APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

JD.com Inc (ADR) / Equity Capital Markets

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.
The Australia placement streak continues as we get another four equity raises this week, out of which, three were about A$1bn or more. National Australia Bank (NAB AU), Charter Hall Retail Reit (CQR AU), and Lendlease Group (LLC AU) held well above their deal price while Newcrest Mining (NCM AU) broke deal price on the first day of trading post-placement. 

National Australia Bank Placement - Risk Reward Favorable but Outlook Still Uncertain

Charter Hall Retail REIT Placement - Large Dilution but Its Not All Bad 

Lendlease Group Placement - Big Deal, Different Narrative, but Well-Positioned for a Recovery 

Newcrest Mining Placement - Increased Exposure Will Likely Be Accretive to Earnings 

Hong Kong's ECM market is also ramping up. We finally got news that JD.com Inc (ADR) (JD US) has filed confidentially for a secondary listing and, as per media reports, the deal size will be somewhere between US$2 - 4bn. Sumeet Singh shared his early thoughts on the deal in:

JD.com HK Listing - Early Look - Getting the Ball Rolling 
Other upcoming listings include Central China New Life (CCNL HK) which has already gotten approval from HKEX and will likely launch its US$300m bookbuild this coming week. Peijia Medical (1740651D CH) got approved as well. We also covered Hangzhou Tigermed Consulting (300347 CH) A/H listing. The company filed its draft prospectus last week. The team share thoughts on the listings in:


Peijia Medical (沛嘉医疗) Pre-IPO: Deserves Valuation Premium for the TAVR Late Comer 

Central China New Life (建业新生活) Pre-IPO - Expanding Focus Beyond Property Management 

Tigermed (泰格医疗) A+H Listing: Hot Deal of the Best China Clinical-CRO Play 

Beyond that, there were also two new filings. Nongfu Spring, a Chinese bottled water and beverage company, which was said to be seeking US$1bn filed its draft prospectus, and, Ocumension Therapeutics, a Shanghai Biopharma which has a portfolio of 16 ophthalmology drugs, is also looking to list.
We will be covering these IPOs soon.
 Accuracy Rate:Our overall accuracy rate is 73.4% for IPOs and 65.4% for Placements (Performance measurement criteria is explained at the end of the note)New IPO filings this week  

Nongfu Spring(~US$1bn, Hong Kong)
Ocumension Therapeutics (US$100m, Hong Kong)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.News on Upcoming IPOs  

China's Toy Retailer Pop Mart is Considering a Hong Kong IPO
Mongolia shelves coal miner Tavan Tolgoi’s US$1 billion IPO plan 
JD.com eyes $3bn Hong Kong listing


Name
Insight

Hong Kong

Ant Financial
Ant Financial IPO Early Thought: Understand Fintech Empire, Growth &amp; Risk Factors


ByteDance
ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)


ByteDance
ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance
ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)


ByteDance
ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 


ByteDance
ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 


ByteDance
ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance
ByteDance (字节跳动) Pre-IPO - Globally the Most Downloaded App for Jan 2020 Driven by India 


GTMH
GreenTown Mgt (绿城管理) Pre-IPO - Sacrificed Margins in Pursuit of Growth, Muddled by JVs 


Helenbergh
Helenbergh (海伦堡) Early Thoughts - The Usual Red Flag - Related Party Transactions


Hepalink
Shenzhen Hepalink (海瑞普) A+H: A Heparin-API King but Nothing Too Exciting 


Hepalink
Shenzhen Hepalink (海瑞普) A+H: FY2019 Results Snippet and Valuation Update 


JD.com
JD.com HK Listing - Early Look - Getting the Ball Rolling 


Kilcoy
Kilcoy Global Foods Pre-IPO - Rapid Earnings Growth on the Back of Margin Improvement 


Kilcoy
Kilcoy Global Foods Pre-IPO - A Lot of Things Still Remain Unexplained 


Kintor
Kintor Pharma (开拓药业) Pre-IPO: Interesting Prostate Cancer Drug but Low in Core Assets 


Kintor
Kintor Pharma (开拓药业) Pre-IPO: Thoughts on Valuation 


Megvii

Megvii (旷视) Pre-IPO - Remarkable Growth (Part 1) 


Megvii

Megvii (旷视) Pre-IPO - A Bet on the Future - Segments, Revenue Drivers and Growth Potential 


Megvii

Megvii (旷视) Pre-IPO - The Real Race Is in Research - Founders' Profile and Talent 


Megvii

Megvii (旷视) Pre-IPO - Competitive Landscape and Peer Analysis 


Megvii

Megvii (旷视) Pre-IPO -  Initial Thoughts on Valuation 


Peijia

Peijia Medical (沛嘉医疗) Pre-IPO: Reminiscence of Venus Medtech? 


