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.

Event-Driven

<p>Today, <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> announced a competing privatisation offer from Cuscaden at S$2.10 cash per SPH share, which is a 40.0% premium to the share price of S$1.50 on 30 March 2021 (announcement of SPH’s strategic review), an 11.7% premium to the share price of S$1.88 on 30 July (last trading day prior to <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a>’s offer) and a 5.5% premium to the share price of S$1.99 on 28 October (last close prior to the trading halt). </p><p>As discussed in <a href="https://www.smartkarma.com/insights/sph-s-privatisation-by-keppel" target="_blank" data-smartkarma-citation="insights:55402" rel="noopener">SPH’s Privatisation by Keppel</a>, on 2 August, SPH announced a privatisation offer from Keppel. The transaction involves Keppel offering S$0.668 cash per SPH share and 0.596 Keppel REIT units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT units per SPH share. Based on the last close price of <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a> and <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a>, the total consideration is S$2.104 per SPH share, a whisker above Cuscaden’s all-cash offer.  </p><p>The two privatisation proposals are the culmination of the SPH’s strategic review to unlock shareholder value. The strategic review commenced with the announcement of the media business restructuring announced on 6 May. Shareholder approval for the media business restructuring was obtained on 10 September and is expected to be completed in December. </p><p>While Cuscaden’s offer is broadly similar in value to Keppel’s offer, Cuscaden’s offer may be more appealing particularly to minorities. Cuscaden’s offer has greater certainty of value as it is all cash, eliminates the risk of changing REIT unit prices (Keppel REIT and SPH REIT) and does any require further shareholders' approval on the part of Cuscaden (Keppel’s offer requires approval from Keppel shareholders). Cuscaden’s offer will also not be reduced by the S$34 million break fee payable to Keppel. </p><p>SPH responded to Cuscaden’s offer by stating that it is "<em>not a firm offer</em>" and it has "<em>not entered into any definitive or binding agreement</em>" with Cuscaden. Keppel responded to Cuscaden’s offer by stating that “<em>we are reviewing the matter and make an announcement at an appropriate time.</em>”</p><div class="content-highlight"><p>In the event of a competing offer, Keppel has a switch option to proceed with the acquisition by way of an offer in lieu of proceeding with the acquisition by way of the scheme. We previously noted that the acquisition of SPH aligns with Keppel’s Vision 2030 of improving earnings quality, increasing scale and pursuing new growth initiatives. The modest premium of both competing offers to SPH’s historical long-term multiples and share prices suggests that there is room for Keppel to bump its offer and start a bidding war. </p></div>

Today, Singapore Press Holdings (SPH SP) announced a competing privatisation offer from Cuscaden at S$2.10 cash per SPH share, which is a 40.0% premium to the share price of S$1.50 on 30 March 2021 (announcement of SPH’s strategic review), an 11.7% premium to the share price of S$1.88 on 30 July (last trading day prior to Keppel Corp (KEP SP)’s offer) and a 5.5% premium to the share price of S$1.99 on 28 October (last close prior to the trading halt). As discussed in SPH’s Privatisation by Keppel, on 2 August, SPH announced a privatisation offer from Keppel. The transaction involves Keppel offering S$0.668 cash per SPH share and 0.596 Keppel REIT units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT units per SPH share. Based on the last close price of Keppel REIT (KREIT SP) and SPH REIT (SPHREIT SP), the total consideration is S$2.104 per SPH share, a whisker above Cuscaden’s all-cash offer.  The two privatisation proposals are the culmination of the SPH’s strategic review to unlock shareholder value. The strategic review commenced with the announcement of the media business restructuring announced on 6 May. Shareholder approval for the media business restructuring was obtained on 10 September and is expected to be completed in December. While Cuscaden’s offer is broadly similar in value to Keppel’s offer, Cuscaden’s offer may be more appealing particularly to minorities. Cuscaden’s offer has greater certainty of value as it is all cash, eliminates the risk of changing REIT unit prices (Keppel REIT and SPH REIT) and does any require further shareholders' approval on the part of Cuscaden (Keppel’s offer requires approval from Keppel shareholders). Cuscaden’s offer will also not be reduced by the S$34 million break fee payable to Keppel. SPH responded to Cuscaden’s offer by stating that it is "not a firm offer" and it has "not entered into any definitive or binding agreement" with Cuscaden. Keppel responded to Cuscaden’s offer by stating that “we are reviewing the matter and make an announcement at an appropriate time.”In the event of a competing offer, Keppel has a switch option to proceed with the acquisition by way of an offer in lieu of proceeding with the acquisition by way of the scheme. We previously noted that the acquisition of SPH aligns with Keppel’s Vision 2030 of improving earnings quality, increasing scale and pursuing new growth initiatives. The modest premium of both competing offers to SPH’s historical long-term multiples and share prices suggests that there is room for Keppel to bump its offer and start a bidding war. 

