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/city-developments-ltd" target="_blank" data-smartkarma-citation="entities:57" rel="noopener">City Developments (CIT SP)</a> divests Seoul Hotel with expected gain of ~S$530m; Divestment of non-core assets continues</li><li><a href="https://www.smartkarma.com/entities/parkway-life-reit" target="_blank" data-smartkarma-citation="entities:13422" rel="noopener">Parkway Life REIT (PREIT SP)</a> acquires Tokyo nursing home at 5.9% NPI yield </li><li><a href="https://www.smartkarma.com/entities/8990-holdings-inc" target="_blank" data-smartkarma-citation="entities:22652" rel="noopener">8990 holdings (HOUSE PM)</a> current ~671ha Land bank can deliver PHP165bn sales</li></ul>

City Developments (CIT SP) divests Seoul Hotel with expected gain of ~S$530m; Divestment of non-core assets continuesParkway Life REIT (PREIT SP) acquires Tokyo nursing home at 5.9% NPI yield 8990 holdings (HOUSE PM) current ~671ha Land bank can deliver PHP165bn sales

ASEAN Builder's Scoop (12Dec21) - CIT Divests Seoul Hotel for ~S$530m Gain

<h2>Singapore</h2>SREITs results in a glance (see detailed spreadsheet and calendar attached)<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/816/original/image_54862238621636079380984.png?1636079382" class="editor-image img-responsive" data-smartkarma-image-id="239816"></figure><h3><a href="https://www.smartkarma.com/entities/lendlease-global-commercial-reit" target="_blank" data-smartkarma-citation="entities:28292" rel="noopener">Lendlease Global Commercial REIT (LREIT SP)</a> 1Q22 Business Updates – Robust occupancy despite hiccups in tenant sales and shopper traffic</h3><ul><li>1Q22 Revenue, NPI, DPU and NAV numbers are not disclosed</li><li>Overall portfolio occupancy stood at 99.8% in 1Q22 (vs. 99.8% in 4Q21 and 99.7% in 3Q21), with a long WALE of 8.5 years by NLA and 4.4 years by GRI. Lease expiring in FY22E has been de-risked to 4% by NLA and 11% by GRI within 1Q22 period</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Lendlease Global Commercial REIT (LREIT SP) 1Q22 Business Updates – Robust occupancy despite hiccups in tenant sales and shopper traffic1Q22 Revenue, NPI, DPU and NAV numbers are not disclosedOverall portfolio occupancy stood at 99.8% in 1Q22 (vs. 99.8% in 4Q21 and 99.7% in 3Q21), with a long WALE of 8.5 years by NLA and 4.4 years by GRI. Lease expiring in FY22E has been de-risked to 4% by NLA and 11% by GRI within 1Q22 period