Peijia

Peijia Medical (沛嘉医疗) Pre-IPO: Deserves Valuation Premium for the TAVR Late Comer 


Smoore
Smoore Tech (麦克韦尔) IPO: Hidden E-Cigarette Player Behind the FEELM Technology 


Smoore
Smoore Tech (麦克韦尔) Pre-IPO: 6Y and 1H2019 Financials Show Technology Driven Growth 


Smoore
Smoore Intl (思摩尔国际) Pre-IPO: Tripling Capacity in Three Years 


Smoore
Smoore Intl (思摩尔国际) Pre-IPO: Thoughts on E-Cig Regulation 


Tasly

Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 


Yeahka

Yeahka (移卡) Pre-IPO Review - Growing in an Increasingly Competitive Space 


Yeahka

Yeahka (移卡) Pre-IPO - Peer Analysis and Early Thoughts on Valuation 


Zhenro Svc

Zhenro Services (正荣服务) Pre-IPO - Diversifying Away from Zhenro Property Group 


Zhenro Svc

Zhenro Services (正荣服务) Pre-IPO - Peer Comparison and Thoughts on Valuation 


WeDoctor

WeDoctor (微医) Pre-IPO -App Walk Through - The Online Medical Directory and More 


WeDoctor

WeDoctor (微医) Pre-IPO - A More Focused Online Medical Svc Provider than Ping An Good Doctor 

India

ASK

ASK Investment Managers Pre-IPO - Riding on a Wave of Wealth 


Aakash Edu
Aakash Education Pre-IPO - Fast Growth in an Attractive Sector


Anmol Ind
Anmol Industries Pre-IPO Quick Take - No Growth, Generous Payments to Founders


Bharat Hotel
Bharat Hotels Pre-IPO - Catching up with Peers 


Burger King
Burger King India Pre-IPO - Has Been Growing Fast and Plans to Grow Even Faster 


Burger King
Burger King India Pre-IPO - Peer Comparison Yields Interesting Nuggets on Profitability and Capex 


Bajaj En
Bajaj Energy Pre-IPO - Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 


CAMS

CAMS Pre-IPO - Quasi Monopoly Status Muddled by Inconsistent Performance 


CMS Info
CMS Info Systems Pre-IPO - When a PE Sells to Another PE... Only One Gets the Timing Right


Crystal Crop
Crystal Crop Protection Pre-IPO - DRHP Raises More Questions than in Answers


ESAF SFB

ESAF Small Finance Bank Pre-IPO - Growing Fast but Remains Highly Dependant on a Related Party 


Equitas SFB

Equitas Small Finance Bank Pre-IPO - Another Forced Small Finance Bank Listing 


Equitas SFB

Equitas Small Finance Bank Pre-IPO - Another Forced Small Finance Bank Listing 


Flemingo 
Flemingo Travel Retail Pre-IPO - Its a Different Business in Every Country


Emami Cem

Emami Cement Pre-IPO - Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 


IRFC

Indian Railway Finance Pre-IPO - Low Risk, Low Margin Business 


NSE
NSE IPO Preview- Not Only Fast..its Risky and Expensive


NSE
National Stock Exchange Pre-IPO Review - Bigger, Better, Stronger but a Little Too Fast for Some


Mazagon
Mazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending


Mindspace

Mindspace Business Parks REIT Pre-IPO - Decent Growth but Not All Assets Are Equal 


Mrs. Bector
Mrs. Bectors Food Specialities Pre-IPO Quick Take - Sales for Its Main Segment Have Been Sta


LIC

Life Insurance Corporation of India Pre-IPO - Early Take on India's Largest IPO 


Lodha
Lodha Developers Pre-IPO - Second Time Lucky but Not Really that Much Affordable


Lodha
Lodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt


Penna Cem

Penna Cement - Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 


PNB Met
PNB Metlife Pre-IPO Quick Take - Doesn't Stack up Well Versus Its Larger Peers


Samhi Hotels

Samhi Hotels Pre-IPO - Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 

Malaysia

Mr DIY

Mr D.I.Y. Pre-IPO - Largest Home Improvement Retailer in Malaysia 


Mr DIY

Mr D.I.Y. Pre-IPO - Store Walk-Through and Thoughts on Value Proposition 


Mr DIY

Mr D.I.Y. Pre-IPO - Peer Comparison - Small Stores with Dominant Market Share  


Mr DIY

Mr D.I.Y. Pre-IPO - Assumptions and Thoughts on Valuation 


QSR
QSR Brands Pre-IPO - As Healthy as Fast Food

Thailand

SCGP

SCGP Pre-IPO - Shift to Packaging Has Been Aiding Margins but Acquisition Drove up Leverage 

The U.S

CDP

CDP Holdings Pre-IPO Review - Highly Reliant on Best Inc. 


