Brief Singapore: ESR Cayman Pre-IPO – A Giant in the Making and more

In this briefing:

1. ESR Cayman Pre-IPO – A Giant in the Making
2. OCBC – Difficult to Square
3. January Chip Revenues Down 15.6% Year-On-Year
4. Accordia Golf Trust (AGT): Buy but Please Consider This…

1. ESR Cayman Pre-IPO – A Giant in the Making

ESR Cayman (ESR HK) aims to raise up to US$1.5bn in its planned Hong Kong listing, as per media reports. The company is backed by Warburg Pincus and counts APG, the Netherlands’ largest pension provider, as one of its main investors.

ESR operates an end-to-end model starting from development of the asset to divesting it to one of its private funds and/or REITs. It operates in China, Japan, South Korea, Australia, Singapore and India. AUM has grown rapidly over the past few years as the company has undertaken a number of acquisitions in the recent past. 

In this insight, I’ll touch upon the company’s business model and provide an overview of its operations. 

2. OCBC – Difficult to Square

The data and text from Oversea Chinese Banking Corp. (OCBC SP) is difficult to square. It talks about improved credit quality, but its NPLs are up both YoY and QoQ.  In the bank’s Pillar 3 disclosure it notes that ‘risk-weighted assets (RWA) were largely stable in the quarter primarily due to improving asset quality.’ In its financial supplement it reports NPLs of S$3,938m compared with S$3,594m, in 4Q18 and 3Q18. This is nearly 10% higher QoQ.  The reality is that OCBC ramped up credit costs in 4Q18 to nearly 3x its full 9M18 charge and despite this, its NPL cover is now down to 57% from 78% a year ago. To us this appears like marked deterioration.  And even QoQ, where NPL cover was 65% in 3Q18. The risk now is that credit costs during the current year are more like 4Q18 or higher, rather than the paltry figures seen during full year 2018. We do not believe the market is expecting this. 

3. January Chip Revenues Down 15.6% Year-On-Year

The Semiconductor Industry Association in the US released the latest WSTS figures for January chip revenues.  Monthly revenues are down 15.6% from January of 2018.  While this is not a surprise to our clients it is frightening to those who anticipated that 2019 would be a continuation of the bonanza enjoyed in 2018.

4. Accordia Golf Trust (AGT): Buy but Please Consider This…

Accordia Golf Trust (AGT SP) is the second largest golf course operator in Japan that offers stable DPU with assets that are less correlated to the global economic cycle but they have their own challenges; aging demographics that makes the number of games played lower over time, volatile weather in Japan (unlike in Singapore where it’s sunny summer all year long), limited upside impact from automation initiative and golf tax.