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

<a href="https://www.smartkarma.com/entities/sf-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:31496:1" rel="noopener">SF Real Estate Investment Trust (SF HK)</a> is a REIT formed with an initial focus on income-generating logistics properties in Hong Kong and China. The sponsor is <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>. SF REIT will be the first logistics-focused REIT to be listed in Hong Kong.SF REIT has launched its IPO with an indicative price range of HK$4.68-5.16 per unit. The total proceeds will be HK$2,433.6-2,683.2 million ($313-345 million) at the price range. Two cornerstone investors will subscribe for $50.0 million of the offer units (15.2% of the offer units at the mid-point of the price range). The cornerstone investors are China Orient International Asset Management and <a href="https://www.smartkarma.com/entities/ci-financial-corp" target="_blank" data-smartkarma-citation="entities:25448:1" rel="noopener">Ci Financial (CIX CN)</a>. <div class="content-highlight">In <a href="https://www.smartkarma.com/insights/sf-reit-ipo-initiation-the-reit-flow-of-things" target="_blank" data-smartkarma-citation="insights:50673" rel="noopener">SF REIT IPO Initiation: The REIT Flow of Things</a>,  we noted that SF REIT offers an attractive proposition for investors willing to invest in a niche segment of the Asian REIT sector. However, our valuation analysis suggests that units are fully priced at the minimum offer price. Consequently, we are inclined to give this IPO a pass and wait for a lower entry point. </div>

SF Real Estate Investment Trust (SF HK) is a REIT formed with an initial focus on income-generating logistics properties in Hong Kong and China. The sponsor is S.F. Holding (002352 CH). SF REIT will be the first logistics-focused REIT to be listed in Hong Kong.SF REIT has launched its IPO with an indicative price range of HK$4.68-5.16 per unit. The total proceeds will be HK$2,433.6-2,683.2 million ($313-345 million) at the price range. Two cornerstone investors will subscribe for $50.0 million of the offer units (15.2% of the offer units at the mid-point of the price range). The cornerstone investors are China Orient International Asset Management and Ci Financial (CIX CN). In SF REIT IPO Initiation: The REIT Flow of Things,  we noted that SF REIT offers an attractive proposition for investors willing to invest in a niche segment of the Asian REIT sector. However, our valuation analysis suggests that units are fully priced at the minimum offer price. Consequently, we are inclined to give this IPO a pass and wait for a lower entry point. 

HK/China Equity Long-Short

Osbert Tang, CFA

In this Insight, we take a look on <a href="https://www.smartkarma.com/entities/sf-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:31496:1" rel="noopener">SF Real Estate Investment Trust (SF HK)</a> (SF REIT), which is a proposed REIT listing in Hong Kong with <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> (SFH) as its sponsor. The REIT will initially have three logistics properties in its portfolio, one in Hong Kong and two in China (Foshan and Wuhu). Having a gross lettable area of 307,990.8 sq.m., the appraised value of these properties amounted to HK$6.1bn.On balance and based on the information in the application proof prospectus, we view the REIT positively. Key positives are: 1.) quality assets; 2.) stable profit and cash flow; and 3.) potential injection. On the other hand, the key negatives are: 1.) focus on HK; 2.) reliance on SFH; and 3.) small size.

In this Insight, we take a look on SF Real Estate Investment Trust (SF HK) (SF REIT), which is a proposed REIT listing in Hong Kong with S.F. Holding (002352 CH) (SFH) as its sponsor. The REIT will initially have three logistics properties in its portfolio, one in Hong Kong and two in China (Foshan and Wuhu). Having a gross lettable area of 307,990.8 sq.m., the appraised value of these properties amounted to HK$6.1bn.On balance and based on the information in the application proof prospectus, we view the REIT positively. Key positives are: 1.) quality assets; 2.) stable profit and cash flow; and 3.) potential injection. On the other hand, the key negatives are: 1.) focus on HK; 2.) reliance on SFH; and 3.) small size.