CloudMinds
CloudMinds Inc Early Thoughts - Still Nascent


Kingsoft Cloud

Kingsoft Cloud (金山云) Pre-IPO: The Leading Cloud Provider in China 


Kingsoft Cloud

Kingsoft Cloud (金山云) Pre-IPO: Video Streaming Exposure and Aggressive Industry Forecast 


Kingsoft Cloud

Kingsoft Cloud (金山云) Pre-IPO: Thoughts on Peers and Valuation 



ECM Weekly (3 May 2020) - JD.com, Hangzhou Tigermed, Peijia Medical, Central China New Life

<a href="https://www.smartkarma.com/entities/lendlease-group" target="_blank" data-smartkarma-citation="entities:11248:1" rel="noopener">Lendlease Group (LLC AU)</a> is looking to raise A$950m in its fully underwritten institutional placement to strengthen its balance sheet.In this note, we will look at the company's plan to tide through the virus outbreak, deal dynamics and run the deal through our framework.

Lendlease Group (LLC AU) is looking to raise A$950m in its fully underwritten institutional placement to strengthen its balance sheet.In this note, we will look at the company's plan to tide through the virus outbreak, deal dynamics and run the deal through our framework.

Lendlease Group Placement - Big Deal, Different Narrative, but Well-Positioned for a Recovery

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

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 <img src='https://api2.sgx.com/sites/default/files/2020-03/Lendlease-Global-REIT-CEO.jpg' alt='Lendlease ' />
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 <div class='content-caption'>Lendlease </div>
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With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and science in real estate.

“Traditionally, in the area of lease management, the key requirement was just to lease the property out, get a good price, and manage its risks,” said the Chief Executive Officer of the manager of SGX-listed Lendlease Global Commercial REIT.

“But in this day and age, just focusing on the science of the transaction is not enough – there’s an art to it as well, such as finding creative ways to manage an asset, understanding the surrounding demographics, and getting the right tenant mix for the target market.”

Chow, who keeps a notebook by his pillow to jot down ideas that pop into his head during the wee hours, finds his greatest satisfaction in instances when he is able to generate value.

“What inspires me most is solving problems and unlocking potential – improving the REIT’s value proposition, such as boosting cashflow and yields, as well as managing disruptors,” he added.

Chow, who holds a Master of Business Administration from Universitas 21 Global, and is a Fellow of the Association of Chartered Certified Accountants, was appointed CEO of the manager of Lendlease Global REIT in 2019.

Prior to this appointment, he was the Managing Director of Investment Management in Asia in 2018, overseeing the asset management function and performance of the Asia funds platform.

Before joining Lendlease, he held senior financial management roles with Keppel REIT, Soilbuild Business Space REIT and then-Cambridge Industrial Trust, now called ESR-REIT.

Listed on SGX Mainboard on 2 October 2019, Lendlease Global REIT has the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, and used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in the Lendlease-developed 313@somerset retail property in Singapore, and a freehold interest in Milan’s Sky Complex that consists of three Grade A freehold office buildings. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion.

The REIT is managed by Lendlease Global Commercial Trust Management Pte Ltd, an indirect, wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd. The latter is part of the Lendlease Group – an international property and infrastructure group established in 1958 and headquartered in Sydney. Listed on the Australian Securities Exchange, the Group has operations spanning Australia, Asia, Europe and the Americas.

Enhancing Performance

To generate growth, Lendlease Global REIT has adopted a three-pronged strategy – proactive asset management, investments and acquisition growth, as well as prudent capital management.

“We want to drive the performance of our existing assets, enhance our portfolio through suitable acquisitions, and manage our financing to maximise returns to unitholders,” Chow said.

For the REIT’s prime retail asset in Singapore – 313@somerset – which has developed as a differentiated lifestyle destination mall, one focus is maintaining a robust relationship with its high-quality, well-diversified base of tenants.

Leases in the mall are typically structured with three-year tenures, comprising base rent and turnover rent, which is calculated as a percentage of tenants’ gross turnover, with an average rental escalation of 3%.

