This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
Embassy Office Parks REIT (EOP IN) plans to raise around US$1bn in its India IPO. EOP will primarily hold office assets in Bengaluru, Pune and Noida with a total portfolio size of US$4.2bn.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
A conditional debt conversion agreement to capitalise all of the “relevant debt” of US$916mn via the allotment and issue of up to approximately 22,573,570,909 new ordinary shares of Ezion at an issue price of S$0.055/share (27.9% premium to last close).
A conditional option agreement for the proposed grant by Ezion of 3,360,495,867 non-listed and transferable share options to Yinson at the exercise price of S$0.0605 per option Share.
This shareholder structure will take the following shape, with Yinson holding 85.9% of shares out after the conversion and 87.5% after both the conversion and the exercise of the share options.
Current Holding
After Conversion
After Conversion & Options
Current shares out
3,728
100%
3,728
14%
3,728
13%
Debt conversion
0%
22,574
86%
22,574
76%
Option shares
0%
0%
3,360
11%
Total shares (mn)
3,728
26,302
29,662
However … as per the more detailed Bursa announcement:
It is the intention of YEPL (wholly-owned sub of Yinson) to acquire up to US$916mn of the Relevant Debts for a consideration to be agreed with the Designated Lenders. Tentatively, YHB (Yinson) expected its cash outlay shall be in the region of USD200mn and some EHL (Ezion) Shares that will give YEPL a shareholding of not less than 70% in EHL at the point of the completion of the Proposed Debt conversion and Subscription. In any event, assuming all convertible securities of EHL are converted, YHB expects its eventual shareholding in EHL shall be a controlling stake of at least 51%.
Ezion is also in negotiation with the major secured lenders to restructure its existing debts which would result in the conversion of certain debts to redeemable convertible preferences shares to be issued by Ezion.
As this is effectively a hybrid takeover, there exist a number of conditions required to complete this proposal. Of importance is the waiver from the Securities Industry Council of Singapore for Yinson not to make a mandatory general offer for Ezion under Rule 14.1 of the Takeover Code, as the share subscription takes Yinson’s stake >30%.
Conditions of the Debt Conversion/Proposed Subscription and Share Options
For the Debt Conversion & Subscription
Conditions
Satisfactory due diligence by Yinson.
Waiver from SIC not to make a MGO.
Independent shareholders of Ezion approving the whitewash waiver. Simple majority vote.
The approval by Ezion shareholders for the allotment and issue of the subscription shares. Simple majority vote.
Other
The long stop date is 6 months from the conditional debt conversion agreement (31 March 2019).
For the Share Options
Conditions
The approval by Ezion shareholders for the option shares. Simple majority vote.
Other
The long stop date is 6 months from the conditional option agreement (31 March 2019).
The exercise period is five years from the issuance of the options.
Gross proceeds will be S$203mn assuming full exercise. To be applied to business expansion or new business opportunities
Inter-conditionality
The grant of options is conditional upon and shall take place simultaneously with the debt conversion and subscription
On Ezion
Ezion develops, owns, and charters offshore assets to support offshore energy markets, via three key segments:
Lifeboats/liftboats – these are self-propelled rigs involved in the production and maintenance of the O&G and windfarm industry. This segment accounted for 57.9% of revenue in FY18.
Jack-up rigs – engaged in non-self propelled rigs involved in the production and maintenance of the O&G and windfarm industry. The segment accounted for 34.1% of revenue in FY18.
And offshore support logistic services, accounting for 7.5% of revenue in FYT18.
Ezion is primarily Asian focused with revenue split between Singapore, India, and the rest of Asia as to 8%, 5.3% and 54%. The Middle East and Africa account for 15.6% and 15.2% respectively.
