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.

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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

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As far back as he can remember, the twin touchstones of Paul Tham’s life have been wisdom and learning. 
Growing up, a familiar mantra was one expounded by the Book of Proverbs in the Bible – “Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding”. 
“My godfather taught me the importance of wisdom and understanding,” the CEO of the manager of SGX-listed Keppel REIT recalled. “Both are tied to two key skills – the willingness to learn, as well as the ability to learn continuously – and involve lots of hard work.” 
Driven by a passion to build and create, Tham began his career as a structural engineer in New York, after graduating with a Bachelor of Science degree in Civil &amp; Environmental Engineering from Cornell University. From for-profit buildings, he moved to non-profit work, which included the construction of school and church buildings. 
“I was picking up different skills every day,” recalled Tham, who also holds a Masters in Business Administration from Singapore Management University. 
“In one of the volunteer projects to build a school in upstate New York, we ended up doing most of the construction work ourselves – driving forklifts and operating small excavators. That was one of the most satisfying projects I was involved in.” 
His next stop – Bain &amp; Company. In his role as management consultant, Tham worked with multinational companies in Asia Pacific on a wide range of functions, including financial performance management and growth strategies. There, he experienced a steep learning curve. 
“Management consulting teaches you to learn continuously. You’re working on new projects, reading research reports, and asking questions all the time. You have to work hard to pick up knowledge on new industries and markets constantly,” he added. 
“And the fastest way to learn is to tap on the expertise and experience of others. The advantage is immediate – you gain wisdom from someone else’s experience and learning, which you can then apply to your own life and work.” 
In 2014, Tham joined Keppel Corporation’s Group Strategy &amp; Development unit, where he played a key role in the formation of Keppel Capital, eventually becoming Keppel Capital’s Chief Financial Officer. The 38-year-old was appointed Deputy Chief Executive Officer of the manager of Keppel REIT in 2018, and assumed his current appointment as CEO a year later. Portfolio Optimisation 
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts across the region. It has the objective of generating stable income and long-term growth for unitholders by owning and investing in a portfolio of quality income-producing commercial real estate and real estate-related assets in Singapore and pan-Asia. 
The REIT has assets under management of approximately S$8 billion in Singapore, the key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul in South Korea. 
Keppel REIT is sponsored by Keppel Land Ltd, and managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital – Asia’s premier asset manager with a diversified, global portfolio in real estate, infrastructure and data centre properties. 
During his two years in Keppel REIT, Tham has implemented key strategies to put the REIT on a steady growth trajectory. 
The first is portfolio optimisation, which allows the REIT to achieve long-term sustainable returns for its unitholders. This includes capturing value through the divestment of lower yielding assets, which in turn increases the manager’s financial flexibility to fund growth through reinvestments, continue its unit buyback programme, distribute capital gains, or pare down debt. 
“Portfolio optimisation for us is really to improve income resilience and portfolio yield. Over the last two years, we’ve divested about S$1.1 billion worth of assets,” Tham said, pointing to the paring of a 20% stake in Ocean Financial Centre in December 2018, the purchase of Seoul’s T Tower in May 2019 – marking the REIT’s first foray into South Korea – and the sale of Bugis Junction Towers last November. 
“The focus is to enhance DPU, and if you look at our recent results, it seems to be working, with Keppel REIT seeing the first year-on-year increase in DPU in 2019 after five years of decline,” he noted, referring to distributions per unit, a metric closely watched by unitholders. 
For the year ended 31 December 2019, Keppel REIT’s DPU edged higher to 5.58 Singapore cents from 5.56 cents the previous year. Between 2013 and 2018, its DPU had registered year-on-year declines. 
The second prong of Tham’s strategy involves boosting the REIT’s capital efficiency by managing both debt and equity. In mid-2018, Keppel REIT became the first REIT in Singapore to run a DPU-accretive, unit buyback program. As at end-2019, the REIT had purchased and cancelled 95.3 million units. 
“We’ve seen the benefits in our first-half 2020 financial results, where distributable income was largely similar, but DPU rose due to a smaller unit base.” 
The REIT has also reduced its overall cost of debt. “We’ve restructured some of our loans, launched convertible bonds, all in an effort to push down borrowing cost,” he added. 
As at 30 June 2020, all the REIT’s 2020 loans have been refinanced. All-in interest rate was also lower at 2.48% per annum versus 2.86% for the same period last year, while aggregate leverage was 36.3%, with a weighted average term to maturity of 3.6 years. Interest cover stood at 3.5 times, with 79% of its borrowings pegged to fixed rates. Resilient and Stable 
Looking ahead, Keppel REIT will remain a Singapore-centric REIT, Tham said. About 80% of its assets under management (AUM) is in Singapore’s prime Central Business District (CBD). 
