In this briefing:
- The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee
- Embassy Office Parks REIT – Comparison with AIT and a Look at the Required Yield
- Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class
- Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
1. The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee
This week’s offering of Insights across ASEAN@Smartkarma is 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.
Macro Insights
In Widodo’s Generals Take Fire / Anti-Foreign Rhetoric Takes Toll / Land Hampers Adhi’s LRT / MRT Near, CrossASEAN Insight Provider Kevin O’Rourke provides his value-added views on political and economic developments in Indonesia over the last week.
In Asia’s External Balances Signal Safety for Investors, Dr Jim Walker takes a close look at Asian currencies, their performance over the last year and highlights some interesting misperceptions.
Equity Bottom-Up Insights
In the second company piece in a Smartkarma Originals series, Indonesia Property – In Search of the End of the Rainbow – Part 2 – Bumi Serpong Damai (BSDE IJ), CrossASEAN Insight ProviderAngus Mackintosh looks in detail at leading township developer Bumi Serpong Damai (BSDE IJ), which has exposure ranging from landed housing, shophouses, condominiums, as well as the defensive and growing buffer of nearly 20% of revenues coming from recurrent rental income.
In Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA, CrossASEAN Insight provider Nicolas Van Broekhoven revisits Procurri Corporation (PROC SP) and finds an overhang lifted for the stock.
In Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring, Angus Mackintosh revisits this leading Indonesian media company and finds it on the cusp of a more digital future.
In Blue Bird (BIRD IJ) – Transport Wizzard with a Twist, Angus Mackintosh revisits Indonesia’s leading taxi company after a meeting with management and comes back with some positive newsflow.
In Sea Ltd: Further Share Re-Rating After a 35% Daily Gain? Why Not?, Johannes Salim, CFA circles back to Sea Ltd (SE US) after the post-results call with management.
In Bank Danamon Goes Ex-Rights, Travis Lundy circles back to the ongoing merger between Bank Danamon Indonesia (BDMN IJ) and Mitsubishi Ufj Financial (8306 JP).
In BIMB: Market Gives Thumbs-Up to Results, Paul Hollingworth takes a close look at this Malaysian Bank. Bimb Holdings (BIMB MK) or BHB commands two subsidiaries, Bank Islam and Takaful Malaysia.
In Golden Land: Less An Offer, More A Consolidation Of Interests, event-driven specialist David Blennerhassett revisits this ongoing takeover situation.
In Ho Bee Land – 4Q Earnings Hit by Unexpected Tax Provision, Royston Foo revisits the company post recent results.
In SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019, our friend at Country Group comment on Synnex Thailand (SYNEX TB) following recent numbers.
In PRM: Thai Largest Tanker Fleets Assured of Consistent Growth, Country Group initiates coverage on Prima Marine PCL (PRM TB) with a BUY rating.
Sector and Thematic Insights
In INDO Snippets: Second Presidential Debate, BNLI & PNBN – This Time Is Real?, CrossASEAN Insight provider Jessica Irene provides us with substantive and significant on the ground chatter that may potentially have a meaningful impact on the Indonesian Equity Market. This week she comments on the second presidential debate, Bank Permata (BNLI IJ) stake sale rumours, as well as ANZ’s potential disposal of its stake in Bank Pan Indonesia (PNBN IJ).
In Jakarta Trip – On the Ground Insight Feb 2019, CrossASEAN Insight Provider Henry Soediarko provides us with his value-added on the ground comments following a trip to Jakarta.
In Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class, Anni Kum puts out her fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, she examines Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign workforce policy.
2. Embassy Office Parks REIT – Comparison with AIT and a Look at the Required Yield
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.
In my previous insight, Embassy Office Parks REIT – Good Assets but Projections Might Be a Tad Too Bullish I covered the company background and its projected growth. In this insight, I’ll compare it to its closest listed peer, Ascendas India Trust (AIT SP) and add in the performance of other yield driven listings in India.
3. Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class
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.
4. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
In the past month, positive announcements from both sides stoked hopes for a trade deal between the US and China. Meanwhile, global security deteriorated, with two more regions finding themselves on a brink of war. A major terrorist act in Kashmir provoked a sharp increase in tensions between India and Pakistan. Venezuela’s opposition leader has called for foreign powers to intervene after deadly clashes on the Colombian border. On the other hand, investors should be relieved by the relatively calm situation in Nigeria where incumbent president Buhari won the election last weekend. In Brazil, newly elected president Bolsonaro hopes to push through radical pension reform.
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