Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

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.

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

Cambodia Real estate / Thematic (Sector/Industry)

<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: 167.45pt;"> </td><td style="width: 129.85pt;">CERT (€)</td><td style="width: 117.6pt;">MUST (US$)</td><td style="width: 117.6pt;">KORE (US$)</td></tr><tr><td style="width: 167.45pt;">Period</td><td style="width: 129.85pt;">1Q21</td><td style="width: 117.6pt;">1Q21</td><td style="width: 117.6pt;">1Q21</td></tr><tr><td style="width: 167.45pt;">Gross Revenue (S$ m)</td><td style="width: 129.85pt;">48.5 (-0.1% YoY)</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">34.6 (-2.1% YoY)</td></tr><tr><td style="width: 167.45pt;">NPI (S$ m)</td><td style="width: 129.85pt;">30.8 (-0.4% YoY)</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">20.4 (-2.8% YoY)</td></tr><tr><td style="width: 167.45pt;">DPU (S$ c)</td><td style="width: 129.85pt;">0.827 (-9.1% YoY)</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">Not Disclosed</td></tr><tr><td style="width: 167.45pt;">NAV per Unit (S$)</td><td style="width: 129.85pt;">2.445</td><td style="width: 117.6pt;">0.730</td><td style="width: 117.6pt;">Not Disclosed</td></tr><tr><td style="width: 167.45pt;">P/B (x)</td><td style="width: 129.85pt;">0.978</td><td style="width: 117.6pt;">1.030 (Based on 4Q20 NAV)</td><td style="width: 117.6pt;">0.90 (Based on 4Q20 NAV)</td></tr><tr><td style="width: 167.45pt;">Occupancy (%)</td><td style="width: 129.85pt;">94.6</td><td style="width: 117.6pt;">92.0</td><td style="width: 117.6pt;">91.6</td></tr><tr><td style="width: 167.45pt;">Reversion (%)</td><td style="width: 129.85pt;">-1.3</td><td style="width: 117.6pt;">2.1</td><td style="width: 117.6pt;">5.7</td></tr><tr><td style="width: 167.45pt;">Gearing (%)</td><td style="width: 129.85pt;">38.5</td><td style="width: 117.6pt;">41.3</td><td style="width: 117.6pt;">37.5</td></tr><tr><td style="width: 167.45pt;">Cost of Debt (%)</td><td style="width: 129.85pt;">1.72</td><td style="width: 117.6pt;">3.18</td><td style="width: 117.6pt;">2.82</td></tr><tr><td style="width: 167.45pt;">1 Yr Fwd Yield (%)</td><td style="width: 129.85pt;">7.95</td><td style="width: 117.6pt;">8.00</td><td style="width: 117.6pt;">8.3</td></tr><tr><td style="width: 167.45pt;">Debt Hedged (%)</td><td style="width: 129.85pt;">100</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">84.7</td></tr><tr><td style="width: 167.45pt;">Target Price</td><td style="width: 129.85pt;">NA</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">NA</td></tr><tr><td style="width: 167.45pt;">Rating</td><td style="width: 129.85pt;">NA</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">NA</td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889" rel="noopener">Cromwell European REIT (CERT SP)</a> 1Q21 Business Update – Weakening operational metrics with negative reversions and falling occupancies</h3><ul><li>1Q21 revenue and NPI decreased by 0.1% and 0.4% YoY, respectively, to €48.5m (28.4% BB est) and €30.8m. Prolonged COVID-19 lockdowns impacted 1Q21 gross revenue and NPI, notably reducing carpark income in the mixed-use Central Plaza in Rotterdam, the Netherlands and resulting in some vacancy in certain light industrial/logistics assets in France and Denmark. The disposal of 12 higher-yielding and higher-risk assets in the Netherlands, France and Denmark also affected gross revenue, though this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia</li><li>1Q21 DPU decreased 9.1% YoY to €0.827c (21.8% BB est). This due to the same factors impacting DI as well as the timing of the investment of the €100m private placement proceeds to offset the additional weighted average units on issue in Mar21. 