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 97.4pt;"> </td><td style="width: 97.4pt;">KDCREIT</td><td style="width: 97.45pt;">MAGIC</td><td style="width: 97.4pt;">ART</td><td style="width: 97.45pt;">KORE (US$)</td><td style="width: 97.4pt;">PREIT</td><td style="width: 97.45pt;">LMRT</td></tr><tr><td style="width: 97.4pt;">Period</td><td style="width: 97.4pt;">2Q21</td><td style="width: 97.45pt;">1Q22</td><td style="width: 97.4pt;">1H21</td><td style="width: 97.45pt;">1H21</td><td style="width: 97.4pt;">2Q21</td><td style="width: 97.45pt;">2Q21</td></tr><tr><td style="width: 97.4pt;">Gross Revenue (S$ m)</td><td style="width: 97.4pt;">68.5 (+7.5% YoY)</td><td style="width: 97.45pt;">103 (+10.0% YoY)</td><td style="width: 97.4pt;">185.0 (-11.2% YoY)</td><td style="width: 97.45pt;">68.38 (-3% YoY)</td><td style="width: 97.4pt;">29.6 (-2.3% YoY)</td><td style="width: 97.45pt;">49.65 (+81.3% YoY)</td></tr><tr><td style="width: 97.4pt;">NPI (S$ m)</td><td style="width: 97.4pt;">62.8 (+6.9% YoY)</td><td style="width: 97.45pt;">78.3 (+14.3% YoY)</td><td style="width: 97.4pt;">82.1 (-7.3% YoY)</td><td style="width: 97.45pt;">40.58 (-3.1% YoY)</td><td style="width: 97.4pt;">27.4 (-2.8% YoY)</td><td style="width: 97.45pt;">31.8 (+148% YoY)</td></tr><tr><td style="width: 97.4pt;">DPU (S$ c)</td><td style="width: 97.4pt;">2.462 (+7.5% YoY)</td><td style="width: 97.45pt;">Not Disclosed</td><td style="width: 97.4pt;">2.050 (+95.2% YoY)</td><td style="width: 97.45pt;">3.16 (+1.9% YoY)</td><td style="width: 97.4pt;">3.38 (+0.7% YoY)</td><td style="width: 97.45pt;">0.09 (-18.2% YoY)</td></tr><tr><td style="width: 97.4pt;">NAV per Unit (S$)</td><td style="width: 97.4pt;">1.21</td><td style="width: 97.45pt;">1.238</td><td style="width: 97.4pt;">1.19</td><td style="width: 97.45pt;">0.82</td><td style="width: 97.4pt;">1.98</td><td style="width: 97.45pt;">0.0955</td></tr><tr><td style="width: 97.4pt;">P/B (x)</td><td style="width: 97.4pt;">2.12</td><td style="width: 97.45pt;">0.83</td><td style="width: 97.4pt;">0.85</td><td style="width: 97.45pt;">0.95</td><td style="width: 97.4pt;">2.38</td><td style="width: 97.45pt;">0.64</td></tr><tr><td style="width: 97.4pt;">Occupancy (%)</td><td style="width: 97.4pt;">98.0</td><td style="width: 97.45pt;">99.8 (Festival Walk)92.9 (Gateway Plaza)99.7 (Sandhill Plaza)98.2 (Japan Properties)95.7 (The Pinnacle Gangnam)</td><td style="width: 97.4pt;">Mid-50</td><td style="width: 97.45pt;">90.5</td><td style="width: 97.4pt;">99.7</td><td style="width: 97.45pt;">83.4</td></tr><tr><td style="width: 97.4pt;">Reversion (%)</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">-34 (Festival Walk)-27 (Gateway Plaza)-4 (Sandhill Plaza)+0.2 (Japan Properties)</td><td style="width: 97.4pt;">Portfolio RevPAU: S$60 (-14% YoY)</td><td style="width: 97.45pt;">+5.4</td><td style="width: 97.4pt;">Not Disclosed</td><td style="width: 97.45pt;">3.4</td></tr><tr><td style="width: 97.4pt;">Gearing (%)</td><td style="width: 97.4pt;">36.7</td><td style="width: 97.45pt;">41.8</td><td style="width: 97.4pt;">35.9</td><td style="width: 97.45pt;">37.1</td><td style="width: 97.4pt;">37</td><td style="width: 97.45pt;">42.5</td></tr><tr><td style="width: 97.4pt;">Cost of Debt (%)</td><td style="width: 97.4pt;">1.5</td><td style="width: 97.45pt;">1.87</td><td style="width: 97.4pt;">1.6</td><td style="width: 97.45pt;">2.82</td><td style="width: 97.4pt;">0.56</td><td style="width: 97.45pt;">6.47</td></tr><tr><td style="width: 97.4pt;">1 Yr Fwd Yield (%)</td><td style="width: 97.4pt;">3.91</td><td style="width: 97.45pt;">6.8</td><td style="width: 97.4pt;">4.16</td><td style="width: 97.45pt;">7.77</td><td style="width: 97.4pt;">2.97</td><td style="width: 97.45pt;">5.5 (annualized 1H21)</td></tr><tr><td style="width: 97.4pt;">Debt Hedged (%)</td><td style="width: 97.4pt;">67</td><td style="width: 97.45pt;">82</td><td style="width: 97.4pt;">50</td><td style="width: 97.45pt;">84.7</td><td style="width: 97.4pt;">82</td><td style="width: 97.45pt;">80.6</td></tr><tr><td style="width: 97.4pt;">Target Price</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">N/A</td><td style="width: 97.45pt;">N/A</td></tr><tr><td style="width: 97.4pt;">Rating</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">N/A</td><td style="width: 97.45pt;">N/A</td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) KDCREITMAGICARTKORE (US$)PREITLMRTPeriod2Q211Q221H211H212Q212Q21Gross Revenue (S$ m)68.5 (+7.5% YoY)103 (+10.0% YoY)185.0 (-11.2% YoY)68.38 (-3% YoY)29.6 (-2.3% YoY)49.65 (+81.3% YoY)NPI (S$ m)62.8 (+6.9% YoY)78.3 (+14.3% YoY)82.1 (-7.3% YoY)40.58 (-3.1% YoY)27.4 (-2.8% YoY)31.8 (+148% YoY)DPU (S$ c)2.462 (+7.5% YoY)Not Disclosed2.050 (+95.2% YoY)3.16 (+1.9% YoY)3.38 (+0.7% YoY)0.09 (-18.2% YoY)NAV per Unit (S$)1.211.2381.190.821.980.0955P/B (x)2.120.830.850.952.380.64Occupancy (%)98.099.8 (Festival Walk)92.9 (Gateway Plaza)99.7 (Sandhill Plaza)98.2 (Japan Properties)95.7 (The Pinnacle Gangnam)Mid-5090.599.783.4Reversion (%)NA-34 (Festival Walk)-27 (Gateway Plaza)-4 (Sandhill Plaza)+0.2 (Japan Properties)Portfolio RevPAU: S$60 (-14% YoY)+5.4Not Disclosed3.4Gearing (%)36.741.835.937.13742.5Cost of Debt (%)1.51.871.62.820.566.471 Yr Fwd Yield (%)3.916.84.167.772.975.5 (annualized 1H21)Debt Hedged (%)67825084.78280.6Target PriceNAN/ANAN/AN/AN/ARatingNAN/ANAN/AN/AN/A

