.  
The top five performers over the month of November were firstly, S-REITs with healthcare assets – First REIT (12.2 per cent in total returns) and ParkwayLife REIT (6.6 per cent) – and secondly, S-REITs with assets located in China – Sasseur REIT (4.7 per cent), EC World REIT (3.1 per cent) and BHG Retail REIT (2.9 per cent).  
As uncertainty over the Omicron variant eased gradually, the iEdge S-Reit Index regained 1.2 per cent over the first 7 sessions of December, bringing its total returns since the start of November to a decline of 1.2 per cent.

S-Reits with healthcare and China-based assets continued to be the top performers over the extended period from the start of November to Dec 9, 2021.  
These S-REITs were: First REIT (18.0 per cent in total returns), BHG Retail REIT (15.4 per cent), ParkwayLife REIT (8.9 per cent), Sasseur REIT (4.7 per cent) and Mapletree North Asia Commercial Trust (4.5 per cent).  
First Reit, in its third quarter business update ended Sep 30, 2021, noted that it continued to see performance stabilising, following the restructuring of the master lease agreements for 14 Indonesia hospitals in January 2021 and its recapitalisation efforts in Q12021.

Last week, the trust also unveiled its 2.0 Growth Strategy, which includes diversifying into developed markets, strengthening of capital structure, reshaping of portfolio for capital-efficient growth as well as a pivoting to ride megatrends like ESG (environmental, social and governance).  
In line with its 2.0 Growth Strategy, First REIT announced the proposed acquisition of 12 nursing homes in Japan from its sponsor, OUE Lippo Healthcare for JPY 24.2 billion.  
Post-acquisition, First Reit will increase its exposure to developed markets, from 3.6 per cent of its asset value as at H12021, to 27.1 per cent on a pro forma basis.

Sasseur Reit declared distribution per unit (DPU) of 1.831 Singapore cents for Q32021, an increase of 13.4 per cent year on year.

The Reit manager noted that despite strict government regulations, the Reit's outlet sales grew 12.0 per cent quarter on quarter to 996.6 million yuan.

For the 9-month period ended Sep 30, 2021, Sasseur Reit's four outlets registered total sales of 3.02 billion yuan, representing an increase of 21.8 per cent compared to a year ago.

Similarly, EC World Reit announced higher DPU of 1.662 Singapore cents for Q32021, an increase of 19.7 per cent year on year.

Four out of EC World Reit's portfolio of 8 properties cater to the e-commerce logistics sector. The occupancy rate of its Wuhan Meiluote property increased from 79.4 per cent to 84.5 per cent, as it secured a 3-month lease starting Oct 1, 2021, in anticipation of the annual Singles Day sales.

As at Oct 31, 2021, EC World Reit's portfolio occupancy is 99.2 per cent.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - S-Reits with healthcare and China assets outshine in November

<div><div><div><div><ul><li>RMB appreciation and lower DI retention rate drove performance. 3Q21 Revenue and NPI rose by 10.9% and 9.4% YoY</li><li>Robust Port and E-Commerce Logistics. Revenue from Port Logistics and ECommerce Logistics segments have increased for six consecutive quarters on a QoQ basis</li><li>Maintain BUY with TP of S$0.87/unit: We maintain our forecasts for FY21E</li></ul><div><div><div><div><div><div><div></div></div></div></div></div></div></div></div></div></div></div>

RMB appreciation and lower DI retention rate drove performance. 3Q21 Revenue and NPI rose by 10.9% and 9.4% YoYRobust Port and E-Commerce Logistics. Revenue from Port Logistics and ECommerce Logistics segments have increased for six consecutive quarters on a QoQ basisMaintain BUY with TP of S$0.87/unit: We maintain our forecasts for FY21E

SCCM | EC World REIT (ECWREIT SP): Awaiting Asset Deal While Collecting 8+% Yield

<h2>Singapore  </h2><p>SREITs results in a glance (see detailed spreadsheet and calendar attached)</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/912/original/image_9006419321636552670499.png?1636552673" class="editor-image img-responsive" data-smartkarma-image-id="240912"></figure><h3><a href="https://www.smartkarma.com/entities/ec-world-reit" target="_blank" data-smartkarma-citation="entities:22842" rel="noopener">EC World Reit (ECWREIT SP)</a> 3Q21 DPU +19.7% YoY; Driven largely by partial DI release and lower retention ratio</h3><ul><li>3Q21 revenue and NPI grew by 10.9% and 9.4% YoY to S$31.6m and S$28.6m, respectively, mainly due to positive straight-line adjustment and strengthening of RMB by 5.2% YoY. 9M21 revenue and NPI grew faster at 16.6% and 15.2% YoY to S$93.5m (78.2% of BB est.) and S$84.2m, respectively, given the absence of one-off rental rebates. On a QoQ basis, revenue and NPI also increased by 1.2% and 2.4% YoY, respectively</li></ul>