“There will be a shift over time as we raise our overseas exposure, such as in Australia and South Korea, but it will be marginal, for example, lifting it to 25%, or even 30%, from 20%.” 
And an overseas footprint has boosted resilience. “Investing in assets across Australia and South Korea enhances our ability to deliver sustainable returns over time through changing property cycles in these different markets,” he said. 
Australian leases, which tend to stretch five to 10 years versus Singapore’s three to five years, also provide added support. “These longer leases with annual rental escalations offer more stability, and increase the REIT’s ability to grow DPU, even if one market is experiencing a downcycle,” he added. 
Meanwhile, the coronavirus outbreak has created headwinds and offered meaningful lessons, Tham noted. 
“COVID-19 has been challenging for retail and hospitality assets, but for an office landlord like us with a small retail component, there’s been minimal impact,” he said. “Nonetheless, there’s a fair amount of uncertainty due to the global recession and rising geopolitical tensions, so our main focus is proactive engagement with our tenants.” 
At one end of the spectrum, technology-related tenants are still expanding, with their growth fuelled by digitalisation trends that accelerated in the wake of the pandemic. At the other end, hospitality and travel-related businesses are struggling. 
“From a leasing standpoint, we try to accommodate their requirements as much as possible – making sure additional space is available for those who need it, and being flexible on lease negotiations with others to retain tenants in our buildings.” 
As at 30 June 2020, Keppel REIT’s tenant support measures stood at an estimated S$12.5 million. These include the full pass-through of property tax rebates and cash grants from the Singapore government. It has also allowed S$1.6 million of rents to be deferred. 
Its portfolio performance remains bolstered by a high committed occupancy rate of 98.6%, as well as long weighted average lease expiry of about 4.6 years and 6.5 years for the overall portfolio and top 10 tenants respectively. For the first six months of 2020, the REIT had a tenant retention rate of 71%. Focus on Future-Proofing 
Looking ahead, future-proofing the REIT’s commercial spaces is key, Tham said. 
“We need to ensure our buildings have the best-in-class infrastructure, such as improving indoor air quality with advanced filtration systems, boosting standards of cleanliness, and using technology to reduce manpower requirements and human interactions,” he added. 
This can be seen from its robot – RoboGuard – that patrols the premises of Ocean Financial Centre to enforce safe-distancing measures. 
“We’re also harnessing technology and automation for other key areas, such as lifts, turnstiles and toilets, and exploring the use of contactless doors within our buildings.” 
Longer term, how tenants use their office space will also evolve, and Keppel REIT needs to stay ahead of such emerging trends, Tham said. 
“Physical offices will remain a necessity, although the form and functions of the office will evolve. Many firms will likely incorporate work-from-home protocols in their future planning. And employees and tenants will want more flexibility from their office space going forward,” he added. 
“Some companies may need less space, but many functions will still require space for social interaction, client engagements and collaborations, especially if you’re a customer-facing business or in the creative industry.” 
There may also be a reversal of densification. “Space for each employee may be increased to incorporate social distancing within an office layout, reversing the trend of higher density over the last two decades,” he added. 
The resulting impact on office demand, therefore, will likely be a measured one, as tenants re-assess their needs along with the terms of their existing leases, which are typically three to five years long. 
“It will become more important to have the ‘right’ office space. If companies reduce their footprint, they will be able to pay more for Grade A premium space, and demand top-notch infrastructure – buildings that are well-networked, well-located, with high hygiene standards,” Tham pointed out. 
In tandem with these considerations, the repositioning of assets has emerged, and will continue to gain momentum. “At the end of the day, owning the right assets will be instrumental to landlords surviving, and thriving,” he added. 
There’s also the potential for supply deferment, as ongoing new projects may be delayed by social distancing restrictions at construction sites. “If demand for commercial buildings moves down slightly, but at the same time, supply moves down as well, net-net, the sector could remain relatively stable over time.” 
Despite the evolving industry, Tham sleeps like a log. “Having three young kids at home means I can fall asleep in a heartbeat – nothing keeps me awake!” laughed the father of two boys and a girl, aged 10 months to nine years. 
“But seriously, to be able to stay worry-free, all the credit goes to my team – they’re doing a really great job,” he said. “Over the years, I have learnt more from them than they from me.” Keppel REIT 
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts pan‐Asia. Keppel REIT’s objective is to generate stable income and long‐term growth for unitholders by owning and investing in a portfolio of quality income‐producing commercial real estate and real estate‐related assets in Singapore and pan‐Asia. The REIT has assets under management of approximately S$8 billion in Singapore, key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul, South Korea. Keppel REIT is sponsored by Keppel Land Ltd, one of Asia's leading property companies. It is managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital Holdings Pte Ltd. Keppel Capital is a premier asset manager in Asia with a diversified portfolio in real estate, infrastructure and data centre properties in key global markets.

