Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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Kenedix Retail REIT / Equity Capital Markets

Kenedix Retail plans to raise JPY17bn (US$155 million) in order to fund its acquisition of seven additional properties worth JPY27.1bn. The deal scores a positive score on our framework as valuations appear reasonable, the acquisition will be accretive to earnings, past deal has done well and recent price momentum remains strong. <h2>Deal overview</h2><ul>
<li>Company Name: Kenedix Retail REIT Corp</li>
<li>Ticker: 3453 JP Equity</li>
<li>Primary placement -Global Offering</li>
<li>Settlement is longer than normal, with stock settling on 21…</li>
</ul>

Kenedix Retail plans to raise JPY17bn (US$155 million) in order to fund its acquisition of seven additional properties worth JPY27.1bn. The deal scores a positive score on our framework as valuations appear reasonable, the acquisition will be accretive to earnings, past deal has done well and recent price momentum remains strong. Deal overview
Company Name: Kenedix Retail REIT Corp
Ticker: 3453 JP Equity
Primary placement -Global Offering
Settlement is longer than normal, with stock settling on 21…


Kenedix Retail REIT - IPO and past Deal Has Done Well, Valuation Remains Undemanding

The deal scores well on our Momentum Adjusted Deal Stag Framework primarily based on:<ul><li>Momentum of the past listings in the sector has been outstanding with an average return of 25.9% at open and 65% over the year</li><li>The REIT is sponsored by Kenedix, which has a strong track record with earlier listings. In addition, there are three alliance companies besides Kenedix helping the REIT with&nbsp;acquisitions&nbsp;and property management</li><li>At a&nbsp;stabilized&nbsp;yield of ~3.9% Kenedix REIT offers a better spread over its peers who are trading at average 3.3% yield. Although arguably Kenedix REIT will have a smaller market cap, thus, it should trade at a discount to larger peers. However, we see space for upside given the strong sponsor and unique exposure.</li><li>There are no retail REITs in Japan offering exposures to&nbsp;neighborhood&nbsp;and community shopping&nbsp;centers&nbsp;accounting for more than 50% of portfolio assets. Kenedix Retail REIT aims to maintain over 80% of its portfolio in this sub-segment of the retail market, as this sub-segment remains more shielded from e-commerce given its highly daily need shopping exposure.&nbsp;</li><li>Post the institutional road show the pricing range has been set 10-15% higher than the initial indications, thus, signalling strong investor demand</li></ul>

The deal scores well on our Momentum Adjusted Deal Stag Framework primarily based on:Momentum of the past listings in the sector has been outstanding with an average return of 25.9% at open and 65% over the yearThe REIT is sponsored by Kenedix, which has a strong track record with earlier listings. In addition, there are three alliance companies besides Kenedix helping the REIT with&nbsp;acquisitions&nbsp;and property managementAt a&nbsp;stabilized&nbsp;yield of ~3.9% Kenedix REIT offers a better spread over its peers who are trading at average 3.3% yield. Although arguably Kenedix REIT will have a smaller market cap, thus, it should trade at a discount to larger peers. However, we see space for upside given the strong sponsor and unique exposure.There are no retail REITs in Japan offering exposures to&nbsp;neighborhood&nbsp;and community shopping&nbsp;centers&nbsp;accounting for more than 50% of portfolio assets. Kenedix Retail REIT aims to maintain over 80% of its portfolio in this sub-segment of the retail market, as this sub-segment remains more shielded from e-commerce given its highly daily need shopping exposure.&nbsp;Post the institutional road show the pricing range has been set 10-15% higher than the initial indications, thus, signalling strong investor demand

Kenedix Retail Reit Corp (3453 JP) - Unique exposure to daily neccessity shopping - Take the deal

Japan

Kenedix Retail REIT Corporation is a real estate investment trust (REIT) which mainly invests in real estate and securitized real estate products. The Company invests mainly in commercial properties which are shopping centers, and super markets in Tokyo metropolitan, Osaka, Nagoya and Fukuoka area.

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Kenedix Retail REIT (3453 JP)

Kenedix Retail REIT - IPO and past Deal Has Done Well, Valuation Remains Undemanding

Kenedix Retail plans to raise JPY17bn (US$155 million) in order to fund its acquisition of seven additional properties worth JPY27.1bn. The deal...

Sumeet Singh

Kenedix Retail Reit Corp (3453 JP) - Unique exposure to daily neccessity shopping - Take the deal

The deal scores well on our Momentum Adjusted Deal Stag Framework primarily based on: Momentum of the past listings in the sector has been...

Sumeet Singh

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