The REIT is also exploring how to unlock further value for unitholders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority’s (URA) Master Plan 2019, resulting in a potential increase of up to 1,008 square metres of space based on its current gross floor area utilisation.

“We’re conducting feasibility studies on what will generate the highest cashflow possible, such as identifying specific floors in the mall where we can increase footfall or traffic,” he added.

Over in Milan, Sky Complex comprises about a third of Lendlease Global REIT’s IPO portfolio based on its appraised value. It consists of three Grade A, freehold office buildings located in one of the city’s newest and most vibrant office precincts – Milano Santa Giula.

It is 100% leased to Sky Italia, an Italian satellite television platform owned by Comcast Corporation, the world’s largest broadcasting and cable TV company by revenue. The single lease runs until 2032, with a break option in 2026.

“There is no retail component in Sky Complex. This tenant is ranked number one in the broadcasting industry, while the lease has a rental step-up clause that tracks the Italian National Institute of Statistics’ Consumer Price Index variation, and features a triple net structure whereby the tenant is generally responsible for the operating expenses of the property,” Chow said.

“It’s like owning AAA-rated bonds – the asset provides the portfolio with very stable cashflow.”

Resilient Outlook

Meanwhile, the outlook for 313@somerset remains bright. The mall features brands – including Pomelo Fashion and Love, Bonito – with omni-channel offerings that appeal to millennials and the younger generation.

“Singapore’s retail sector will continue to evolve, driven by changing consumer behaviours and the rise of e-commerce,” he added.

“The government’s proposed plans to rejuvenate Singapore's Orchard Road shopping belt, with the Somerset sub-precinct slated to provide more youth-oriented dining and entertainment offerings, also augurs well for us.”

While acknowledging that the COVID-19 coronavirus outbreak may impact domestic retail sales, Chow remains sanguine about 313@somerset’s performance.

“Yes, regional travel bans may affect foot traffic, but we expect the mall to stay resilient,” he said.

Retail market fundamentals also appear encouraging, with little supply expected over the next two to three years, according to data from real estate consultancy JLL. They point to a tighter vacancy environment that should support modest rental growth, Chow added.

“Our rental rates for 313@somerset are already at the bottom of the cycle, with one-third of our leases due for renewal. The remaining two-thirds will capture the annual rental escalation, and help mitigate any downside.”

Nonetheless, the REIT manager will monitor the impact of COVID-19 and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

And as for Milan – the fourth-largest economy in Europe and one of the continent’s top office sector destinations for investors and businesses – the investment market has remained active through 2019, with strong interest from both domestic and foreign investors for office assets, Chow noted.

“The robust take-up rates for office space led to tighter supply in 2019, and the take-up rate for this year is expected to stay healthy. We’re pretty positive on this asset, and don’t expect much downside risk ahead,” he added.

Earlier this week, Italy imposed a ban on all non-essential travel to and around the country, as well as a temporary ban of public events through 3 April 2020, in a bid to contain the coronavirus spread.

Meanwhile, acquisitions are definitely on the cards. But the REIT, which has a global mandate, isn’t focusing on any specific country or region at the moment. “The potential asset must tick the right boxes – enhance the diversification of the portfolio and deliver the best value proposition to investors,” he noted.

Key criteria include at least 80% occupancy levels, no major asset enhancement initiatives (AEIs) for two years post-acquisition, and prevailing rentals must be at or above market rates. Opportunities may also emerge in Singapore, Italy, or other gateway cities in which its sponsor, Lendlease Corporation, has a presence.

“Current market conditions – whether the office or retail sector in that geography is in an up or downturn – will also play a part,” he added.

Lendlease Corporation has a secured development pipeline of approximately A$112 billion and current funds under management of approximately A$37 billion, each of which includes retail and office assets. These may present future acquisition opportunities for the REIT.

Fully Hedged

Prudence is the watchword as macro challenges continue to abound, ranging from continuing US-Sino trade tensions to the economic fallout generated by the coronavirus epidemic, Chow noted.

Lendlease Global REIT has hedged 100% of its floating-rate debt to fixed-rate via interest rate swaps and options. To mitigate foreign currency risks, it has also substantially hedged its projected euro-denominated income for FY2020 and FY2021.

“We have also protected our cashflows – they are hedged not just for one but two years,” he added.

The REIT has a focus on delivering stable and long-term returns to investors. For example, it has obtained a euro-denominated term loan, which provides a full natural currency hedge against its euro investment in Sky Complex.

“When the euro falls, our asset values will fall in tandem, but our loan amount will also decline, which neutralises the impact on our balance sheet as well as P&amp;L,” he added, referring to the REIT’s profit and loss statement.