 
The company website is: <a href="www.keppelreit.com">www.keppelreit.com</a>. 
Click <a href="https://www.sgx.com/securities/equities/K71U">here</a> for the company's StockFacts page. 
For the six months ended 30 June 2020 financial results, click <a href="https://links.sgx.com/FileOpen/Keppel%20REIT%202Q20%20Financial%20Results.ashx?App=Announcement&amp;FileID=624206">here</a>. 
 

About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="///C:/Users/tanje/Desktop/Working%20Files/kopi-C/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    KeppelREIT-CEO


As far back as he can remember, the twin touchstones of Paul Tham’s life have been wisdom and learning.  
Growing up, a familiar mantra was one expounded by the Book of Proverbs in the Bible – “Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding”.  
“My godfather taught me the importance of wisdom and understanding,” the CEO of the manager of SGX-listed Keppel REIT recalled. “Both are tied to two key skills – the willingness to learn, as well as the ability to learn continuously – and involve lots of hard work.”  
Driven by a passion to build and create, Tham began his career as a structural engineer in New York, after graduating with a Bachelor of Science degree in Civil &amp; Environmental Engineering from Cornell University. From for-profit buildings, he moved to non-profit work, which included the construction of school and church buildings.  
“I was picking up different skills every day,” recalled Tham, who also holds a Masters in Business Administration from Singapore Management University.  
“In one of the volunteer projects to build a school in upstate New York, we ended up doing most of the construction work ourselves – driving forklifts and operating small excavators. That was one of the most satisfying projects I was involved in.”  
His next stop – Bain &amp; Company. In his role as management consultant, Tham worked with multinational companies in Asia Pacific on a wide range of functions, including financial performance management and growth strategies. There, he experienced a steep learning curve.  
“Management consulting teaches you to learn continuously. You’re working on new projects, reading research reports, and asking questions all the time. You have to work hard to pick up knowledge on new industries and markets constantly,” he added.  
“And the fastest way to learn is to tap on the expertise and experience of others. The advantage is immediate – you gain wisdom from someone else’s experience and learning, which you can then apply to your own life and work.”  
In 2014, Tham joined Keppel Corporation’s Group Strategy &amp; Development unit, where he played a key role in the formation of Keppel Capital, eventually becoming Keppel Capital’s Chief Financial Officer. The 38-year-old was appointed Deputy Chief Executive Officer of the manager of Keppel REIT in 2018, and assumed his current appointment as CEO a year later.  Portfolio Optimisation  
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts across the region. It has the objective of generating stable income and long-term growth for unitholders by owning and investing in a portfolio of quality income-producing commercial real estate and real estate-related assets in Singapore and pan-Asia.  
The REIT has assets under management of approximately S$8 billion in Singapore, the key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul in South Korea.  
Keppel REIT is sponsored by Keppel Land Ltd, and managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital – Asia’s premier asset manager with a diversified, global portfolio in real estate, infrastructure and data centre properties.  
During his two years in Keppel REIT, Tham has implemented key strategies to put the REIT on a steady growth trajectory.  
The first is portfolio optimisation, which allows the REIT to achieve long-term sustainable returns for its unitholders. This includes capturing value through the divestment of lower yielding assets, which in turn increases the manager’s financial flexibility to fund growth through reinvestments, continue its unit buyback programme, distribute capital gains, or pare down debt.  
“Portfolio optimisation for us is really to improve income resilience and portfolio yield. Over the last two years, we’ve divested about S$1.1 billion worth of assets,” Tham said, pointing to the paring of a 20% stake in Ocean Financial Centre in December 2018, the purchase of Seoul’s T Tower in May 2019 – marking the REIT’s first foray into South Korea – and the sale of Bugis Junction Towers last November.  