ASEAN Builder's Scoop (27Jul21) - KDCREIT Maiden China Acq

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> to acquire an industrial property at Tuas South for S$21m; Expanding its Space Optimisation Business</h3><ul><li>LHN has accepted the OTP for the purchase of Tuas South Property for S$21m. The acquisition is expected to complete by 1Oct21 and will be financed by a mix of internal sources of funding and bank borrowings</li><li>The Tuas South Property is located at 55 Tuas South Avenue 1, with a land area of 51,655sqft and a remaining lease of ~39 years. The property has GFA of 129,138sqft and consists of (i) an 11-storey industrial building with a basement carpark; (ii) a part single-storey industrial factory; and (iii) a part single-storey industrial factory with two storey workers’ dormitory. This property is a foreclosed property and DBS Bank is selling it as the mortgagee of the property exercising its power of sale</li><li>LHN intends to operate the property under the industrial segment of its Space Optimisation Business to provide business spaces under the Business 2 zone for industrial developments as well as a range of value-added logistics support services to its tenants</li></ul>Comments: The Tuas South Property will add 2.9% of Industrial Space to LHN’s Space Optimisation Business, bringing total Industrial space to 1.83m sqft. LHN has been rationalizing its Industrial Space in FY20/21 by not renewing expired leases that are deemed underperforming. Including the 2 new JVs at 202 Kallang Bahru and 5 Toa Payoh, Industrial Space registered a net decline of -1.10m sqft (or -38.3%) over the last two years. We are positive on the acquisition given the strategic location and favorable price. The Consideration of S$21m translates to S$163psf, which is lower than the last two industrial property transactions along Tuas South Avenue 1 in 2020 at S$194psf and S$222psf, respectively (source: edgeprop). We expect future CapEx should be small as the property’s existing GFA of 129,138sqf is already at its maximum allowable plot ratio of 2.5 under the URA’s Master Plan 2019.