1Q21 DI was €21.7m, 6.5% lower YoY, due to the same factors affecting gross revenue and NPI. It was further impacted by €0.8m of higher interest expenses from the €500m longer-tenured bond issuances and certain one-off trust expenses of €0.4m</li><li>Overall portfolio occupancy decreased slightly to 94.6% in 1Q21 (vs. 95.1% in 4Q20 and 94.3% in 3Q20), mainly due to vacancies in office assets in France and Finland and the departure of an anchor tenant-customer (Nilfisk), which relocated its operations to Belgium from the Priorparken 700 / 800 asset in Copenhagen, Denmark. CERT recorded 37 new leases and 21 renewals for 19,735sqm and 13,428sqm of space, respectively. Portfolio WALE stood at 4.8 years. Rental reversions came in at -1.3% in 1Q21 (vs +2.1% in 4Q20 and +2.8% in 3Q20)</li><li>Office – Occupancy of 94.5% (vs 95.1% in 4Q20 and 94.9% in 3Q20). CERT recorded 9 new leases and 7 renewals for 1,180sqm and 2,189sqm of space, respectively. 34% tenant retention rate, 21% of expiries and breaks up to 30Sep21 have been de-risked. Office WALE stood at 4.4 years. Rental reversions came in at -1.0% in 1Q21 (vs +1.7% in 4Q20 and -1.4% in 3Q20)   </li><li>Industrial/logistics – Occupancy of 93.8% (vs 94.1% in 4Q20 and 92.3% in 3Q20). CERT recorded 28 new leases and 13 renewals for 18,556sqm and 10,381sqm of space, respectively. 26% tenant retention rate, 79% of expiries and breaks up to 30Sep21 have been de-risked. Industrial WALE stood at 4.8 years. Rental reversions came in at +1.5% in 1Q21 (vs +3.8% in 4Q20 and +14.4% in 3Q20)   </li><li>Portfolio gearing stands at 38.5% (vs. 38.1% in 4Q20 and 35.9% in 3Q20) with average cost of debt of 1.72% pa. (vs. 1.66% in 4Q20 and 1.5% in 3Q20) with 100% of debt hedged. CERT maintained a strong cash position of €75.8m</li><li>CERT currently trades at 7.95% FY21E yield and 0.978x P/B.</li></ul><h3><a href="https://www.smartkarma.com/entities/manulife-us-reit" target="_blank" data-smartkarma-citation="entities:567" rel="noopener">Manulife US REIT (MUST SP)</a> 1Q21 Business Updates – US office market remains muted, mitigated by limited supply and expiry in MUST’s markets</h3><ul><li>Revenue, NPI and DI were not disclosed in 1Q21</li><li>Overall portfolio occupancy dipped further to 92.0% in 1Q21 (vs. 93.4% in 4Q20 and 94.3% in 3Q20), but is still above the US Class-A average of ~82%</li><li>MUST signed 270,000sqft (~5.8% of NLA) of leases in 1Q21 with +2.1% rental reversions (vs. +0.1% in full-year FY20 and +7.9% in 9M20). These leases are mainly from renewals (93.6%), followed by expansion (5.3%) and new leases (1.1%), supported by finance and insurance, administrative, advertising and legal sectors. It has a long WALE of 5.3 years with ~4.4% (by GRI) or 4.3% (by NLA) of leases up for renewal for the remaining of FY21E. Nonetheless, its current portfolio has a 2.1% in-place rental escalations. Given limited supply in MUST’s markets over the next 12 months, these markets is expected to see a 2.5% rent growth, in line with the overall US average</li><li>Tenants’ collection rate remains healthy (98% collection), but challenges for 2021 include: 1) Low physical occupancy at 5-25% (low carpark income), and 2) existing vacancies remain a challenge to fill (larger space takes longer to fill and it’s still a tenant’s market with higher incentive and rent free)</li><li>Portfolio gearing stands at 41.3% (vs. 41.0% in 4Q20 and 39.9% in 3Q20) with average cost of debt of 3.18% pa. (vs. 3.18% in 4Q20 and 3.21% in 3Q20). In Apr21, MUST has refinanced its loans due FY21E at lower interest rate, bringing weighted average interest rate to 3.0% and increasing weighted average debt maturity to 3.4 years</li><li>MUST currently trades at 8.00% FY21E yield and 1.03x P/B. </li></ul><figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=03e35791bb&amp;attid=0.0.3&amp;permmsgid=msg-f:1699422834728702566&amp;th=1795901073311266&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8sEKl6WDAe8N9__qHKBNe6-08vbrc8QfHwJamRBTAaR_dON_UK1yOULc7lIYoAqOLnG1bIt-bZRfkFUmsv6mNgGuwGup4IAMyZuiuu1S3HH7pcwGFiu6yseig&amp;disp=emb" width="403" height="199" class="editor-image img-responsive" data-image-whitelisted=""></figure><figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=03e35791bb&amp;attid=0.0.4&amp;permmsgid=msg-f:1699422834728702566&amp;th=1795901073311266&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_0APJf80bwv3E2S_EiRYN8qcm-reP1OQ2z06j7ZbYooytHl5IJJso0tnZEZ2wCt-YWmA-nXxQk1VnMuNtz5DfMAf0FyvFj2bW9VWWOmPzOeJvwjpGsNdafsus&amp;disp=emb" width="364" height="196" class="editor-image