“The focus is to enhance DPU, and if you look at our recent results, it seems to be working, with Keppel REIT seeing the first year-on-year increase in DPU in 2019 after five years of decline,” he noted, referring to distributions per unit, a metric closely watched by unitholders.  
For the year ended 31 December 2019, Keppel REIT’s DPU edged higher to 5.58 Singapore cents from 5.56 cents the previous year. Between 2013 and 2018, its DPU had registered year-on-year declines.  
The second prong of Tham’s strategy involves boosting the REIT’s capital efficiency by managing both debt and equity. In mid-2018, Keppel REIT became the first REIT in Singapore to run a DPU-accretive, unit buyback program. As at end-2019, the REIT had purchased and cancelled 95.3 million units.  
“We’ve seen the benefits in our first-half 2020 financial results, where distributable income was largely similar, but DPU rose due to a smaller unit base.”  
The REIT has also reduced its overall cost of debt. “We’ve restructured some of our loans, launched convertible bonds, all in an effort to push down borrowing cost,” he added.  
As at 30 June 2020, all the REIT’s 2020 loans have been refinanced. All-in interest rate was also lower at 2.48% per annum versus 2.86% for the same period last year, while aggregate leverage was 36.3%, with a weighted average term to maturity of 3.6 years. Interest cover stood at 3.5 times, with 79% of its borrowings pegged to fixed rates.  Resilient and Stable  
Looking ahead, Keppel REIT will remain a Singapore-centric REIT, Tham said. About 80% of its assets under management (AUM) is in Singapore’s prime Central Business District (CBD).  
“There will be a shift over time as we raise our overseas exposure, such as in Australia and South Korea, but it will be marginal, for example, lifting it to 25%, or even 30%, from 20%.”  
And an overseas footprint has boosted resilience. “Investing in assets across Australia and South Korea enhances our ability to deliver sustainable returns over time through changing property cycles in these different markets,” he said.  
Australian leases, which tend to stretch five to 10 years versus Singapore’s three to five years, also provide added support. “These longer leases with annual rental escalations offer more stability, and increase the REIT’s ability to grow DPU, even if one market is experiencing a downcycle,” he added.  
Meanwhile, the coronavirus outbreak has created headwinds and offered meaningful lessons, Tham noted.  
“COVID-19 has been challenging for retail and hospitality assets, but for an office landlord like us with a small retail component, there’s been minimal impact,” he said. “Nonetheless, there’s a fair amount of uncertainty due to the global recession and rising geopolitical tensions, so our main focus is proactive engagement with our tenants.”  
At one end of the spectrum, technology-related tenants are still expanding, with their growth fuelled by digitalisation trends that accelerated in the wake of the pandemic. At the other end, hospitality and travel-related businesses are struggling.  
“From a leasing standpoint, we try to accommodate their requirements as much as possible – making sure additional space is available for those who need it, and being flexible on lease negotiations with others to retain tenants in our buildings.”  
As at 30 June 2020, Keppel REIT’s tenant support measures stood at an estimated S$12.5 million. These include the full pass-through of property tax rebates and cash grants from the Singapore government. It has also allowed S$1.6 million of rents to be deferred.  
Its portfolio performance remains bolstered by a high committed occupancy rate of 98.6%, as well as long weighted average lease expiry of about 4.6 years and 6.5 years for the overall portfolio and top 10 tenants respectively. For the first six months of 2020, the REIT had a tenant retention rate of 71%.  Focus on Future-Proofing   
Looking ahead, future-proofing the REIT’s commercial spaces is key, Tham said.  
“We need to ensure our buildings have the best-in-class infrastructure, such as improving indoor air quality with advanced filtration systems, boosting standards of cleanliness, and using technology to reduce manpower requirements and human interactions,” he added.  