Fundamentals
US$mn
FY16
FY17
FY18
Revenues
Liftboats
127
96
69
Jack-Up Rigs
158
76
41
Offshore Support Logistic Services
33
20
9
Others
1
1
1
Total Revenue
318
193
119
EBITDA
Liftboats
77
68
21
Jack-Up Rigs
112
60
16
Offshore Support Logistic Services
22
16
(1)
Others
1
1
1
Total EBITDA
212
144
37
NPBT
Liftboats
62
(16)
(54)
Jack-Up Rigs
(54)
(745)
(297)
Offshore Support Logistic Services
(13)
(156)
(53)
Others
1
1
7
Unallocated Expenses
(24)
(82)
94
Total NPBT
(29)
(999)
(303)
Assets
Liftboats
811
772
807
Jack-Up Rigs
1,382
556
226
Offshore Support Logistic Services
415
315
119
Others
79
81
32
Unallocated Assets
165
70
108
Total assets
2,851
1,794
1,291
Total equity
1,315
305
(255)
Net debt
1,282
1,358
1,358
Source: CapIQ
Revenue declined by US$125mn in FY17 due to a reduction in charter rates and delays in re-deployment of the Ezion’s liftboats due to working capital constraints. The loss before tax was exacerbated by impairment losses totalling US$897mn.
Revenue declined by US$74mn in FY17 due to a drop in the utilisation rates of liftboats and jack-up rigs. FY18 also saw an increase in impairments loses of US$84.5mn, while loses in associate and jointly controlled entities increased to US$39mn in FY18 from US$16mn in FY17.
Effect on NTA from the conversion/options
Assuming the subscription and options were completed on 31 December 2018, the effects of the Ezion’s NTL/NTA per share would be as follows:
Singapore’s Urban Redevelopment Authority (“URA”) announced the flash estimate of the private residential Property Price Index (“PPI”) for 1Q 2019 yesterday.
Flash estimate for private residential PPI indicated an acceleration in price decline in the Singapore residential market in general. Private residential PPI decreased 0.9 percentage point from 149.6 points in 4th Quarter 2018 to 148.7 points in 1st Quarter 2019.
Non-landed private residential properties in the Core Central Region (“CCR”) were the worst performing segment, with prices decreased by 2.9% QoQ, compared to the 1.0% decrease in the previous quarter.
The softening of prices in the luxury residential segment did not come as any surprise. If weak sales persist, developers may eventually be forced to write-down the value of their high-end development properties, reduce selling prices to clear their luxury inventories.
Mass-market residential property segment has always been relatively more defensive in comparison to the mid-range and high-end property segment but in recent times, some signs of weakness have been observed in the mass market segment.
In view of the current outlook in the Singapore residential market, I reiterate my BUY recommendation on Sing Holdings (SING SP) (due to its defensive traits and growth prospects) with a target price of S$0.66 per share.
In my previous insights I’ve covered the company background, its projected growth, compared it to its main listed peer and other yield assets in India:
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
The highlights of this week are comments on the Thai elections with differing perspectives from CrossASEAN Economist Prasenjit K. Basu, Thailand based Athaporn Arayasantiparb, CFA, and Dr Jim Walker. Dr Jim Walker also gives us his views on the key beneficiaries and the ongoing US-China trade dispute and singles out Indonesia and Vietnam. On this theme, Kevin O’Rourke highlights a potentially significant announcement of a US$400m investment in Kendal, Central Java by a Chinese Textile company of its intention to relocate a shirt manufacturing facility there from China. Kawasan Industri Jababeka (KIJA IJ) and Sembcorp Industries (SCI SP) have a JV industrial estate there, which stands potentially to benefit should this move should it transpire. More importantly, it could signal the start of a more promising future for Indonesia’s manufacturing sector.
In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Singapore’s Urban Redevelopment Authority (“URA”) announced the flash estimate of the private residential Property Price Index (“PPI”) for 1Q 2019 yesterday.
Flash estimate for private residential PPI indicated an acceleration in price decline in the Singapore residential market in general. Private residential PPI decreased 0.9 percentage point from 149.6 points in 4th Quarter 2018 to 148.7 points in 1st Quarter 2019.
Non-landed private residential properties in the Core Central Region (“CCR”) were the worst performing segment, with prices decreased by 2.9% QoQ, compared to the 1.0% decrease in the previous quarter.
The softening of prices in the luxury residential segment did not come as any surprise. If weak sales persist, developers may eventually be forced to write-down the value of their high-end development properties, reduce selling prices to clear their luxury inventories.
