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

<figure class="editor-figure mceNonEditable"><img src="https://api2.sgx.com/sites/default/files/2022-03/Capture_16.PNG" class="editor-image img-responsive"></figure>
<div class="content-caption">Insti investors continue to net buy sreits</div>
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<p>The iEdge S-Reit Index recovered 2.5 per cent in total returns over the past 5 sessions (Feb 25, 2022 through to Mar 3, 2022), after a 2 per cent decline seen last Thursday (Feb 24) as global markets saw major moves amid the market volatility.</p>
<p>Despite the dip, the iEdge S-Reit Index has returned 0.6 per cent in total returns for the whole period from Feb 24, 2022 through to Mar 3, 2022.</p>
<p>This means it outperformed the FTSE EPRA Nareit Asia ex-Japan Index which declined 0.7 per cent during the same period.<br><br>Within the S-Reit sub-sectors, gainers were led by the specialised, healthcare and office Reits while decliners were led by hospitality, retail and diversified Reits.</p>
<p>During the period, institutional investors have been a key driver in S-Reits' fund flow activities, accumulating net institutional inflows of S$30.4 million.</p>
<p>Retail investors on the other hand, net sold S$42.6 million for the sector.<br><br>In terms of sub-sectors, institutional flows were driven by inflows seen in diversified S-Reits (+S$16.7 million), specialised/data centre S-Reits (+S$6.9 million), and office S-Reits (+S$6.7 million).</p>
<p>The largest retail outflows were seen in diversified S-Reits (-S$22.8 million), office S-Reits (-S$6.6 million), and industrial S-Reits (-S$5.5 million).</p>
<p>On a year-to-date basis, S-Reits have seen a 2 per cent decline, against the Straits Times Index's 4.4 per cent total returns, while the FTSE EPRA Nareit Asia ex-Japan Index has seen a decline of 2.3 per cent.</p>
<p>Interest rates continue to be a key focus for the sector, as expectations of a rate hike grow.</p>
<p>As the earnings season concludes for the sector, broad based distribution per unit growth and healthy occupancy rates remain a common theme.<br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/green-shoots-for-retail-and-hospitality-s-reits-amid-new-pandemic-phase" target="_blank" rel="noopener">&nbsp;</a><a href="https://www.businesstimes.com.sg/companies-markets/institutional-investors-continue-to-net-buy-s-reits" target="_blank" rel="noopener">read&nbsp;</a>the original version.</em></strong></p>


Insti investors continue to net buy sreits

The iEdge S-Reit Index recovered 2.5 per cent in total returns over the past 5 sessions (Feb 25, 2022 through to Mar 3, 2022), after a 2 per cent decline seen last Thursday (Feb 24) as global markets saw major moves amid the market volatility.
Despite the dip, the iEdge S-Reit Index has returned 0.6 per cent in total returns for the whole period from Feb 24, 2022 through to Mar 3, 2022.
This means it outperformed the FTSE EPRA Nareit Asia ex-Japan Index which declined 0.7 per cent during the same period.  Within the S-Reit sub-sectors, gainers were led by the specialised, healthcare and office Reits while decliners were led by hospitality, retail and diversified Reits.
During the period, institutional investors have been a key driver in S-Reits' fund flow activities, accumulating net institutional inflows of S$30.4 million.
Retail investors on the other hand, net sold S$42.6 million for the sector.  In terms of sub-sectors, institutional flows were driven by inflows seen in diversified S-Reits (+S$16.7 million), specialised/data centre S-Reits (+S$6.9 million), and office S-Reits (+S$6.7 million).
The largest retail outflows were seen in diversified S-Reits (-S$22.8 million), office S-Reits (-S$6.6 million), and industrial S-Reits (-S$5.5 million).
On a year-to-date basis, S-Reits have seen a 2 per cent decline, against the Straits Times Index's 4.4 per cent total returns, while the FTSE EPRA Nareit Asia ex-Japan Index has seen a decline of 2.3 per cent.
Interest rates continue to be a key focus for the sector, as expectations of a rate hike grow.
As the earnings season concludes for the sector, broad based distribution per unit growth and healthy occupancy rates remain a common theme.  REIT Watch is a weekly column on The Business Times,&nbsp;read&nbsp;the original version.