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

Hotel Properties Limited / Equity Bottom-Up

<div><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></div>
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<p>Company Update</p>
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<h3>Hotel Properties Limited</h3>
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<p><strong>COMPANY DESCRIPTION</strong><br><span style="font-size: var(--content-font-size);">Hotel Properties Limited and its subsidiaries (collectively defined herein as HPL) have principal business activities relating to hotel ownership, management &amp; operation, property development and investment holding.</span></p>
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<p><strong>SUMMARY</strong><br>For the half-year ended 30 June 2021 (1H2021), HPL reported a 17.2% year-on-year (y-o-y) increase in revenue to S$169.6 million from S$144.8 million, largely due to improved hotel revenue and rental income. Cost of sales increased by 1.6% y-o-y to S$150.8 million as revenue rose. As a result, gross profit amounted to S$18.8 million for the period compared to a loss of S$3.7 million in 1H2020. During the period, administrative expenses fell by 16.0% y-o-y to S$22.9 million while finance costs increased by 1.8% y-o-y to S$16.8 million. Other operating expenses dropped by 90.7% y-o-y to S$3.4 million, mainly due to the absence of S$33.8 million in net fair value losses in investments which were recorded in 1H2020. Meanwhile, a loss of S$18.7 million from share of results of associates &amp; jointly controlled entities was recorded for the period, compared to a profit of S$4.2 million in 1H2020. This was mainly attributable to losses incurred by hotel owning associates &amp; jointly controlled entities due to the impact of Covid-19 and given that residential apartments from Holland Park Villas and Burlington Gate in London were fully sold in 2020. Consequently, HPL reported a net loss attributable to ordinary shareholders of S$29.3 million after adjusting for non- controlling interests and distribution to perpetual capital securities. Accordingly, loss per share amounted to 5.62 cents. No dividend was declared for the period as in 1H2020.</p>
<p><strong>RECOMMENDATION</strong><br>Based on its reported net asset value (NAV) per share of S$3.26 as at 30 June 2021, HPL is currently trading at P/NAV of 1.02x. We note that HPL’s hotels (excluding those held by associates &amp; jointly controlled entities) are classified under Property, Plant &amp; Equipment (PPE) on its balance sheet and recorded at historical cost without revaluation. To adjust the hotels’ valuation to reflect current market conditions, we performed a revaluation of several of HPL’s hotels classified as PPE. Based on our revaluation, we derived a revalued NAV (RNAV) per share of S$5.48, which would imply a P/NAV of 0.61x at the current share price of S$3.330. This is lower than the P/NAV of 1.02x based on the reported NAV per share of S$3.26. We believe this may suggest that HPL could be undervalued at the current share price. Meanwhile, our peer comparison results show that HPL’s P/NAV of 0.61x, based on the RNAV per share of S$5.48, is lower than the peers’ average P/NAV of 0.67x. Based on a relative valuation approach, we estimate a target price of S$3.672 if HPL were to trade at the peers’ average P/NAV of 0.67x. This estimated target price represents a 10.3% upside from the current share price of S$3.330. We believe that further upside potential is supported by the possibility of a takeover offer for HPL. Given the above, we will maintain a buy recommendation on HPL.</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.