Mass-market residential property segment has always been relatively more defensive in comparison to the mid-range and high-end property segment but in recent times, some signs of weakness have been observed in the mass market segment.
In view of the current outlook in the Singapore residential market, I reiterate my BUY recommendation on Sing Holdings (SING SP) (due to its defensive traits and growth prospects) with a target price of S$0.66 per share.
In my previous insights I’ve covered the company background, its projected growth, compared it to its main listed peer and other yield assets in India:
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
The highlights of this week are comments on the Thai elections with differing perspectives from CrossASEAN Economist Prasenjit K. Basu, Thailand based Athaporn Arayasantiparb, CFA, and Dr Jim Walker. Dr Jim Walker also gives us his views on the key beneficiaries and the ongoing US-China trade dispute and singles out Indonesia and Vietnam. On this theme, Kevin O’Rourke highlights a potentially significant announcement of a US$400m investment in Kendal, Central Java by a Chinese Textile company of its intention to relocate a shirt manufacturing facility there from China. Kawasan Industri Jababeka (KIJA IJ) and Sembcorp Industries (SCI SP) have a JV industrial estate there, which stands potentially to benefit should this move should it transpire. More importantly, it could signal the start of a more promising future for Indonesia’s manufacturing sector.
In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.
Global Liquidity bottoming out, but Central Banks not yet easing
US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
PBoC still tightening through OMOs
ECB on ‘pause’
QE4 is coming in 2019, but no evidence it has started yet
Get Straight to the Source on Smartkarma
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Embassy Office Parks REIT (EOP IN) plans to raise around US$1bn in its India IPO. EOP will primarily hold office assets in Bengaluru, Pune and Noida with a total portfolio size of US$4.2bn.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
In my previous insights I’ve covered the company background, its projected growth, compared it to its main listed peer and other yield assets in India:
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
The highlights of this week are comments on the Thai elections with differing perspectives from CrossASEAN Economist Prasenjit K. Basu, Thailand based Athaporn Arayasantiparb, CFA, and Dr Jim Walker. Dr Jim Walker also gives us his views on the key beneficiaries and the ongoing US-China trade dispute and singles out Indonesia and Vietnam. On this theme, Kevin O’Rourke highlights a potentially significant announcement of a US$400m investment in Kendal, Central Java by a Chinese Textile company of its intention to relocate a shirt manufacturing facility there from China. Kawasan Industri Jababeka (KIJA IJ) and Sembcorp Industries (SCI SP) have a JV industrial estate there, which stands potentially to benefit should this move should it transpire. More importantly, it could signal the start of a more promising future for Indonesia’s manufacturing sector.
In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.
The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).
In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.
The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.
Exhibit 1: Funnel of proposed LNG projects getting bigger
Source: Energy Market Square, interpretation of data from Shell LNG Outlook 2019, public filings. Higher probability rating depending on oil majors backing, level of offtake agreements, positive news flow catalysts (e.g. regulatory approval, equity financing, EPC agreements). Demand projection assumes 90% capacity utilization. Bubble size proportional to project capacity. The position of the bubbles within the probability ranges is random.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Our positive view of the Asian region in 2018 was not reflected in stock market performance. But now is not the time to discard fundamentals and fundamental analysis. Unlike the US, the Asian region is in the early stages of a profit upcycle. As we have argued on many occasions, that is the building block required to kick start the investment cycle. But theoretical explanations of the growth process aside, is there any empirical support for the argument that profits and investment, and therefore growth, are related? We would answer in the affirmative and, in the following report, we try to show how the process works and where Asia stands on two of our Austrian Stress Indicators (ASIs). Market volatility aside, the conditions for good growth gains are firmly in place in most of the region.
Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit, this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
Embassy Office Parks REIT (EOP IN) plans to raise around US$1bn in its India IPO. EOP will primarily hold office assets in Bengaluru, Pune and Noida with a total portfolio size of US$4.2bn.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
The highlights of this week are comments on the Thai elections with differing perspectives from CrossASEAN Economist Prasenjit K. Basu, Thailand based Athaporn Arayasantiparb, CFA, and Dr Jim Walker. Dr Jim Walker also gives us his views on the key beneficiaries and the ongoing US-China trade dispute and singles out Indonesia and Vietnam. On this theme, Kevin O’Rourke highlights a potentially significant announcement of a US$400m investment in Kendal, Central Java by a Chinese Textile company of its intention to relocate a shirt manufacturing facility there from China. Kawasan Industri Jababeka (KIJA IJ) and Sembcorp Industries (SCI SP) have a JV industrial estate there, which stands potentially to benefit should this move should it transpire. More importantly, it could signal the start of a more promising future for Indonesia’s manufacturing sector.
In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.
The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).
In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.
The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.
Exhibit 1: Funnel of proposed LNG projects getting bigger
Source: Energy Market Square, interpretation of data from Shell LNG Outlook 2019, public filings. Higher probability rating depending on oil majors backing, level of offtake agreements, positive news flow catalysts (e.g. regulatory approval, equity financing, EPC agreements). Demand projection assumes 90% capacity utilization. Bubble size proportional to project capacity. The position of the bubbles within the probability ranges is random.
The fact that the dollar has strengthened despite the dovish turn at the Fed this year and the significant fall in US rates and bond yields has confounded many analysts.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit, this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
Embassy Office Parks REIT (EOP IN) plans to raise around US$1bn in its India IPO. EOP will primarily hold office assets in Bengaluru, Pune and Noida with a total portfolio size of US$4.2bn.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit, this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China.
This week’s offering of Insights across ASEAN@Smartkarmais filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
Embassy Office Parks REIT (EOP IN) plans to raise around US$1bn in its India IPO. EOP will primarily hold office assets in Bengaluru, Pune and Noida with a total portfolio size of US$4.2bn.
Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, we examine Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign work force policy.
The number of Work Permit holders in the construction, marine, processing and manufacturing industries has declined in the last three years and we see the government being content to keep the foreign workers quota unchanged for these sectors in Budget 2019. In spite of the continued decline in the foreign workers population amidst a soft patch in those industries, Centurion Corp (CENT SP), a major PBWA operator in Singapore, has identified a huge gap between demand and supply, where demand outstrips supply by 120,000 to 150,000 beds. This shortfall of supply represents a whopping 54% to 67% of existing bed capacity for PBWA. There is no new supply expected in 2019 and we observed that government policies continue to encourage the shift of foreign workers from public housing, on-site dormitories and other non-purpose built accommodation to PBWA.
However, capacity growth for PBWA is limited by land scarcity, high construction cost as well as stricter regulatory standards which increase the operators’ running costs.
Based on Centurion’s results for the financial year ended 2018 (FY2018), its portfolio of four workers accommodation in Singapore is enjoying a healthy average occupancy rate of 96%. Pre-tax profit margin improved from 60% in FY2017 to 62% in FY2018. In light of the heavy regulation in Singapore’s PBWA, the company is expecting stronger growth to come instead from its PBWA business in our neighbouring country, Malaysia. There are about 1.7 million registered legal foreign workers in Malaysia. Half of this number is from manufacturing. The Malaysian government is said to be drafting new laws requiring employers to provide adequate housing for foreign workers. Centurion’s PBWA capacity in Malaysia is forecast to grow 28% in 2019 and a further 20% in 2020 to reach 36,400 beds, while its capacity in Singapore is forecast to remain constant at 26,100 over the next two years. That said, the strong profit margin of its PBWA business in Singapore could still be sustainable due to the demand and supply imbalance and high entry barriers.
Centurion, the only listed operator (dual listing in Singapore and Hong Kong Centurion Corp (6090 HK) ), is believed to be one of the largest operators in Singapore’s S$720-million1 dollar PBWA industry based on its 10.8% share of industry revenue and 11.7% share of total bed capacity. Investing in Centurion is a cheaper option to profit from running a PBWA compared to being an operator. Besides its core business in PBWA, Centurion operates a growing portfolio of student accommodation in the United States, United Kingdom, Australia, Singapore and South Korea.
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