SingaporeLHN Ltd (LHN SP) to acquire an industrial property at Tuas South for S$21m; Expanding its Space Optimisation BusinessLHN has accepted the OTP for the purchase of Tuas South Property for S$21m. The acquisition is expected to complete by 1Oct21 and will be financed by a mix of internal sources of funding and bank borrowingsThe Tuas South Property is located at 55 Tuas South Avenue 1, with a land area of 51,655sqft and a remaining lease of ~39 years. The property has GFA of 129,138sqft and consists of (i) an 11-storey industrial building with a basement carpark; (ii) a part single-storey industrial factory; and (iii) a part single-storey industrial factory with two storey workers’ dormitory. This property is a foreclosed property and DBS Bank is selling it as the mortgagee of the property exercising its power of saleLHN intends to operate the property under the industrial segment of its Space Optimisation Business to provide business spaces under the Business 2 zone for industrial developments as well as a range of value-added logistics support services to its tenantsComments: The Tuas South Property will add 2.9% of Industrial Space to LHN’s Space Optimisation Business, bringing total Industrial space to 1.83m sqft. LHN has been rationalizing its Industrial Space in FY20/21 by not renewing expired leases that are deemed underperforming. Including the 2 new JVs at 202 Kallang Bahru and 5 Toa Payoh, Industrial Space registered a net decline of -1.10m sqft (or -38.3%) over the last two years. We are positive on the acquisition given the strategic location and favorable price. The Consideration of S$21m translates to S$163psf, which is lower than the last two industrial property transactions along Tuas South Avenue 1 in 2020 at S$194psf and S$222psf, respectively (source: edgeprop). We expect future CapEx should be small as the property’s existing GFA of 129,138sqf is already at its maximum allowable plot ratio of 2.5 under the URA’s Master Plan 2019.

ASEAN Builder's Scoop (15Jul21) - LHN Expands Its Space Optimization Biz

<h2>Singapore</h2>
<h3>SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)</h3>
With Singapore moving into Phase 3, economic recovery should regain momentum, albeit uneven across sectors. The accelerated timetable for US interest rate hikes has triggered yield spread compression, but also signaled a stronger and sustainable economic growth, which bodes well for trade-dependent Singapore. We reinitiate the SREIT sector with BUY. Top picks are FCT, DASIN, AAREIT and AREIT. SGREIT offers a good entry point for midterm recovery play; while ECWREIT could see a DPU boost from deferred DI.
<ul>
<li>Economy recovery provides strong tailwind for yield, albeit uneven across sectors. Following a setback from a month-long partial lockdown in Phase 2, Singapore has resume gradual reopening on 14Jun, thus setting economy back on track to recovery. However, we should see some deviation from initial expected timeline and recovery pace across sectors. In particular, tourism-related sectors are set to see further delays in recovery given the slower lifting of global travel curbs and the recent cut in capacity limits at local attractions. On the other hand, domestic-driven expenditures and outward-oriented sectors, such as retail and manufacturing, are expected to benefit from the pick-up in demand</li>
<li>We prefer Retail and Commercial subsectors, which should recover on stronger pace and offer attractive yields within the SREIT sector, while trading at c.1.0x forward P/B. Industrial subsector offers mixed picture, where we are positive on warehouse space, but neutral on other property types. Continued M&amp;A activities within the Industrial subsector should boost future DPU growth in addition to organic growth</li>
<li>We underweight both Hospitality and Healthcare subsectors. Outlook for Hospitality subsector remains cloudy in near term. Nonetheless, we remain upbeat on the longer-term prospect of the subsector in anticipation of international border reopening. On the other hand, the robust valuations of Healthcare subsector and low cash-flow growth realizations could indicate over optimism in investors’ expectations</li>
<li>Our top picks: FCT (Buy; S$2.89) for its faster recovery in near term. DASIN (Buy; S$0.81) for China-focused retail play with its Greater Bay Area (GBA) exposure. We favour AAREIT (Buy; S$1.60) and AREIT (Buy; S$3.55) for their strong balance sheet, which allows them financial flexibility in pursuing new acquisitions, or embarking on development/ redevelopment/ AEI projects. Tactical investment into ECWREIT (Buy; S$0.82) on potential DPU boost from deferred DI.
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</li>
</ul>

Singapore
SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)
With Singapore moving into Phase 3, economic recovery should regain momentum, albeit uneven across sectors. The accelerated timetable for US interest rate hikes has triggered yield spread compression, but also signaled a stronger and sustainable economic growth, which bodes well for trade-dependent Singapore. We reinitiate the SREIT sector with BUY. Top picks are FCT, DASIN, AAREIT and AREIT. SGREIT offers a good entry point for midterm recovery play; while ECWREIT could see a DPU boost from deferred DI.