An added complexity, however, comes from the nature of retail malls, Chow admitted. “The challenge lies in managing our tenants’ performances and sales, as well as determining the overall mix of stores within the mall.”

“This encompasses a gamut of marketing and promotional activities, which are aimed at forging a clear identity for the mall, targeting specific shopper profiles, and could include using technology to develop apps to reward spending,” he added.

Apart from grappling with the day-to-day operational issues of the REIT, the 48-year-old is also focused on nurturing the next-generation of leaders for the real estate industry.

“REITs as an industry will continue to grow in Singapore, but where will the next-generation of talent come from?” he asked.

“The question I ask myself is: Do I see my job just as a career? Or can I create a legacy by sharing my values, experience and knowledge? The answer is obvious – it’s the latter.”

Lendlease Global Commercial REIT

Listed on SGX on 2 October 2019, Lendlease Global Commercial REIT is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in, 313@somerset, a retail property located in Singapore, and a freehold interest in Sky Complex, which comprises three office buildings located in Milan. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion. LREIT is managed by Lendlease Global Commercial Trust Management Pte. Ltd, an indirect wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd.

The company website is: <a href="http://www.lendleaseglobalcommercialreit.com">www.lendleaseglobalcommercialreit.com</a>. 
Click <a href="https://www2.sgx.com/securities/equities/JYEU">here</a> for the company's StockFacts page. 
For financial results from 2 Oct 2019 to 31 Dec 2019, click <a href="https://links.sgx.com/FileOpen/2QFY2020%20Results%20Press%20Release%20-%20Final..ashx?App=Announcement&amp;FileID=595729">here</a>.
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    Lendlease 


With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and science in real estate.

“Traditionally, in the area of lease management, the key requirement was just to lease the property out, get a good price, and manage its risks,” said the Chief Executive Officer of the manager of SGX-listed Lendlease Global Commercial REIT.

“But in this day and age, just focusing on the science of the transaction is not enough – there’s an art to it as well, such as finding creative ways to manage an asset, understanding the surrounding demographics, and getting the right tenant mix for the target market.”

Chow, who keeps a notebook by his pillow to jot down ideas that pop into his head during the wee hours, finds his greatest satisfaction in instances when he is able to generate value.

“What inspires me most is solving problems and unlocking potential – improving the REIT’s value proposition, such as boosting cashflow and yields, as well as managing disruptors,” he added.

Chow, who holds a Master of Business Administration from Universitas 21 Global, and is a Fellow of the Association of Chartered Certified Accountants, was appointed CEO of the manager of Lendlease Global REIT in 2019.

Prior to this appointment, he was the Managing Director of Investment Management in Asia in 2018, overseeing the asset management function and performance of the Asia funds platform.

Before joining Lendlease, he held senior financial management roles with Keppel REIT, Soilbuild Business Space REIT and then-Cambridge Industrial Trust, now called ESR-REIT.

Listed on SGX Mainboard on 2 October 2019, Lendlease Global REIT has the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, and used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in the Lendlease-developed 313@somerset retail property in Singapore, and a freehold interest in Milan’s Sky Complex that consists of three Grade A freehold office buildings. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion.

The REIT is managed by Lendlease Global Commercial Trust Management Pte Ltd, an indirect, wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd. The latter is part of the Lendlease Group – an international property and infrastructure group established in 1958 and headquartered in Sydney. Listed on the Australian Securities Exchange, the Group has operations spanning Australia, Asia, Europe and the Americas.

Enhancing Performance

To generate growth, Lendlease Global REIT has adopted a three-pronged strategy – proactive asset management, investments and acquisition growth, as well as prudent capital management.

“We want to drive the performance of our existing assets, enhance our portfolio through suitable acquisitions, and manage our financing to maximise returns to unitholders,” Chow said.

For the REIT’s prime retail asset in Singapore – 313@somerset – which has developed as a differentiated lifestyle destination mall, one focus is maintaining a robust relationship with its high-quality, well-diversified base of tenants.

Leases in the mall are typically structured with three-year tenures, comprising base rent and turnover rent, which is calculated as a percentage of tenants’ gross turnover, with an average rental escalation of 3%.

The REIT is also exploring how to unlock further value for unitholders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority’s (URA) Master Plan 2019, resulting in a potential increase of up to 1,008 square metres of space based on its current gross floor area utilisation.

“We’re conducting feasibility studies on what will generate the highest cashflow possible, such as identifying specific floors in the mall where we can increase footfall or traffic,” he added.

