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> 1H22 Business Updates – No distributions in 1H22, loan facilities extended until 31Dec22</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> 1H22 DPU -32.1% YoY; Dragged by one-off refinancing cost and forex losses, though occupancy remains robust</li><li><a href="https://www.smartkarma.com/entities/uol-group-ltd" target="_blank" data-smartkarma-citation="entities:142" rel="noopener">UOL Group (UOL SP)</a> 1H22 PATMI +306% YoY; Robust residential, retail, and hotel operations offset weaknesses in office portfolio</li></ul>

Dasin Retail Trust (DASIN SP) 1H22 Business Updates – No distributions in 1H22, loan facilities extended until 31Dec22BHG Retail REIT (BHGREIT SP) 1H22 DPU -32.1% YoY; Dragged by one-off refinancing cost and forex losses, though occupancy remains robustUOL Group (UOL SP) 1H22 PATMI +306% YoY; Robust residential, retail, and hotel operations offset weaknesses in office portfolio

ASEAN Builder's Scoop (15Aug22) - DASIN Defers Distributions, Extends Loan Facilities

<ul><li><a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666" rel="noopener">Apple Inc (AAPL US)</a> acquires UE BizHub Central at Ang Mo Kio for S$55m from United Engineers</li><li><a href="https://www.smartkarma.com/entities/keppel-dc-reit" target="_blank" data-smartkarma-citation="entities:85" rel="noopener">Keppel DC REIT (KDCREIT SP)</a> looks to pick up more Asia-Pac Data Centre hubs</li><li><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> to reap S$29m gain from London hotel sale</li></ul>

Apple Inc (AAPL US) acquires UE BizHub Central at Ang Mo Kio for S$55m from United EngineersKeppel DC REIT (KDCREIT SP) looks to pick up more Asia-Pac Data Centre hubsHotel Properties Limited (HPL SP) to reap S$29m gain from London hotel sale

ASEAN Builder's Scoop (11Apr22) - AAPL Buys UE Bizhub Central for S$55m

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)

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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.

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Equity Bottom-Up

Hotel Properties Limited / Equity Bottom-Up

<div>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.</div>
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Company Update
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<h3>Hotel Properties Limited</h3>
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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.
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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.
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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

<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>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.

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>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. <table class="table table-striped"><tbody><tr><td style="width: 59.3438px;">Asset</td><td style="width: 48.4375px;">Asset Type</td><td style="width: 45.9375px;">FY20 Gross Revenue</td><td style="width: 59.5781px;">NLA as at 31Dec20</td><td style="width: 59.5625px;">Occupancy as at 31Dec20</td><td style="width: 60.6406px;">Acquisition Date</td><td style="width: 60.6406px;">Acquisition Price</td><td style="width: 101.734px;">Valuation as at 31Dec20(A$1.000:S$0.980)</td><td style="width: 94.9219px;">Sale Price(A$1.00:S$1.029)</td><td style="width: 63.7188px;">Buyer</td></tr><tr><td style="width: 59.3438px;">82 Noosa Street, Brisbane, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$3.3m</td><td style="width: 59.5781px;">38,000sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Oct15</td><td style="width: 60.6406px;">S$66.0m</td><td style="width: 101.734px;">A$53.0m (S$51.9m)</td><td rowspan="2" style="width: 94.9219px;">A$101.6m (S$104.5m)or A$1,624psqm</td><td rowspan="2" style="width: 63.7188px;">SIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners</td></tr><tr><td style="width: 59.3438px;">62 Stradbroke Street, Brisbane, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$2.6m</td><td style="width: 59.5781px;">24,555sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Oct15</td><td style="width: 60.6406px;">S$35.9m</td><td style="width: 101.734px;">A$37.4m (S$36.7m)</td></tr><tr><td style="width: 59.3438px;">1314 Ferntree Gully Road, Melbourne, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$0.5m</td><td style="width: 59.5781px;">16,134sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Jun18</td><td style="width: 60.6406px;">S$16.4m</td><td style="width: 101.734px;">A$16.6m (S$16.3m)</td><td style="width: 94.9219px;">A$23.5m (S$24.2m)or A$1,500psqm</td><td style="width: 63.7188px;">China Tube Pty Ltd and Haelram Pty Ltd</td></tr><tr><td colspan="2" style="width: 128.781px;">TOTAL</td><td style="width: 45.9375px;">S$6.4m</td><td style="width: 59.5781px;"> </td><td style="width: 59.5625px;"> </td><td style="width: 60.6406px;"> </td><td style="width: 60.6406px;">S$118.3m</td><td style="width: 101.734px;">A$107.1m (S$104.9m)</td><td style="width: 94.9219px;">A$125.1m (S$128.7m)</td><td style="width: 63.7188px;"> </td></tr></tbody></table>Comments:<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

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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Hotel Properties Limited (HPL SP)

ASEAN Builder's Scoop (15Aug22) - DASIN Defers Distributions, Extends Loan Facilities

BHGREIT dragged by one-off costs; UOL hotel ops leading the way; ART buys 9 props with +2.8% DPU accretion; STRTR divvy specie in ESR shares; ALI...

SCCM Asia Research

ASEAN Builder's Scoop (11Apr22) - AAPL Buys UE Bizhub Central for S$55m

KDCREIT to pick up more APAC DC hubs; HPL exits Hilton London; Vista REIT strong pipeline from VLL; SENTRAL Klang Valley office under pressure

SCCM Asia Research

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

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 (17Sep21)

HPL/Six Senses collaborates again in Maldives; Condo/HDB rents up 8-9% YTD; TRCB issues Sukuk perps; BKK prop market set to recover in 2022;...

SCCM Asia Research

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

AREIT divesting 3 AUS props for ~4.1% yield; CIT plans UK-backed SREIT IPO; Hilton Orchard undergoing rebranding; SG bungalow prices reaching new...

SCCM Asia Research

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