Company Update

Hotel Properties Limited

COMPANY DESCRIPTION Hotel Properties Limited and its subsidiaries (collectively defined herein as HPL) have principal business activities relating to hotel ownership, management &amp; operation, property development and investment holding.

SUMMARY For the half-year ended 30 June 2021 (1H2021), HPL reported a 17.2% year-on-year (y-o-y) increase in revenue to S$169.6 million from S$144.8 million, largely due to improved hotel revenue and rental income. Cost of sales increased by 1.6% y-o-y to S$150.8 million as revenue rose. As a result, gross profit amounted to S$18.8 million for the period compared to a loss of S$3.7 million in 1H2020. During the period, administrative expenses fell by 16.0% y-o-y to S$22.9 million while finance costs increased by 1.8% y-o-y to S$16.8 million. Other operating expenses dropped by 90.7% y-o-y to S$3.4 million, mainly due to the absence of S$33.8 million in net fair value losses in investments which were recorded in 1H2020. Meanwhile, a loss of S$18.7 million from share of results of associates &amp; jointly controlled entities was recorded for the period, compared to a profit of S$4.2 million in 1H2020. This was mainly attributable to losses incurred by hotel owning associates &amp; jointly controlled entities due to the impact of Covid-19 and given that residential apartments from Holland Park Villas and Burlington Gate in London were fully sold in 2020. Consequently, HPL reported a net loss attributable to ordinary shareholders of S$29.3 million after adjusting for non- controlling interests and distribution to perpetual capital securities. Accordingly, loss per share amounted to 5.62 cents. No dividend was declared for the period as in 1H2020.
RECOMMENDATION Based on its reported net asset value (NAV) per share of S$3.26 as at 30 June 2021, HPL is currently trading at P/NAV of 1.02x. We note that HPL’s hotels (excluding those held by associates &amp; jointly controlled entities) are classified under Property, Plant &amp; Equipment (PPE) on its balance sheet and recorded at historical cost without revaluation. To adjust the hotels’ valuation to reflect current market conditions, we performed a revaluation of several of HPL’s hotels classified as PPE. Based on our revaluation, we derived a revalued NAV (RNAV) per share of S$5.48, which would imply a P/NAV of 0.61x at the current share price of S$3.330. This is lower than the P/NAV of 1.02x based on the reported NAV per share of S$3.26. We believe this may suggest that HPL could be undervalued at the current share price. Meanwhile, our peer comparison results show that HPL’s P/NAV of 0.61x, based on the RNAV per share of S$5.48, is lower than the peers’ average P/NAV of 0.67x. Based on a relative valuation approach, we estimate a target price of S$3.672 if HPL were to trade at the peers’ average P/NAV of 0.67x. This estimated target price represents a 10.3% upside from the current share price of S$3.330. We believe that further upside potential is supported by the possibility of a takeover offer for HPL. Given the above, we will maintain a buy recommendation on HPL.





(Non-SGX Report) Company Update: Hotel Properties Limited

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/hotel-properties-ltd" target="_blank" data-smartkarma-citation="entities:5801" rel="noopener">Hotel Properties Limited (HPL SP)</a> and Six Senses to collaborate on second resort in Maldives</h3><p>HPL and Six Senses are collaborating for the second time on a property located on the Lhaviyani Atoll in Maldives. HPL had acquired the resort, known as Kanuhura Maldives, from Mauritian hotel group Sun Resorts earlier this year. The property will adopt the Six Senses brand in late 2022 and will be a sister resort to Six Senses Laamu, HPL and Six Senses’ first collaboration. Currently, HPL owns 41 hotels and resorts in 15 countries, with eight of them located in the Maldives. Under the Six Senses brand, Kanuhura, which is a 40-minute seaplane flight from the main international airport on Malé, will offer 80 private overwater, beach, and spacious family villas.</p>