img-responsive" data-image-whitelisted=""></figure><h3><a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209" rel="noopener">Propnex Ltd (PROP SP)</a> 1Q21 PATMI almost doubled to S$16.2m; Debt free balance sheet  </h3>PROP reported a 96.7% YoY growth in net profit after tax for 1Q21 to S$16.2m(vs S$8.2m in 1Q20), on the back of a 63.3% YoY growth in revenue to S$220.6m (vs S$135.1m in 1Q20). The performance was driven by higher number of transactions completed in 1Q21 following the recovery of private residential market from the property cooling measures in Jul18. Revenue growth was mainly driven due to the increase in commission income from agency services of ~S$47.5m and increase in project marketing services of ~S$38.0m. The results translate to an EPS growth of 95.6% YoY to S$4.01c in 1Q21. PROP remained debt free, and its balance sheet remained robust with cash and cash equivalents of S$118.9m as at 31Mar21, compared to S$105.8m as at 31Dec20. PROP has also taken 70% interest in Ovvy, The People Marketplace, a technology platform that connects service providers to consumers.<h3><a href="https://www.smartkarma.com/entities/lh-group-ltd" target="_blank" data-smartkarma-citation="entities:4397" rel="noopener">Pacific Star Development (PSTAR SP)</a> 3Q21 net loss increases, identified uncertainty over operating as going concern</h3>PSTAR, whose management is voicing uncertainty over its ability to operate as a going concern, sank further into the red in 3Q21. Net loss widened to S$8.2m as revenue came in 81% YoY lower at S$674,000 due to lower number of Puteri Cove Residences units sold. Gross profit plunged 90% YoY to S$56,000. The group booked an increase of S$1.28m in other expenses largely due to an increase in trade receivables written off as a result of cancellation of sales and purchase agreements for Puteri Cove Residences units. Loss per share was S$1.64c, higher than S$1.6c the year before. As at 31Mar, the group's net liability position was S$69.3m. PSTAR said there is uncertainty as to whether the group is able to meet its contractual obligations in the next 12 months as and when they fall due, and hence there is uncertainty over its ability to operate as a going concern for the next 12 months.

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) CERT (€)MUST (US$)KORE (US$)Period1Q211Q211Q21Gross Revenue (S$ m)48.5 (-0.1% YoY)NA34.6 (-2.1% YoY)NPI (S$ m)30.8 (-0.4% YoY)NA20.4 (-2.8% YoY)DPU (S$ c)0.827 (-9.1% YoY)NANot DisclosedNAV per Unit (S$)2.4450.730Not DisclosedP/B (x)0.9781.030 (Based on 4Q20 NAV)0.90 (Based on 4Q20 NAV)Occupancy (%)94.692.091.6Reversion (%)-1.32.15.7Gearing (%)38.541.337.5Cost of Debt (%)1.723.182.821 Yr Fwd Yield (%)7.958.008.3Debt Hedged (%)100NA84.7Target PriceNANANARatingNANANACromwell European REIT (CERT SP) 1Q21 Business Update – Weakening operational metrics with negative reversions and falling occupancies1Q21 revenue and NPI decreased by 0.1% and 0.4% YoY, respectively, to €48.5m (28.4% BB est) and €30.8m. Prolonged COVID-19 lockdowns impacted 1Q21 gross revenue and NPI, notably reducing carpark income in the mixed-use Central Plaza in Rotterdam, the Netherlands and resulting in some vacancy in certain light industrial/logistics assets in France and Denmark. The disposal of 12 higher-yielding and higher-risk assets in the Netherlands, France and Denmark also affected gross revenue, though this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia1Q21 DPU decreased 9.1% YoY to €0.827c (21.8% BB est). This due to the same factors impacting DI as well as the timing of the investment of the €100m private placement proceeds to offset the additional weighted average units on issue in Mar21. 1Q21 DI was €21.7m, 6.5% lower YoY, due to the same factors affecting gross revenue and NPI. It was further impacted by €0.8m of higher interest expenses from the €500m longer-tenured bond issuances and certain one-off trust expenses of €0.4mOverall portfolio occupancy decreased slightly to 94.6% in 1Q21 (vs. 95.1% in 4Q20 and 94.3% in 3Q20), mainly due to vacancies in office assets in France and Finland and the departure of an anchor tenant-customer (Nilfisk), which relocated its operations to Belgium from the Priorparken 700 / 800 asset in Copenhagen, Denmark. CERT recorded 37 new leases and 21 renewals for 19,735sqm and 13,428sqm of space, respectively. Portfolio WALE stood at 4.8 years. Rental reversions came in at -1.3% in 1Q21 (vs +2.1% in 4Q20 and +2.8% in 3Q20)Office – Occupancy of 94.5% (vs 95.1% in 4Q20 and 94.9% in 3Q20). CERT recorded 9 new leases and 7 renewals for 1,180sqm and 2,189sqm of space, respectively. 