Over in Milan, Sky Complex comprises about a third of Lendlease Global REIT’s IPO portfolio based on its appraised value. It consists of three Grade A, freehold office buildings located in one of the city’s newest and most vibrant office precincts – Milano Santa Giula.

It is 100% leased to Sky Italia, an Italian satellite television platform owned by Comcast Corporation, the world’s largest broadcasting and cable TV company by revenue. The single lease runs until 2032, with a break option in 2026.

“There is no retail component in Sky Complex. This tenant is ranked number one in the broadcasting industry, while the lease has a rental step-up clause that tracks the Italian National Institute of Statistics’ Consumer Price Index variation, and features a triple net structure whereby the tenant is generally responsible for the operating expenses of the property,” Chow said.

“It’s like owning AAA-rated bonds – the asset provides the portfolio with very stable cashflow.”

Resilient Outlook

Meanwhile, the outlook for 313@somerset remains bright. The mall features brands – including Pomelo Fashion and Love, Bonito – with omni-channel offerings that appeal to millennials and the younger generation.

“Singapore’s retail sector will continue to evolve, driven by changing consumer behaviours and the rise of e-commerce,” he added.

“The government’s proposed plans to rejuvenate Singapore's Orchard Road shopping belt, with the Somerset sub-precinct slated to provide more youth-oriented dining and entertainment offerings, also augurs well for us.”

While acknowledging that the COVID-19 coronavirus outbreak may impact domestic retail sales, Chow remains sanguine about 313@somerset’s performance.

“Yes, regional travel bans may affect foot traffic, but we expect the mall to stay resilient,” he said.

Retail market fundamentals also appear encouraging, with little supply expected over the next two to three years, according to data from real estate consultancy JLL. They point to a tighter vacancy environment that should support modest rental growth, Chow added.

“Our rental rates for 313@somerset are already at the bottom of the cycle, with one-third of our leases due for renewal. The remaining two-thirds will capture the annual rental escalation, and help mitigate any downside.”

Nonetheless, the REIT manager will monitor the impact of COVID-19 and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

And as for Milan – the fourth-largest economy in Europe and one of the continent’s top office sector destinations for investors and businesses – the investment market has remained active through 2019, with strong interest from both domestic and foreign investors for office assets, Chow noted.

“The robust take-up rates for office space led to tighter supply in 2019, and the take-up rate for this year is expected to stay healthy. We’re pretty positive on this asset, and don’t expect much downside risk ahead,” he added.

Earlier this week, Italy imposed a ban on all non-essential travel to and around the country, as well as a temporary ban of public events through 3 April 2020, in a bid to contain the coronavirus spread.

Meanwhile, acquisitions are definitely on the cards. But the REIT, which has a global mandate, isn’t focusing on any specific country or region at the moment. “The potential asset must tick the right boxes – enhance the diversification of the portfolio and deliver the best value proposition to investors,” he noted.

Key criteria include at least 80% occupancy levels, no major asset enhancement initiatives (AEIs) for two years post-acquisition, and prevailing rentals must be at or above market rates. Opportunities may also emerge in Singapore, Italy, or other gateway cities in which its sponsor, Lendlease Corporation, has a presence.

“Current market conditions – whether the office or retail sector in that geography is in an up or downturn – will also play a part,” he added.

Lendlease Corporation has a secured development pipeline of approximately A$112 billion and current funds under management of approximately A$37 billion, each of which includes retail and office assets. These may present future acquisition opportunities for the REIT.

Fully Hedged

Prudence is the watchword as macro challenges continue to abound, ranging from continuing US-Sino trade tensions to the economic fallout generated by the coronavirus epidemic, Chow noted.

Lendlease Global REIT has hedged 100% of its floating-rate debt to fixed-rate via interest rate swaps and options. To mitigate foreign currency risks, it has also substantially hedged its projected euro-denominated income for FY2020 and FY2021.

“We have also protected our cashflows – they are hedged not just for one but two years,” he added.

The REIT has a focus on delivering stable and long-term returns to investors. For example, it has obtained a euro-denominated term loan, which provides a full natural currency hedge against its euro investment in Sky Complex.

“When the euro falls, our asset values will fall in tandem, but our loan amount will also decline, which neutralises the impact on our balance sheet as well as P&amp;L,” he added, referring to the REIT’s profit and loss statement.

An added complexity, however, comes from the nature of retail malls, Chow admitted. “The challenge lies in managing our tenants’ performances and sales, as well as determining the overall mix of stores within the mall.”

