Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p><em><strong>This week in StubWorld ...</strong></em></p>
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<p><a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a>, relative to <a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a>, is around record-lows outside the Covid-affect low last year. This is occurring amid recent corporate developments within the Jardine stable of companies.</p>
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<p>Preceding my comments on JCNC are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Jardine Cycle &amp; Carriage (JCNC SP), relative to Astra International (ASII IJ), is around record-lows outside the Covid-affect low last year. This is occurring amid recent corporate developments within the Jardine stable of companies.



Preceding my comments on JCNC are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


<p>In my prior insight <em><a href="https://skr.ma/h4f6C" target="_blank" rel="noopener">Jardine Matheson: Lessons in Dissent</a></em> on the 29 April, I thought <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> was unattractive at a 13% discount to NAV, plus near-term news may focus on <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a>'s dissension rights, and Matheson's potential exposure thereon.</p>
<p>Matheson is down ~15% since that note (while the Straits Times Index is down ~4%). </p>
<p>Since that insight, Matheson released its <a href="https://www.jardines.com/assets/files/NewsAndEvents/corporate-press-releases/jardine-matheson/int21.pdf" target="_blank" rel="noopener">interim results</a>, which not only provided clarity on the net debt at the parent level, which was largely guesswork amid the Matheson/<a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> circularity; but also unlisted stub ops - especially Jardine Motors - performed exceptionally in the 1H21.</p>
<p>At a ~23% discount to NAV on adjusted historical NAVs, value <em>is</em> emerging. Yet Matheson is not an obvious buy here.</p>
<p>More below the fold. </p>

In my prior insight Jardine Matheson: Lessons in Dissent on the 29 April, I thought Jardine Matheson Holdings (JM SP) was unattractive at a 13% discount to NAV, plus near-term news may focus on Jardine Strategic Holdings (JS SP)'s dissension rights, and Matheson's potential exposure thereon.
Matheson is down ~15% since that note (while the Straits Times Index is down ~4%). 
Since that insight, Matheson released its interim results, which not only provided clarity on the net debt at the parent level, which was largely guesswork amid the Matheson/Jardine Strategic Holdings (JS SP) circularity; but also unlisted stub ops - especially Jardine Motors - performed exceptionally in the 1H21.
At a ~23% discount to NAV on adjusted historical NAVs, value is emerging. Yet Matheson is not an obvious buy here.
More below the fold. 

Jardine Matheson: Value Gradually Emerging Four Months On

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><a href="https://www.smartkarma.com/entities/mapletree-logistics-trust" target="_blank" data-smartkarma-citation="entities:16035" rel="noopener">Mapletree Logistics Trust (MLT SP)</a> looks to acquire a Changi logistics property for S$24.5m; Stabilized NPI yield of ~6.2% </h3><ul><li>MLT has been granted an option to acquire 9 Changi South Street 2 from RSH Holdings for a purchase price of S$24.5m (vs. independent valuation of S$24.6m as at 25Jun21). The property, a purpose-built facility comprising a part 3-storey, part 4-storey temperature-controlled warehouse with ancillary office and other amenities, has a GFA of 11,506sqm. It is located at a prime location and a relatively long remaining land tenure of ~33.3 years. The property is also adjacent to its existing property at 15 Changi South Street 2, thus presenting the opportunity for potential economies of scale</li><li>Its favourable location should attract demand from industries involved in high-value and time-sensitive goods such as electronics and pharmaceutical, as well as e-commerce firms and third-party logistics players (“3PLs”) looking to expand in the Changi South/East region. The Property will be sold with vacant possession and the Manager is in talks with an international 3PL to lease it as the anchor tenant</li><li>The Proposed Acquisition is subject to, among others, approval from JTC Corporation and exercise of the OTP by MLT. The total purchase consideration of S$27.2m (including transaction costs of c.S$2.7m) will be funded by debt and is expected to be completed by 3QFY21/22</li><li>Upon completion, MLT’s aggregate leverage ratio will be ~38.5%, while MLT’s total portfolio will comprise 164 properties with total AUM of S$10.8bn. The proposed acquisition is expected to generate a stabilised NPI yield of ~6.2% based on the purchase price and initial land premium, and it is also expected to be DPU accretive.</li></ul>