This can be seen from its robot – RoboGuard – that patrols the premises of Ocean Financial Centre to enforce safe-distancing measures.  
“We’re also harnessing technology and automation for other key areas, such as lifts, turnstiles and toilets, and exploring the use of contactless doors within our buildings.”  
Longer term, how tenants use their office space will also evolve, and Keppel REIT needs to stay ahead of such emerging trends, Tham said.  
“Physical offices will remain a necessity, although the form and functions of the office will evolve. Many firms will likely incorporate work-from-home protocols in their future planning. And employees and tenants will want more flexibility from their office space going forward,” he added.  
“Some companies may need less space, but many functions will still require space for social interaction, client engagements and collaborations, especially if you’re a customer-facing business or in the creative industry.”  
There may also be a reversal of densification. “Space for each employee may be increased to incorporate social distancing within an office layout, reversing the trend of higher density over the last two decades,” he added.  
The resulting impact on office demand, therefore, will likely be a measured one, as tenants re-assess their needs along with the terms of their existing leases, which are typically three to five years long.  
“It will become more important to have the ‘right’ office space. If companies reduce their footprint, they will be able to pay more for Grade A premium space, and demand top-notch infrastructure – buildings that are well-networked, well-located, with high hygiene standards,” Tham pointed out.  
In tandem with these considerations, the repositioning of assets has emerged, and will continue to gain momentum. “At the end of the day, owning the right assets will be instrumental to landlords surviving, and thriving,” he added.  
There’s also the potential for supply deferment, as ongoing new projects may be delayed by social distancing restrictions at construction sites. “If demand for commercial buildings moves down slightly, but at the same time, supply moves down as well, net-net, the sector could remain relatively stable over time.”  
Despite the evolving industry, Tham sleeps like a log. “Having three young kids at home means I can fall asleep in a heartbeat – nothing keeps me awake!” laughed the father of two boys and a girl, aged 10 months to nine years.  
“But seriously, to be able to stay worry-free, all the credit goes to my team – they’re doing a really great job,” he said. “Over the years, I have learnt more from them than they from me.”   Keppel REIT  
Keppel REIT listed on SGX in April 2006. It is one of Asia’s leading REITs with a portfolio of premium Grade A commercial assets in prime business and financial districts pan‐Asia. Keppel REIT’s objective is to generate stable income and long‐term growth for unitholders by owning and investing in a portfolio of quality income‐producing commercial real estate and real estate‐related assets in Singapore and pan‐Asia. The REIT has assets under management of approximately S$8 billion in Singapore, key Australian cities of Sydney, Melbourne, Brisbane and Perth, as well as Seoul, South Korea. Keppel REIT is sponsored by Keppel Land Ltd, one of Asia's leading property companies. It is managed by Keppel REIT Management Ltd, a wholly owned subsidiary of Keppel Capital Holdings Pte Ltd. Keppel Capital is a premier asset manager in Asia with a diversified portfolio in real estate, infrastructure and data centre properties in key global markets.

 
The company website is: www.keppelreit.com.  
Click here for the company's StockFacts page.  
For the six months ended 30 June 2020 financial results, click here.  
 

About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Singapore

Keppel Land Limited provides real estate services. The Company offers acquisition, investment, development of office properties. Keppel Land serves customers in Asia.

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Keppel REIT Repositions for the Future

As far back as he can remember, the twin touchstones of Paul Tham’s life have been wisdom and learning. Growing up, a familiar...

Singapore Exchange Ltd (SGX)

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