REIT Watch - Institutional Investors Continue to Net Buy S-Reits

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>Elite Commercial REIT</h2>
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<h3>Superior income visibility not priced in</h3>
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<p>Investment Thesis:</p>
<p><strong>Maintain BUY and TP of GBP0.80, implying a 24% potential upside, with attractive yields of 7.5%/7.8% for FY22F/FY23F.</strong> Elite Commercial REIT (ECR)’s portfolio of 155 properties boasts of full occupancy and a long WALE of six years, with over 99% leased to the AA-rated UK Government. As the lease break option in 2023 was removed for almost half of the portfolio, 79% of the portfolio now has straight leases through to 2028 without lease break options. The strong income visibility is a key positive for the REIT.</p>
<p><strong>Revaluation gains ahead to drive share price re-rating.</strong> We believe that ECR will likely see a lift in valuations with the removal of lease break options for 100 out of 117 properties leased to DWP. The remaining 17 properties have lease break options undecided by DWP as of now, but notice will have to be served by the end of this month, otherwise the leases will continue to run till 2028, generating further upside to valuations. The weighted average lease to break (WALB) is now at its longest ever at c.5 years, which will be a critical factor for the stock to re-rate; historically P/NAV was at 1.2x when WALB was at its longest at c.4.5 years, and the stock is currently trading at just 1x P/NAV with potential revaluation gains ahead.</p>
<p><strong>Greater incentive for DWP to continue its leases beyond 2028.</strong> With the government’s aim to achieve sustainability goals such as net zero carbon emissions by 2050, this sustainability collaboration by ECR and DWP is timely. Achieving higher Energy Performance Certificate (EPC) ratings for the properties in the portfolio can provide a greater incentive for DWP to stay as a tenant beyond 2028, future-proofing the REIT.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



Elite Commercial REIT



Superior income visibility not priced in



Investment Thesis:
Maintain BUY and TP of GBP0.80, implying a 24% potential upside, with attractive yields of 7.5%/7.8% for FY22F/FY23F. Elite Commercial REIT (ECR)’s portfolio of 155 properties boasts of full occupancy and a long WALE of six years, with over 99% leased to the AA-rated UK Government. As the lease break option in 2023 was removed for almost half of the portfolio, 79% of the portfolio now has straight leases through to 2028 without lease break options. The strong income visibility is a key positive for the REIT.
Revaluation gains ahead to drive share price re-rating. We believe that ECR will likely see a lift in valuations with the removal of lease break options for 100 out of 117 properties leased to DWP. The remaining 17 properties have lease break options undecided by DWP as of now, but notice will have to be served by the end of this month, otherwise the leases will continue to run till 2028, generating further upside to valuations. The weighted average lease to break (WALB) is now at its longest ever at c.5 years, which will be a critical factor for the stock to re-rate; historically P/NAV was at 1.2x when WALB was at its longest at c.4.5 years, and the stock is currently trading at just 1x P/NAV with potential revaluation gains ahead.
Greater incentive for DWP to continue its leases beyond 2028. With the government’s aim to achieve sustainability goals such as net zero carbon emissions by 2050, this sustainability collaboration by ECR and DWP is timely. Achieving higher Energy Performance Certificate (EPC) ratings for the properties in the portfolio can provide a greater incentive for DWP to stay as a tenant beyond 2028, future-proofing the REIT.










(Non-SGX Report) Elite Commercial REIT - Superior Income Visibility Not Priced In

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/dasin-retail-trust" target="_blank" data-smartkarma-citation="entities:23743" rel="noopener">Dasin Retail Trust (DASIN SP)</a> 2H21 DPU +10.9% YoY; All eyes remain on the hefty 2022 refinancing burden</li><li><a href="https://www.smartkarma.com/entities/bhg-retail-reit" target="_blank" data-smartkarma-citation="entities:21021" rel="noopener">BHG Retail REIT (BHGREIT SP)</a> 2H21 DPU -0.9% YoY; Steady as she goes with occupancy rates inching higher</li><li><a href="https://www.smartkarma.com/entities/ireit-global" target="_blank" data-smartkarma-citation="entities:10596" rel="noopener">IREIT Global (IREIT SP)</a> 2H21 DPU +7.9% YoY; Continued to trade ~25% below book value despite an attractive 7+% yield</li></ul>

Dasin Retail Trust (DASIN SP) 2H21 DPU +10.9% YoY; All eyes remain on the hefty 2022 refinancing burdenBHG Retail REIT (BHGREIT SP) 2H21 DPU -0.9% YoY; Steady as she goes with occupancy rates inching higherIREIT Global (IREIT SP) 2H21 DPU +7.9% YoY; Continued to trade ~25% below book value despite an attractive 7+% yield