SingaporeHotel Properties Limited (HPL SP) and Six Senses to collaborate on second resort in MaldivesHPL and Six Senses are collaborating for the second time on a property located on the Lhaviyani Atoll in Maldives. HPL had acquired the resort, known as Kanuhura Maldives, from Mauritian hotel group Sun Resorts earlier this year. The property will adopt the Six Senses brand in late 2022 and will be a sister resort to Six Senses Laamu, HPL and Six Senses’ first collaboration. Currently, HPL owns 41 hotels and resorts in 15 countries, with eight of them located in the Maldives. Under the Six Senses brand, Kanuhura, which is a 40-minute seaplane flight from the main international airport on Malé, will offer 80 private overwater, beach, and spacious family villas.

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/ascendas-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:39" rel="noopener">Ascendas Real Estate Investment Trust (AREIT SP)</a> to divest three properties in Australia for ~4.1% NPI yield (BUY; TP S$3.55/unit)</h3><p>AREIT will divest three logistics properties in Australia for a total of AUD125.1m (S$128.7m). The sale price is ~16.8% higher than the total market valuations of the properties of AUD101.1m as at 31Dec20. The divestments are expected to be completed by 3Q21. AREIT had entered into two separate agreements with unrelated purchasers for the sale of two logistics properties (82 Noosa Street and 62 Stradbroke Street) in Brisbane; and one logistics property (1314 Ferntree Gully Road) in Melbourne. Assuming the divestments were completed on 1Jan20, the annualised proforma impact on AREIT’s NPI would have been a decrease of S$5.1m and DPU would have fallen by S$0.075c for FY20. Net proceeds after divestment costs are expected to be S$124.0m. If the net proceeds were used to repay AREIT’s borrowings as at 31Mar, its gearing will be reduced from 38% to around 37.5%. Post-divestment, AREIT will own 95 properties in Singapore, 34 properties in Australia, 30 properties in the US and 49 properties in the UK/Europe. </p><table class="table table-striped"><tbody><tr><td style="width: 59.3438px;"><p>Asset</p></td><td style="width: 48.4375px;"><p>Asset Type</p></td><td style="width: 45.9375px;"><p>FY20 Gross Revenue</p></td><td style="width: 59.5781px;"><p>NLA as at 31Dec20</p></td><td style="width: 59.5625px;"><p>Occupancy as at 31Dec20</p></td><td style="width: 60.6406px;"><p>Acquisition Date</p></td><td style="width: 60.6406px;"><p>Acquisition Price</p></td><td style="width: 101.734px;"><p>Valuation as at 31Dec20</p><p>(A$1.000:S$0.980)</p></td><td style="width: 94.9219px;"><p>Sale Price</p><p>(A$1.00:S$1.029)</p></td><td style="width: 63.7188px;"><p>Buyer</p></td></tr><tr><td style="width: 59.3438px;"><p>82 Noosa Street, Brisbane, Australia</p></td><td style="width: 48.4375px;"><p>Logistics</p></td><td style="width: 45.9375px;"><p>S$3.3m</p></td><td style="width: 59.5781px;"><p>38,000sqm</p></td><td style="width: 59.5625px;"><p>100%</p></td><td style="width: 60.6406px;"><p>Oct15</p></td><td style="width: 60.6406px;"><p>S$66.0m</p></td><td style="width: 101.734px;"><p>A$53.0m (S$51.9m)</p></td><td