Singapore  SREITs results in a glance (see detailed spreadsheet and calendar attached)EC World Reit (ECWREIT SP) 3Q21 DPU +19.7% YoY; Driven largely by partial DI release and lower retention ratio3Q21 revenue and NPI grew by 10.9% and 9.4% YoY to S$31.6m and S$28.6m, respectively, mainly due to positive straight-line adjustment and strengthening of RMB by 5.2% YoY. 9M21 revenue and NPI grew faster at 16.6% and 15.2% YoY to S$93.5m (78.2% of BB est.) and S$84.2m, respectively, given the absence of one-off rental rebates. On a QoQ basis, revenue and NPI also increased by 1.2% and 2.4% YoY, respectively

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<p>Chinese real estate and property-related stocks have been dominating headlines over the past week as investors remain cautious and watch for updates.<br><br>
Closer to home, there are four S-REITs which have their entire portfolio of assets in China – CapitaLand China Trust, Sasseur REIT, EC World REIT, and BHG Retail REIT.<br><br>
Together the four S-Reits have generated -0.9 per cent in average price returns over the past week, comparatively to the swings of Chinese property stocks.<br><br>
The Reits have averaged 8.0 per cent in total returns in the year-to-date, 6.1 per cent in average distribution yields, and an average gearing ratio of 34.1 per cent which is lower than the sector average of 37.4 per cent.</p>

<p>S-Reits have a regulated leverage limited of 50 per cent.</p>

<p>CapitaLand China Trust (CLCT) is the largest multi-asset China focused S-Reit with an expanded mandate from a pure retail Reit into a diversified portfolio of retail and business park assets since earlier this year.<br><br>
Its Sponsor is CapitaLand Investment Limited, a leading global real estate investment manager, which made its trading debut on the SGX last week.<br><br>
CLCT has a gearing ratio of 35.9 per cent and average term to maturity of 3.80 years, with the majority of the refinancing requirements in 2021 completed.</p>

<p>It has 78 per cent of its total term loans on fixed interest rates and has hedged approximately 55 per cent of its undistributed income to reduce foreign currency fluctuations.</p>

<p>Sasseur Reit operates four outlet malls located in Chongqing, Bishan, Hefei and Kunming and is Asia's first outlet mall Reit.</p>

<p>The Reit has a gearing ratio of 27.8 per cent which is the lowest across the S-Reits sector and sees this as providing ample debt headroom for potential acquisitions.</p>

<p>Sasseur Reit has an average debt to maturity of 1.7 years and an interest coverage ratio of 4.5 times as at June 30, 2021 which has improved from 4.0 times in Dec 31, 2020.</p>

<p>Its weighted average cost of debt reduced to 4.4 per cent per annum for H1 2021, from 5.3 per cent per annum in H1 2020.</p>

<p>EC World Reit has a diversified portfolio of assets used primarily for e-commerce, supply-chain management and logistics purposes in the e-commerce clusters of Hangzhou and Wuhan.</p>

<p>The Reit has a gearing ratio of 37.6 per cent, weighted average debt maturity of 1.13 years and interest coverage ratio of 2.86 times.</p>

<p>The Reit manager has expressed in its latest financial results that it will continue to actively explore and diversify sources of funding and hedging instruments to optimise its capital structure.</p>

<p>BHG Retail Reit has a diversified portfolio of six retail properties in Beijing, Chengdu, Hefei, Xining and Dalian. It has a gearing ratio of 34.9 per cent.</p>

<p>BHG Retail Reit has an average cost of debt at 3.7 per cent and interest coverage ratio of 2.6 times.</p>

<p>Over 80 per cent of its borrowings are denominated in Singapore dollars and US dollars and about 60 per cent of offshore loans are hedged via interest rate swaps. <br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/china-focused-s-reits-resilient-amid-onshore-property-focus"> </a><a href="https://www.businesstimes.com.sg/companies-markets/governance-and-transparency-scores-of-s-reits-hit-all-time-high">read</a><a href="https://www.businesstimes.com.sg/companies-markets/10-s-reits-yielding-long-term-annualised-returns"> </a>the original version.</em></strong></p>
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    SREIT with 100%


Chinese real estate and property-related stocks have been dominating headlines over the past week as investors remain cautious and watch for updates.  
Closer to home, there are four S-REITs which have their entire portfolio of assets in China – CapitaLand China Trust, Sasseur REIT, EC World REIT, and BHG Retail REIT.  
Together the four S-Reits have generated -0.9 per cent in average price returns over the past week, comparatively to the swings of Chinese property stocks.  
The Reits have averaged 8.0 per cent in total returns in the year-to-date, 6.1 per cent in average distribution yields, and an average gearing ratio of 34.1 per cent which is lower than the sector average of 37.4 per cent.