ASEAN Builder's Scoop 28Feb22 - DASIN All Eyes on Mar22 Loan Refinancing

<ul><li><a href="https://www.smartkarma.com/entities/elite-commercial-reit" target="_blank" data-smartkarma-citation="entities:28807" rel="noopener">Elite Commercial REIT (ELITE SP)</a> 2H21 DPU +12.4% YoY; Enlarged portfolio boosts performance but watch for rising debt cost</li><li>Higher property tax for higher end properties in 2023-24</li><li>Orchard building owners look for collective sales; Rejuvenate Orchard Rd precinct</li></ul>

Elite Commercial REIT (ELITE SP) 2H21 DPU +12.4% YoY; Enlarged portfolio boosts performance but watch for rising debt costHigher property tax for higher end properties in 2023-24Orchard building owners look for collective sales; Rejuvenate Orchard Rd precinct

ASEAN Builder's Scoop (21Jan22) - ELITE Enlarged Portfolio Boosts Performance

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/238/848/original/image_287512276191635730663687.png?1635730667" class="editor-image img-responsive" data-smartkarma-image-id="238848"></figure><h3><a href="https://www.smartkarma.com/entities/elite-commercial-reit" target="_blank" data-smartkarma-citation="entities:28807" rel="noopener">Elite Commercial REIT (ELITE SP)</a> 3Q21 DPU +20.3% YoY; High-yielding GBP exposure with steady operating metrics</h3><ul><li>3Q21 revenue came in at GBP9.4m (+61.7% YoY; 60.4% higher than IPO projection), while NPI was undisclosed. Revenue was boosted by contributions from its maiden acquisitions. 9M21 revenue rose 67.2% YoY to GBP25.3m (75% of BB est.)</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Elite Commercial REIT (ELITE SP) 3Q21 DPU +20.3% YoY; High-yielding GBP exposure with steady operating metrics3Q21 revenue came in at GBP9.4m (+61.7% YoY; 60.4% higher than IPO projection), while NPI was undisclosed. Revenue was boosted by contributions from its maiden acquisitions. 9M21 revenue rose 67.2% YoY to GBP25.3m (75% of BB est.)

Singapore

Elite Commercial REIT (“Elite REIT”) is a Singapore real estate investment trust established with the investment strategy of principally investing, directly or indirectly, in commercial real-estate related assets in the United Kingdom (“UK”). Elite REIT is the only UK REIT listed in Pound sterling on the Singapore Exchange.

Elite REIT’s portfolio (“Portfolio”) comprises predominantly freehold properties strategically located mainly in town centres, and near amenities and transportation nodes. The Portfolio offers a stable government-backed income stream with over 99% of the gross rental income derived from the UK Government, backed by AA-rated sovereign credit strength. The leases are on triple net basis(1) and Elite REIT is one of the largest provider of critical social infrastructure to the Department for Work & Pensions (“DWP”) and other UK Government departments. The DWP is the UK’s largest public service department that is responsible for welfare, pensions and child maintenance, serving over 20 million claimants. The Portfolio is part of the crucial social infrastructure through which the DWP provides services to local communities.

Note:
1.	Known as a full repairing and insuring lease, the responsibility for the repair of the external and internal parts as well as the structure of the property is placed with the tenant for occupied assets.

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Elite UK REIT (ELITE SP)

REIT Watch - Institutional Investors Continue to Net Buy S-Reits

The iEdge S-Reit Index recovered 2.5 per cent in total returns over the past 5 sessions (Feb 25, 2022 through to Mar 3, 2022), after a 2 per...

Singapore Exchange Ltd (SGX)

(Non-SGX Report) Elite Commercial REIT - Superior Income Visibility Not Priced In

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

ASEAN Builder's Scoop 28Feb22 - DASIN All Eyes on Mar22 Loan Refinancing

BHGREIT steady as she goes; IREIT trading ~25% below book; AEW sells 55MS for S$3,450psf; CLD signs S$1.3bn Vietnam MOU; ELITE embarks on new AEI

SCCM Asia Research

ASEAN Builder's Scoop (21Jan22) - ELITE Enlarged Portfolio Boosts Performance

ELITE enlarged portfolio boosts performance; Higher tax for high-end props in 2023-24; Ochard rd buildings en-bloc galore; RLC new estate near...

SCCM Asia Research

ASEAN Builder's Scoop (1Nov21)

ELITE high-yielding GBP exposure; ART US, Europe leading the recovery; CDREIT AUS, SG remains muted; ART expands further into US dormitory; CERT...

SCCM Asia Research

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