rowspan="2" style="width: 94.9219px;"><p>A$101.6m (S$104.5m)</p><p>or A$1,624psqm</p><p></p></td><td rowspan="2" style="width: 63.7188px;"><p>SIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners</p></td></tr><tr><td style="width: 59.3438px;"><p>62 Stradbroke Street, Brisbane, Australia</p></td><td style="width: 48.4375px;"><p>Logistics</p></td><td style="width: 45.9375px;"><p>S$2.6m</p></td><td style="width: 59.5781px;"><p>24,555sqm</p></td><td style="width: 59.5625px;"><p>100%</p></td><td style="width: 60.6406px;"><p>Oct15</p></td><td style="width: 60.6406px;"><p>S$35.9m</p></td><td style="width: 101.734px;"><p>A$37.4m (S$36.7m)</p></td></tr><tr><td style="width: 59.3438px;"><p>1314 Ferntree Gully Road, Melbourne, Australia</p></td><td style="width: 48.4375px;"><p>Logistics</p></td><td style="width: 45.9375px;"><p>S$0.5m</p></td><td style="width: 59.5781px;"><p>16,134sqm</p></td><td style="width: 59.5625px;"><p>100%</p></td><td style="width: 60.6406px;"><p>Jun18</p></td><td style="width: 60.6406px;"><p>S$16.4m</p></td><td style="width: 101.734px;"><p>A$16.6m (S$16.3m)</p></td><td style="width: 94.9219px;"><p>A$23.5m (S$24.2m)</p><p>or A$1,500psqm</p></td><td style="width: 63.7188px;"><p>China Tube Pty Ltd and Haelram Pty Ltd</p></td></tr><tr><td colspan="2" style="width: 128.781px;"><p>TOTAL</p></td><td style="width: 45.9375px;"><p>S$6.4m</p></td><td style="width: 59.5781px;"><p> </p></td><td style="width: 59.5625px;"><p> </p></td><td style="width: 60.6406px;"><p> </p></td><td style="width: 60.6406px;"><p>S$118.3m</p></td><td style="width: 101.734px;"><p>A$107.1m (S$104.9m)</p></td><td style="width: 94.9219px;"><p>A$125.1m (S$128.7m)</p></td><td style="width: 63.7188px;"><p> </p></td></tr></tbody></table><p>Comments:</p><ul><li>Taking reference from FY20 AUS Portfolio NPI Margin of 79.0%, the blended NPI yield based on S$128.7m Sale Price would be ~3.9%. Note that comparing the exchange rate adopted for Sale Price vs. Valuation as at 31Dec20, the AUD has strengthen ~5%. Using the 31Dec20 exchange rate, the blended NPI yield would be ~4.1%. Together with its recent divestment of 11 Changi North Way (at S$16.0m), AREIT would have a total divestment proceeds S$144.7m and booking total S$33.8m divestment gain</li><li>Moving forward, we expect AREIT’s DPU to be propelled by both organic and inorganic growth while it reconstitute its portfolio. Notwithstanding the S$1.19bn worth of acquisitions in 1Q21 (estimated to be 1.5% DPU accretive) and the acquisition of remaining 75% of Galaxis (estimated to be 0.40% DPU accretive), the new BTS business park development for Grab as well as UBIX redevelopment (formerly 25 &amp; 27 Ubi Road 4) should start contributing by 2H21 (expected to add S$14.2m to NPI on a full-year basis at 6.4%-7.5% NPI yields)</li><li>We believe AREIT remains in a virtuous cycle of growth. The S$420.0m EFR exercise in 4May21 as well as repayment debt utilizing the divestment proceeds should lower its gearing. With greater financial flexibility, relatively low cost of equity and low interest rate environment, AREIT has further scope for inorganic growth. We have a BUY rating with TP of S$3.55/Unit.</li></ul>