SF REIT Pre-IPO: Initial Thoughts on S.F. Holding's (002352 CH) Logistics REIT In HK

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

* Poor FY 2020 Results: Link REIT (823.HK) reported FY 2H20 losses of HKD 23.9 bn  - against FY 1H20 earnings results of HKD 6.7 bn, quite a swing during the COVID-19 pandemic. Bottom-line losses were driven primarily by one factor – the HKD 27.6 bn property revaluation loss versus a HKD 3.7 bn gain in FY 1H20;*Rental Reversion Rates Under Heavy Pressure: Asset enhancement initiatives (AEI) remain budgeted at only HKD 411 mn in Hong Kong during FY 2021 - lower than the HKD 700 mn which was previously guided. Unfortunately, given the weaker than expected Hong Kong retail environment is leading to lower level of rental reversions (RRR) – as noted by the HOH decline. Tenant occupancy costs were 14.7% for FY 2020, and 15.3% rate in FY 4Q20 for Link REIT – well above the 15% comfortable level where RRR becomes a challenge;  and *Capital Pressures On Horizon: Now is the time to conserve capital. Despite the significant 14% decline in book value per share HOH due to both the dividend and MTM of its property book on the 26 bp change in cap rates, management remains committed to its special distribution of HKD 0.14 per share through March 2022 and completing its share purchaser program. Perhaps Link REIT ought to focus on how it will maintain its 96.5% occupancy rate as the declining retail revenues in Hong Kong push its tenants into the red, rather than capital management in this current environment.

* Poor FY 2020 Results: Link REIT (823.HK) reported FY 2H20 losses of HKD 23.9 bn  - against FY 1H20 earnings results of HKD 6.7 bn, quite a swing during the COVID-19 pandemic. Bottom-line losses were driven primarily by one factor – the HKD 27.6 bn property revaluation loss versus a HKD 3.7 bn gain in FY 1H20;*Rental Reversion Rates Under Heavy Pressure: Asset enhancement initiatives (AEI) remain budgeted at only HKD 411 mn in Hong Kong during FY 2021 - lower than the HKD 700 mn which was previously guided. Unfortunately, given the weaker than expected Hong Kong retail environment is leading to lower level of rental reversions (RRR) – as noted by the HOH decline. Tenant occupancy costs were 14.7% for FY 2020, and 15.3% rate in FY 4Q20 for Link REIT – well above the 15% comfortable level where RRR becomes a challenge;  and *Capital Pressures On Horizon: Now is the time to conserve capital. Despite the significant 14% decline in book value per share HOH due to both the dividend and MTM of its property book on the 26 bp change in cap rates, management remains committed to its special distribution of HKD 0.14 per share through March 2022 and completing its share purchaser program. Perhaps Link REIT ought to focus on how it will maintain its 96.5% occupancy rate as the declining retail revenues in Hong Kong push its tenants into the red, rather than capital management in this current environment.

Link REIT - Squeezing Every Last Drop of Blood

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/link-reit" target="_blank" data-smartkarma-citation="entities:872:1" rel="noopener">Link REIT (823 HK)</a>, Hong Kong's largest listed REIT, has not avoided the uncertainties generated by COVID-19.
Its current P/B of 0.75x compares to its five-year average of 0.94x. Shares are down 28% yoy - which were impacted by localised protests - and down 18% YTD. This compares with 35% and 25% respectively for REIT peers.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/679/original/image_94931558221588734063822.png?1588734065" class="editor-image img-responsive" data-smartkarma-image-id="131679"></figure>
<div style="text-align: left;" class="content-caption">Source: CapIQ</div>
Retail accounts for 74.6% of Link's HK$224bn portfolio, the majority situated in Hong Kong.
Hong Kong just recorded a decline of 42% yoy in retail sales in March as various measures brought tourism to a standstill.
Link has diversified its portfolio into an office development project in Kowloon, a shopping mall in Australia - its first foray - and additional shopping malls in China. 
Further diversification is needed - and expected.

Link REIT (823 HK), Hong Kong's largest listed REIT, has not avoided the uncertainties generated by COVID-19.
Its current P/B of 0.75x compares to its five-year average of 0.94x. Shares are down 28% yoy - which were impacted by localised protests - and down 18% YTD. This compares with 35% and 25% respectively for REIT peers.