SingaporeMapletree Logistics Trust (MLT SP) looks to acquire a Changi logistics property for S$24.5m; Stabilized NPI yield of ~6.2% MLT has been granted an option to acquire 9 Changi South Street 2 from RSH Holdings for a purchase price of S$24.5m (vs. independent valuation of S$24.6m as at 25Jun21). The property, a purpose-built facility comprising a part 3-storey, part 4-storey temperature-controlled warehouse with ancillary office and other amenities, has a GFA of 11,506sqm. It is located at a prime location and a relatively long remaining land tenure of ~33.3 years. The property is also adjacent to its existing property at 15 Changi South Street 2, thus presenting the opportunity for potential economies of scaleIts favourable location should attract demand from industries involved in high-value and time-sensitive goods such as electronics and pharmaceutical, as well as e-commerce firms and third-party logistics players (“3PLs”) looking to expand in the Changi South/East region. The Property will be sold with vacant possession and the Manager is in talks with an international 3PL to lease it as the anchor tenantThe Proposed Acquisition is subject to, among others, approval from JTC Corporation and exercise of the OTP by MLT. The total purchase consideration of S$27.2m (including transaction costs of c.S$2.7m) will be funded by debt and is expected to be completed by 3QFY21/22Upon completion, MLT’s aggregate leverage ratio will be ~38.5%, while MLT’s total portfolio will comprise 164 properties with total AUM of S$10.8bn. The proposed acquisition is expected to generate a stabilised NPI yield of ~6.2% based on the purchase price and initial land premium, and it is also expected to be DPU accretive.

ASEAN Builder's Scoop (12Jul21) - MLT Acquires Changi Logistics at 6.2% Yield

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

<p><strong><em>*Better, But Weak Metrics: </em></strong>Link REIT (823.HK) [Link REIT] reported a positive FY 2H21 bottom-line result of HKD 5.3 bn, increasing HKD 9.4 bn over the HKD 4.1 bn in losses posted in FY 1H21. However, when we exclude Link’s non-cash FV marks of HKD 2.0 bn, operating performance cam in at just HKD 3.3 bn – improving just HKD 143 mn (4.5%) HOH. The positive HOH operating performance was driven by an increase in revenues from mainland China and overseas related property;  </p><p><em><strong>*Worries Remain In Hong Kong: </strong></em>Hong Kong retail portfolio's rental reversion rate continued to be challenged YOY in FY 2H21, albeit slightly improving from a negative 2.6% in FY 1H21 to a negative 1.8%. Although not a enormous surprise, this trend would appear to be with us for an extended period in Hong Kong - especially given the continued border closures amid the COVID-19 disruption; and</p><p><em><strong>*Poor Capital Management Becoming A Big Problem: </strong></em>Link management also appears hellbent on destroying shareholder value with deals that make little financial sense. Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou where the current annualized NPI yield barely covering the project’s cost of funding. In order to improve occupancy, it would appear that Link would likely need to offering significant tenant enticements, and investment massively in asset enhancement. Bizarrely instead of weighing buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend shares against short-selling.</p>

*Better, But Weak Metrics: Link REIT (823.HK) [Link REIT] reported a positive FY 2H21 bottom-line result of HKD 5.3 bn, increasing HKD 9.4 bn over the HKD 4.1 bn in losses posted in FY 1H21. However, when we exclude Link’s non-cash FV marks of HKD 2.0 bn, operating performance cam in at just HKD 3.3 bn – improving just HKD 143 mn (4.5%) HOH. The positive HOH operating performance was driven by an increase in revenues from mainland China and overseas related property;  *Worries Remain In Hong Kong: Hong Kong retail portfolio's rental reversion rate continued to be challenged YOY in FY 2H21, albeit slightly improving from a negative 2.6% in FY 1H21 to a negative 1.8%. Although not a enormous surprise, this trend would appear to be with us for an extended period in Hong Kong - especially given the continued border closures amid the COVID-19 disruption; and*Poor Capital Management Becoming A Big Problem: Link management also appears hellbent on destroying shareholder value with deals that make little financial sense. Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou where the current annualized NPI yield barely covering the project’s cost of funding. In order to improve occupancy, it would appear that Link would likely need to offering significant tenant enticements, and investment massively in asset enhancement. Bizarrely instead of weighing buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend shares against short-selling.