S-Reits have a regulated leverage limited of 50 per cent.

CapitaLand China Trust (CLCT) is the largest multi-asset China focused S-Reit with an expanded mandate from a pure retail Reit into a diversified portfolio of retail and business park assets since earlier this year.  
Its Sponsor is CapitaLand Investment Limited, a leading global real estate investment manager, which made its trading debut on the SGX last week.  
CLCT has a gearing ratio of 35.9 per cent and average term to maturity of 3.80 years, with the majority of the refinancing requirements in 2021 completed.

It has 78 per cent of its total term loans on fixed interest rates and has hedged approximately 55 per cent of its undistributed income to reduce foreign currency fluctuations.

Sasseur Reit operates four outlet malls located in Chongqing, Bishan, Hefei and Kunming and is Asia's first outlet mall Reit.

The Reit has a gearing ratio of 27.8 per cent which is the lowest across the S-Reits sector and sees this as providing ample debt headroom for potential acquisitions.

Sasseur Reit has an average debt to maturity of 1.7 years and an interest coverage ratio of 4.5 times as at June 30, 2021 which has improved from 4.0 times in Dec 31, 2020.

Its weighted average cost of debt reduced to 4.4 per cent per annum for H1 2021, from 5.3 per cent per annum in H1 2020.

EC World Reit has a diversified portfolio of assets used primarily for e-commerce, supply-chain management and logistics purposes in the e-commerce clusters of Hangzhou and Wuhan.

The Reit has a gearing ratio of 37.6 per cent, weighted average debt maturity of 1.13 years and interest coverage ratio of 2.86 times.

The Reit manager has expressed in its latest financial results that it will continue to actively explore and diversify sources of funding and hedging instruments to optimise its capital structure.

BHG Retail Reit has a diversified portfolio of six retail properties in Beijing, Chengdu, Hefei, Xining and Dalian. It has a gearing ratio of 34.9 per cent.

BHG Retail Reit has an average cost of debt at 3.7 per cent and interest coverage ratio of 2.6 times.

Over 80 per cent of its borrowings are denominated in Singapore dollars and US dollars and about 60 per cent of offshore loans are hedged via interest rate swaps.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - China focused S-Reits resilient amid onshore property focus

Singapore

EC World Real Estate Investment Trust (EC World REIT) is the first Chinese specialised logistics and e-commerce logistics REIT listed on SGX-ST. 

It has a portfolio of quality properties located predominantly in one of the largest e-commerce clusters in the Yangtze River Delta which offers investors unique exposure to the logistics and e-commerce sectors in Hangzhou and Wuhan, China.
  
EC World REIT’s investment strategy is to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate which is used primarily for e-commerce, supply-chain management and logistics purposes, as well as real estate-related assets, with an initial geographical focus on the PRC. 

EC World REIT is listed in several indices. These include the FTSE ASEAN All-Share Index, FTSE ST All-Share Index, FTSE ST China Index and FTSE ST Singapore Shariah Index. For more information, please visit: http://www.ecwreit.com/ 

EC World REIT is managed by EC World Asset Management Pte. Ltd., which is an indirect wholly-owned subsidiary of the Sponsor – Forchn Holdings Group Co., Ltd.

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EC World Reit (ECWREIT SP)

ASEAN Builder's Scoop (3Jan22) - MCT/MAGIC Merger

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REIT Watch - S-Reits with healthcare and China assets outshine in November

Global Reit markets dipped over the last 3 sessions of November, as investors grappled with the unknowns of the Covid Omicron...

Singapore Exchange Ltd (SGX)

SCCM | EC World REIT (ECWREIT SP): Awaiting Asset Deal While Collecting 8+% Yield

3Q21 results were driven mainly by RMB appreciation (5.2% YoY) and lower DI retention rate at 5% (vs 9% in 3Q20), with 9M21 figures forming 74.0...

SCCM Asia Research

ASEAN Builder's Scoop (10Nov21)

ECWREIT driven by DI release and lower retention; SHG privatization offer; PROP 3Q21 earnings more than doubled; Oct21 condo resale prices rose...

SCCM Asia Research

REIT Watch - China focused S-Reits resilient amid onshore property focus

Chinese real estate and property-related stocks have been dominating headlines over the past week as investors remain cautious...

Singapore Exchange Ltd (SGX)

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