Source: CapIQ
Retail accounts for 74.6% of Link's HK$224bn portfolio, the majority situated in Hong Kong.
Hong Kong just recorded a decline of 42% yoy in retail sales in March as various measures brought tourism to a standstill.
Link has diversified its portfolio into an office development project in Kowloon, a shopping mall in Australia - its first foray - and additional shopping malls in China. 
Further diversification is needed - and expected.

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.

CapitaLand Ascendas REIT / Equity Bottom-Up

SGX is one of Asia’s regional hub for Real Estate Investment Trusts (REITs) &amp; Property Trusts. Based on the FTSE ST REIT Index, the dividend yield for Singapore REITs have been 4.2 – 6.8% over a period of 5 years (Source: Bloomberg, 2014-2018). Over 80% of Singapore REITs &amp; Property Trusts own offshore assets across Asia Pacific, US &amp; Europe.&nbsp;
As of end Sep 2019, SGX lists 44 REITs &amp; Property Trusts with a combined market capitalisation of over S$100 billion, representing c.12% of Singapore’s overall market
SGX’s REITs &amp; Property Trusts offer wide diversity across property sub-segments REIT Indices:
<ul>
<li>FTSE ST REIT Index: 37 out of the 44 trusts represented</li>
<li>iEdge S-REIT Index: 36 out of the 44 trusts represented</li>
</ul>
<h2>Key Statistics At a Glance</h2>
<ul>
<li>Average dividend yield of 6.2%</li>
<li>Average 3-year annualised total return of 10.8%</li>
<li>Average gearing ratio of 34.5%</li>
<li>10 year market cap CAGR of 22%</li>
</ul>

SGX is one of Asia’s regional hub for Real Estate Investment Trusts (REITs) &amp; Property Trusts. Based on the FTSE ST REIT Index, the dividend yield for Singapore REITs have been 4.2 – 6.8% over a period of 5 years (Source: Bloomberg, 2014-2018). Over 80% of Singapore REITs &amp; Property Trusts own offshore assets across Asia Pacific, US &amp; Europe.&nbsp;
As of end Sep 2019, SGX lists 44 REITs &amp; Property Trusts with a combined market capitalisation of over S$100 billion, representing c.12% of Singapore’s overall market
SGX’s REITs &amp; Property Trusts offer wide diversity across property sub-segments REIT Indices:

FTSE ST REIT Index: 37 out of the 44 trusts represented
iEdge S-REIT Index: 36 out of the 44 trusts represented

Key Statistics At a Glance

Average dividend yield of 6.2%
Average 3-year annualised total return of 10.8%
Average gearing ratio of 34.5%
10 year market cap CAGR of 22%


Chartbook: SREITs & Property Trusts -  October 2019

Singapore

Fortune REIT is a real estate investment trust that invests in a portfolio of retail shopping malls located in Hong Kong.

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Fortune REIT (778 HK)

SF REIT IPO: Valuation Insights

SF REIT has launched its IPO to raise $313-345 million at the price range. Our valuation analysis suggests that units are fully priced at the...

Arun George

SF REIT Pre-IPO: Initial Thoughts on S.F. Holding's (002352 CH) Logistics REIT In HK

SF REIT will be an interesting REIT given its close tie with SF Holding. We see the huge potential for future acquisitions from the sponsor a clear...

Osbert Tang, CFA

Link REIT - Squeezing Every Last Drop of Blood

* Poor FY 2020 Results: Link REIT (823.HK) reported FY 2H20 losses of HKD 23.9 bn - against FY 1H20 earnings results of HKD 6.7 bn, quite a swing...

Thomas J. Monaco

Link REIT: Options Amidst Retail Pain

Link REIT (823 HK), Hong Kong's largest listed REIT, has not avoided the uncertainties generated by COVID-19. Its current P/B of 0.75x compares to...

David Blennerhassett

Chartbook: SREITs & Property Trusts - October 2019

SGX is one of Asia’s regional hub for Real Estate Investment Trusts (REITs) & Property Trusts. Based on the FTSE ST REIT Index, the dividend...

Singapore Exchange Ltd (SGX)

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