Link REIT – Hong Kong “Stabilizing”

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> revamps 1557 Keppel Road into office and Co-living spaces</h3><p>Once the nine-years lease was up in Dec19 for 1557 Keppel Road, LHN, the master tenant of the state land, decided to repurpose the place on a fresh term of lease into an integrated space comprising office and co-living spaces, occupying over 96,299sqft. The renovations took about 10 months, with delays due to the pandemic. The co-living business at the development runs under LHN’s brand Coliwoo, which has a total of over 800 rooms in the city-state. Coliwoo also operates in other areas like Balestier, Boon Lay and Bukit Timah. To date, LHN says 50% of its office spaces are already leased out. Confirmed tenants include a digital media and financial consultancy firm, while arrangements are still pending with three other businesses: an architectural firm, a digital media consultancy and a FinTech company. There will also be a gym operated by Anytime Fitness, and an F&amp;B eatery catering to the office and residential tenants within the development. At Coliwoo 1557 Keppel Road, LHN has also carved out 47 co-living units ranging from 180-260sqft across two residential blocks. Due to pandemic-led lockdowns, Coliwoo has seen demand from locals increase to 30% from 10% previously.</p>

SingaporeLHN Ltd (LHN SP) revamps 1557 Keppel Road into office and Co-living spacesOnce the nine-years lease was up in Dec19 for 1557 Keppel Road, LHN, the master tenant of the state land, decided to repurpose the place on a fresh term of lease into an integrated space comprising office and co-living spaces, occupying over 96,299sqft. The renovations took about 10 months, with delays due to the pandemic. The co-living business at the development runs under LHN’s brand Coliwoo, which has a total of over 800 rooms in the city-state. Coliwoo also operates in other areas like Balestier, Boon Lay and Bukit Timah. To date, LHN says 50% of its office spaces are already leased out. Confirmed tenants include a digital media and financial consultancy firm, while arrangements are still pending with three other businesses: an architectural firm, a digital media consultancy and a FinTech company. There will also be a gym operated by Anytime Fitness, and an F&amp;B eatery catering to the office and residential tenants within the development. At Coliwoo 1557 Keppel Road, LHN has also carved out 47 co-living units ranging from 180-260sqft across two residential blocks. Due to pandemic-led lockdowns, Coliwoo has seen demand from locals increase to 30% from 10% previously.

ASEAN Builder's Scoop (21May21) - LHN unveils 1557KR Co-living and office space

Hong Kong

Hongkong Land is a major listed property investment, management and development group. 

The Group owns and manages more than 850,000 sq. m. of prime office and luxury retail property in key Asian cities, principally in Hong Kong, Singapore, Beijing and Jakarta.  The Group also has a number of high quality residential, commercial, and mixed-use projects under development in cities across Greater China and Southeast Asia.  In Singapore, its subsidiary, MCL Land, is a well-established residential developer.  

Hongkong Land Holdings Limited is incorporated in Bermuda and has a standard listing on the London Stock Exchange, with secondary listings in Bermuda and Singapore.  The Group’s assets and investments are managed from Hong Kong by Hongkong Land Limited.  Hongkong Land is a member of the Jardine Matheson Group.

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Hongkong Land (HKL SP)

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Collapsing the circularity and removing its complexity should drive interest in Matheson. And holdings like HKL are cheap at 0.3x P/B. The pushback...

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ASEAN Builder's Scoop (12Jul21) - MLT Acquires Changi Logistics at 6.2% Yield

MLT acquires Changi logistics at 6.2% yield; FRAG privatization offer; Selo Group enters Malaysian market; AWC bets on tourism rebound; BI to...

SCCM Asia Research

Link REIT – Hong Kong “Stabilizing”

LINK REIT: Link operating results only improved 4.5% HOH, driven by mainland China and overseas. Hong Kong retail portfolio remains a challenge, as...

Thomas J. Monaco

ASEAN Builder's Scoop (21May21) - LHN unveils 1557KR Co-living and office space

LHN unveils 1557KR Co-living and office space; SUN rolls out tenant supports; HK starts REIT subsidy to rival SG, Japan; AGI weak 1Q21 results; LBS...

SCCM Asia Research

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