Economy recovery provides strong tailwind for yield, albeit uneven across sectors. Following a setback from a month-long partial lockdown in Phase 2, Singapore has resume gradual reopening on 14Jun, thus setting economy back on track to recovery. However, we should see some deviation from initial expected timeline and recovery pace across sectors. In particular, tourism-related sectors are set to see further delays in recovery given the slower lifting of global travel curbs and the recent cut in capacity limits at local attractions. On the other hand, domestic-driven expenditures and outward-oriented sectors, such as retail and manufacturing, are expected to benefit from the pick-up in demand
We prefer Retail and Commercial subsectors, which should recover on stronger pace and offer attractive yields within the SREIT sector, while trading at c.1.0x forward P/B. Industrial subsector offers mixed picture, where we are positive on warehouse space, but neutral on other property types. Continued M&amp;A activities within the Industrial subsector should boost future DPU growth in addition to organic growth
We underweight both Hospitality and Healthcare subsectors. Outlook for Hospitality subsector remains cloudy in near term. Nonetheless, we remain upbeat on the longer-term prospect of the subsector in anticipation of international border reopening. On the other hand, the robust valuations of Healthcare subsector and low cash-flow growth realizations could indicate over optimism in investors’ expectations
Our top picks: FCT (Buy; S$2.89) for its faster recovery in near term. DASIN (Buy; S$0.81) for China-focused retail play with its Greater Bay Area (GBA) exposure. We favour AAREIT (Buy; S$1.60) and AREIT (Buy; S$3.55) for their strong balance sheet, which allows them financial flexibility in pursuing new acquisitions, or embarking on development/ redevelopment/ AEI projects. Tactical investment into ECWREIT (Buy; S$0.82) on potential DPU boost from deferred DI.






ASEAN Builder's Scoop (1Jul21) - SREITs Reflation Is Working in Its Favour

Singapore

Parkway Life Real Estate Investment Trust (Parkway Life REIT) invests primarily in income producing real estate and real estate related assets in the Asia Pacific region. The trust's real estate is used primarily for healthcare and healthcare-related purposes.

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Parkway Life REIT (PREIT SP)

ASEAN Builder's Scoop (12Dec21) - CIT Divests Seoul Hotel for ~S$530m Gain

CIT divests Seoul hotel for ~S$530m gain; PREIT buys Tokyo nursing home at 5.9% yield; HOUSE ample land bank for next 7-10yrs; Phils FDI exceeds...

SCCM Asia Research

ASEAN Builder's Scoop (5Nov21)

LREIT hiccups in tenant sales and visitations; CERT timely pivot to logistics sector; PRIME strong reversions; PLIFE new master lease offers long...

SCCM Asia Research

ASEAN Builder's Scoop (27Jul21) - KDCREIT Maiden China Acq

KDCREIT maiden China acq; MAGIC improvements seen at FW; ART recovery momentum continues; KORE occupancy weakness; PLIFE flattish quarter; LMRT...

SCCM Asia Research

ASEAN Builder's Scoop (15Jul21) - LHN Expands Its Space Optimization Biz

LHN expands its Space Optimization biz; PLIFE/IHH extends lease agreement; Condo rents flattish in Jun21; Aboitiz builds Batangas office complex;...

SCCM Asia Research

ASEAN Builder's Scoop (1Jul21) - SREITs Reflation Is Working in Its Favour

SREITs reflation is working in its favour; 2Q21 resi prices up 0.9% QoQ; CAPL exits malls, expands into logistics in Japan; KREIT divests Brisbane...

SCCM Asia Research

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