“This encompasses a gamut of marketing and promotional activities, which are aimed at forging a clear identity for the mall, targeting specific shopper profiles, and could include using technology to develop apps to reward spending,” he added.

Apart from grappling with the day-to-day operational issues of the REIT, the 48-year-old is also focused on nurturing the next-generation of leaders for the real estate industry.

“REITs as an industry will continue to grow in Singapore, but where will the next-generation of talent come from?” he asked.

“The question I ask myself is: Do I see my job just as a career? Or can I create a legacy by sharing my values, experience and knowledge? The answer is obvious – it’s the latter.”

Lendlease Global Commercial REIT

Listed on SGX on 2 October 2019, Lendlease Global Commercial REIT is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in, 313@somerset, a retail property located in Singapore, and a freehold interest in Sky Complex, which comprises three office buildings located in Milan. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion. LREIT is managed by Lendlease Global Commercial Trust Management Pte. Ltd, an indirect wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd.

The company website is: www.lendleaseglobalcommercialreit.com.  
Click here for the company's StockFacts page.  
For financial results from 2 Oct 2019 to 31 Dec 2019, click here.



Lendlease Global REIT: Unlocking Value, Driving Growth

Lendlease Global Commercial REIT / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/lendlease-global-commercial-reit" target="_blank" data-smartkarma-citation="entities:28292:1" rel="noopener">Lendlease Global REIT (1745226D SP)</a> (LGR) is looking to raise about US$540m in its upcoming Singapore IPO. 
LGR have two properties in its porfolio, 313@Somerset and Sky Complex, a office complex fully let by Sky Italia. The two properties in the portfolio have high occupancy rate and built-in rental escalation for FY2020. 313, in particular, is the prized asset of the REIT and seemed to have a track record of attracting interesting tenants to mall which appeals to the younger crowd.
However, the lack of historical operating and financial data is a disappointment.

Lendlease Global REIT (1745226D SP) (LGR) is looking to raise about US$540m in its upcoming Singapore IPO. 
LGR have two properties in its porfolio, 313@Somerset and Sky Complex, a office complex fully let by Sky Italia. The two properties in the portfolio have high occupancy rate and built-in rental escalation for FY2020. 313, in particular, is the prized asset of the REIT and seemed to have a track record of attracting interesting tenants to mall which appeals to the younger crowd.
However, the lack of historical operating and financial data is a disappointment.

Lendlease REIT IPO Early Thoughts - Looking Forward Without Historical Data

Macro and Australian equity strategist, Macro Strategy Advisors

Shane Lee

Macro and Australian equity strategist

Macro Strategy Advisors

Cross Asset Strategy

<ul>
<li>
Reporting season has been relatively disappointing with only 45% of stocks able to either meet or beat FY19 expectations. Analyst expectations in FY20 still look too optimistic with 8.3% EPS growth expected down from 9.8% at the start of reporting season.  </li>
<li>
Trade tensions between the US and China have provided a relatively sombre backdrop, with the ASX 200 4% below its peak just before reporting season kicked off. Materials have been the key underperforming sector, with both BHP and RIO trading lower on the back of weaker iron ore prices and global growth concerns.  The RIO result was broadly in line with expectations, while the BHP result was a little weaker.  The result of the other market heavy-weight, CBA, was a little disappointing mainly because cash from the CFSGAM business sale remains on the balance sheet, but industry structural headwinds relating to remediation costs, low short rates and weak credit growth remain.</li>
<li>
Capital management has been a key area of focus. SUN, ABP and SCG announced buybacks after selling assets, while CCL preferred to hand the cashback as a special dividend after its SPC  QAN and CPU also announced buybacks, while WHC, SPK and ASX announced special dividends.  Several Miners including EVN and SAR announced changes to payout policy, while AMC decided to pay shareholders dividends on a quarterly basis.</li>
<li>
Some management teams (SUL, JBH, MGR, DHG, REA and CAR) in industries with headwinds such as housing and consumer spending are clearly taking up the challenge. CGF and MFG are taking up the fight in financial services and NEC is successfully repositioning itself away from broadcasting.  GFG is exposed to global trade issues like AMC and BXB, but management remains cautiously optimistic about the outlook.  BXB is facing structural headwinds from online retailing, but recessionary forces in Europe are a more immediate threat.  AMC is combating global weakness by focusing on integrating the Bemis acquisition.  Similarly, TCL is benefiting from the integration of its new asset (M4 East Tunnel).  Natural disasters were a dampener on the insurance results, while weakness in the High-roller market is again a clear negative for SKC and CWN. </li>
<li>
Green shoots are appearing in turnaround stories such as CCL, LLC and COL, but the market thinks it’s too early to add stocks such as VOC, CTD, PGH, BKL and CGC to that list. JHX could also be added as lower mortgage rates in both Australia and the US gain traction to support better industry conditions.</li>
<li>
CSL and COH were both standout positive results because their longer-term growth models are payoff and they are sticking to the winning strategy going forward. We thought A2M was dealt with a little harshly, but TWE seemed to silence some of its critics.</li>
<li>
We will update our model portfolio in a few weeks, but at this stage, we are likely to pull back our resources exposure after we receive the benefit of dividends. Clearly, the iron ore price cycle has turned, but we expect gold will remain well bid and would look to taking up positions in these stocks.  We think it’s too early to go fully defensive, but de-risking the portfolio more seems prudent.  Even lower global interest rates will make it difficult to be positive on Banks and some financials, but market volatility could create some opportunities.</li>
</ul>