SingaporeAscendas Real Estate Investment Trust (AREIT SP) to divest three properties in Australia for ~4.1% NPI yield (BUY; TP S$3.55/unit)AREIT will divest three logistics properties in Australia for a total of AUD125.1m (S$128.7m). The sale price is ~16.8% higher than the total market valuations of the properties of AUD101.1m as at 31Dec20. The divestments are expected to be completed by 3Q21. AREIT had entered into two separate agreements with unrelated purchasers for the sale of two logistics properties (82 Noosa Street and 62 Stradbroke Street) in Brisbane; and one logistics property (1314 Ferntree Gully Road) in Melbourne. Assuming the divestments were completed on 1Jan20, the annualised proforma impact on AREIT’s NPI would have been a decrease of S$5.1m and DPU would have fallen by S$0.075c for FY20. Net proceeds after divestment costs are expected to be S$124.0m. If the net proceeds were used to repay AREIT’s borrowings as at 31Mar, its gearing will be reduced from 38% to around 37.5%. Post-divestment, AREIT will own 95 properties in Singapore, 34 properties in Australia, 30 properties in the US and 49 properties in the UK/Europe. AssetAsset TypeFY20 Gross RevenueNLA as at 31Dec20Occupancy as at 31Dec20Acquisition DateAcquisition PriceValuation as at 31Dec20(A$1.000:S$0.980)Sale Price(A$1.00:S$1.029)Buyer82 Noosa Street, Brisbane, AustraliaLogisticsS$3.3m38,000sqm100%Oct15S$66.0mA$53.0m (S$51.9m)A$101.6m (S$104.5m)or A$1,624psqmSIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners62 Stradbroke Street, Brisbane, AustraliaLogisticsS$2.6m24,555sqm100%Oct15S$35.9mA$37.4m (S$36.7m)1314 Ferntree Gully Road, Melbourne, AustraliaLogisticsS$0.5m16,134sqm100%Jun18S$16.4mA$16.6m (S$16.3m)A$23.5m (S$24.2m)or A$1,500psqmChina Tube Pty Ltd and Haelram Pty LtdTOTALS$6.4m   S$118.3mA$107.1m (S$104.9m)A$125.1m (S$128.7m) Comments:Taking reference from FY20 AUS Portfolio NPI Margin of 79.0%, the blended NPI yield based on S$128.7m Sale Price would be ~3.9%. Note that comparing the exchange rate adopted for Sale Price vs. Valuation as at 31Dec20, the AUD has strengthen ~5%. Using the 31Dec20 exchange rate, the blended NPI yield would be ~4.1%. Together with its recent divestment of 11 Changi North Way (at S$16.0m), AREIT would have a total divestment proceeds S$144.7m and booking total S$33.8m divestment gainMoving forward, we expect AREIT’s DPU to be propelled by both organic and inorganic growth while it reconstitute its portfolio. Notwithstanding the S$1.19bn worth of acquisitions in 1Q21 (estimated to be 1.5% DPU accretive) and the acquisition of remaining 75% of Galaxis (estimated to be 0.40% DPU accretive), the new BTS business park development for Grab as well as UBIX redevelopment (formerly 25 &amp; 27 Ubi Road 4) should start contributing by 2H21 (expected to add S$14.2m to NPI on a full-year basis at 6.4%-7.5% NPI yields)We believe AREIT remains in a virtuous cycle of growth. The S$420.0m EFR exercise in 4May21 as well as repayment debt utilizing the divestment proceeds should lower its gearing. With greater financial flexibility, relatively low cost of equity and low interest rate environment, AREIT has further scope for inorganic growth. We have a BUY rating with TP of S$3.55/Unit.