Reporting season has been relatively disappointing with only 45% of stocks able to either meet or beat FY19 expectations. Analyst expectations in FY20 still look too optimistic with 8.3% EPS growth expected down from 9.8% at the start of reporting season.  

Trade tensions between the US and China have provided a relatively sombre backdrop, with the ASX 200 4% below its peak just before reporting season kicked off. Materials have been the key underperforming sector, with both BHP and RIO trading lower on the back of weaker iron ore prices and global growth concerns.  The RIO result was broadly in line with expectations, while the BHP result was a little weaker.  The result of the other market heavy-weight, CBA, was a little disappointing mainly because cash from the CFSGAM business sale remains on the balance sheet, but industry structural headwinds relating to remediation costs, low short rates and weak credit growth remain.

Capital management has been a key area of focus. SUN, ABP and SCG announced buybacks after selling assets, while CCL preferred to hand the cashback as a special dividend after its SPC  QAN and CPU also announced buybacks, while WHC, SPK and ASX announced special dividends.  Several Miners including EVN and SAR announced changes to payout policy, while AMC decided to pay shareholders dividends on a quarterly basis.

Some management teams (SUL, JBH, MGR, DHG, REA and CAR) in industries with headwinds such as housing and consumer spending are clearly taking up the challenge. CGF and MFG are taking up the fight in financial services and NEC is successfully repositioning itself away from broadcasting.  GFG is exposed to global trade issues like AMC and BXB, but management remains cautiously optimistic about the outlook.  BXB is facing structural headwinds from online retailing, but recessionary forces in Europe are a more immediate threat.  AMC is combating global weakness by focusing on integrating the Bemis acquisition.  Similarly, TCL is benefiting from the integration of its new asset (M4 East Tunnel).  Natural disasters were a dampener on the insurance results, while weakness in the High-roller market is again a clear negative for SKC and CWN. 

Green shoots are appearing in turnaround stories such as CCL, LLC and COL, but the market thinks it’s too early to add stocks such as VOC, CTD, PGH, BKL and CGC to that list. JHX could also be added as lower mortgage rates in both Australia and the US gain traction to support better industry conditions.

CSL and COH were both standout positive results because their longer-term growth models are payoff and they are sticking to the winning strategy going forward. We thought A2M was dealt with a little harshly, but TWE seemed to silence some of its critics.

We will update our model portfolio in a few weeks, but at this stage, we are likely to pull back our resources exposure after we receive the benefit of dividends. Clearly, the iron ore price cycle has turned, but we expect gold will remain well bid and would look to taking up positions in these stocks.  We think it’s too early to go fully defensive, but de-risking the portfolio more seems prudent.  Even lower global interest rates will make it difficult to be positive on Banks and some financials, but market volatility could create some opportunities.


ASX Reporting Season Update: Misses and Downgrades Amongst Bright Spots

Australia

Lendlease Group designs, develops, and manages property and infrastructure assets. The Company constructs apartments, commercial buildings, government offices, retirement living, and educational facilities. Lendlease serves customers worldwide.

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Lendlease Group (LLC AU)

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Lendlease REIT IPO Early Thoughts - Looking Forward Without Historical Data

Lendlease Global REIT (1745226D SP) (LGR) is looking to raise about US$540m in its upcoming Singapore IPO. LGR have two properties in its...

Zhen Zhou, Toh

ASX Reporting Season Update: Misses and Downgrades Amongst Bright Spots

Reporting season has been relatively disappointing with only 45% of stocks able to either meet or beat FY19 expectations. Analyst expectations in...

Shane Lee

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