ASEAN Builder's Scoop (4Jun21) - AREIT Divesting 3 AUS Props for ~4.1% Yield

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<p>Initiating Coverage</p>
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<h3>REAL ESTATE EQUITY RESEARCH</h3>
<h2>Hotel Properties Limited</h2>
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<p><strong>COMPANY DESCRIPTION</strong><br>Hotel Properties Limited (HPL or the company) is a mainboard-listed company on the Singapore Exchange. The principal business activities of HPL and its subsidiaries (the Group) include hotel ownership, management &amp; operation, property development and investment holding.</p>
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<p><strong>SUMMARY</strong><br>Owing to the COVID-19 pandemic, the Group’s business has been severely impacted. Total revenue declined by close to 50% in the first half of 2020 mainly due to lower contributions by the Group’s hotel division. A loss per share of 15.12 cents was reported for the period. While there have been signs of recovery in hotel markets, the Group’s performance is expected to underperform in 2020. Nevertheless, recent positive developments on vaccine treatments provide optimism on a stronger recovery in 2021 as international travel gradually resumes. The main concern is that it would take time for international travel to fully recover. In the longer-term, the Group’s exposure to popular tourist destinations such as Maldives and Bali could prove advantageous for the recovery of its hotel division. Further, the Group’s mixed-used developments in London have the potential to underpin earnings in the future.</p>
<p><strong>RECOMMENDATION</strong><br>We derived a RNAV of S$5.32 per share based on a revaluation of some of the Group’s assets. This translates to a P/B of 0.57x which is lower than 0.84x based on the Group’s reported NAV per share of S$3.59. Based on our analysis of HPL’s takeover offer in 2014, we adopted a 30.3% discount on our RNAV per share of S$5.32 to estimate a target price of S$3.71. This target price is a 22.8% upside to the current price of S$3.02. This could be a conservative estimate, given that our RNAV per share of S$5.32 only accounts for the revaluation of several of the Group’s hotels which are classified as PPE. We believe the upside is justified by a potential redevelopment of the Group’s assets in the Orchard Road area. This could lead to a new takeover offer at an attractive acquisition cost of S$3.93 (inclusive of 30% premium from the current price). In the medium term, it could achieve a conservative price of S$4.29. Further, share acquisitions by HPL’s major controlling shareholder also reflect positively on the company’s value. While we expect the Group’s financial performance to be negatively impacted in 2020 and 2021, we are positive on the longer-term outlook for its business performance. Given the above consideration, we issue a buy recommendation on HPL and our target price is S$3.71 per share.</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.
Initiating Coverage

REAL ESTATE EQUITY RESEARCH
Hotel Properties Limited

COMPANY DESCRIPTION Hotel Properties Limited (HPL or the company) is a mainboard-listed company on the Singapore Exchange. The principal business activities of HPL and its subsidiaries (the Group) include hotel ownership, management &amp; operation, property development and investment holding.





SUMMARY Owing to the COVID-19 pandemic, the Group’s business has been severely impacted. Total revenue declined by close to 50% in the first half of 2020 mainly due to lower contributions by the Group’s hotel division. A loss per share of 15.12 cents was reported for the period. While there have been signs of recovery in hotel markets, the Group’s performance is expected to underperform in 2020. Nevertheless, recent positive developments on vaccine treatments provide optimism on a stronger recovery in 2021 as international travel gradually resumes. The main concern is that it would take time for international travel to fully recover. In the longer-term, the Group’s exposure to popular tourist destinations such as Maldives and Bali could prove advantageous for the recovery of its hotel division. Further, the Group’s mixed-used developments in London have the potential to underpin earnings in the future.
RECOMMENDATION We derived a RNAV of S$5.32 per share based on a revaluation of some of the Group’s assets. This translates to a P/B of 0.57x which is lower than 0.84x based on the Group’s reported NAV per share of S$3.59. Based on our analysis of HPL’s takeover offer in 2014, we adopted a 30.3% discount on our RNAV per share of S$5.32 to estimate a target price of S$3.71. This target price is a 22.8% upside to the current price of S$3.02. This could be a conservative estimate, given that our RNAV per share of S$5.32 only accounts for the revaluation of several of the Group’s hotels which are classified as PPE. We believe the upside is justified by a potential redevelopment of the Group’s assets in the Orchard Road area. This could lead to a new takeover offer at an attractive acquisition cost of S$3.93 (inclusive of 30% premium from the current price). In the medium term, it could achieve a conservative price of S$4.29. Further, share acquisitions by HPL’s major controlling shareholder also reflect positively on the company’s value. While we expect the Group’s financial performance to be negatively impacted in 2020 and 2021, we are positive on the longer-term outlook for its business performance. Given the above consideration, we issue a buy recommendation on HPL and our target price is S$3.71 per share.








(Non-SGX Report) Real Estate Equity Research: Hotel Properties Limited

Singapore

Hotel Properties Limited, through its subsidiaries, operates and manages hotels. The Company also operates restaurants and retails and distributes food and fashion merchandise.  In addition, Hotel Properties trades shares, develops and invests in properties, hotels, and resorts.

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