34% tenant retention rate, 21% of expiries and breaks up to 30Sep21 have been de-risked. Office WALE stood at 4.4 years. Rental reversions came in at -1.0% in 1Q21 (vs +1.7% in 4Q20 and -1.4% in 3Q20)   Industrial/logistics – Occupancy of 93.8% (vs 94.1% in 4Q20 and 92.3% in 3Q20). CERT recorded 28 new leases and 13 renewals for 18,556sqm and 10,381sqm of space, respectively. 26% tenant retention rate, 79% of expiries and breaks up to 30Sep21 have been de-risked. Industrial WALE stood at 4.8 years. Rental reversions came in at +1.5% in 1Q21 (vs +3.8% in 4Q20 and +14.4% in 3Q20)   Portfolio gearing stands at 38.5% (vs. 38.1% in 4Q20 and 35.9% in 3Q20) with average cost of debt of 1.72% pa. (vs. 1.66% in 4Q20 and 1.5% in 3Q20) with 100% of debt hedged. CERT maintained a strong cash position of €75.8mCERT currently trades at 7.95% FY21E yield and 0.978x P/B.Manulife US REIT (MUST SP) 1Q21 Business Updates – US office market remains muted, mitigated by limited supply and expiry in MUST’s marketsRevenue, NPI and DI were not disclosed in 1Q21Overall portfolio occupancy dipped further to 92.0% in 1Q21 (vs. 93.4% in 4Q20 and 94.3% in 3Q20), but is still above the US Class-A average of ~82%MUST signed 270,000sqft (~5.8% of NLA) of leases in 1Q21 with +2.1% rental reversions (vs. +0.1% in full-year FY20 and +7.9% in 9M20). These leases are mainly from renewals (93.6%), followed by expansion (5.3%) and new leases (1.1%), supported by finance and insurance, administrative, advertising and legal sectors. It has a long WALE of 5.3 years with ~4.4% (by GRI) or 4.3% (by NLA) of leases up for renewal for the remaining of FY21E. Nonetheless, its current portfolio has a 2.1% in-place rental escalations. Given limited supply in MUST’s markets over the next 12 months, these markets is expected to see a 2.5% rent growth, in line with the overall US averageTenants’ collection rate remains healthy (98% collection), but challenges for 2021 include: 1) Low physical occupancy at 5-25% (low carpark income), and 2) existing vacancies remain a challenge to fill (larger space takes longer to fill and it’s still a tenant’s market with higher incentive and rent free)Portfolio gearing stands at 41.3% (vs. 41.0% in 4Q20 and 39.9% in 3Q20) with average cost of debt of 3.18% pa. (vs. 3.18% in 4Q20 and 3.21% in 3Q20). In Apr21, MUST has refinanced its loans due FY21E at lower interest rate, bringing weighted average interest rate to 3.0% and increasing weighted average debt maturity to 3.4 yearsMUST currently trades at 8.00% FY21E yield and 1.03x P/B. Propnex Ltd (PROP SP) 1Q21 PATMI almost doubled to S$16.2m; Debt free balance sheet  PROP reported a 96.7% YoY growth in net profit after tax for 1Q21 to S$16.2m(vs S$8.2m in 1Q20), on the back of a 63.3% YoY growth in revenue to S$220.6m (vs S$135.1m in 1Q20). The performance was driven by higher number of transactions completed in 1Q21 following the recovery of private residential market from the property cooling measures in Jul18. Revenue growth was mainly driven due to the increase in commission income from agency services of ~S$47.5m and increase in project marketing services of ~S$38.0m. The results translate to an EPS growth of 95.6% YoY to S$4.01c in 1Q21. PROP remained debt free, and its balance sheet remained robust with cash and cash equivalents of S$118.9m as at 31Mar21, compared to S$105.8m as at 31Dec20. PROP has also taken 70% interest in Ovvy, The People Marketplace, a technology platform that connects service providers to consumers.Pacific Star Development (PSTAR SP) 3Q21 net loss increases, identified uncertainty over operating as going concernPSTAR, whose management is voicing uncertainty over its ability to operate as a going concern, sank further into the red in 3Q21. Net loss widened to S$8.2m as revenue came in 81% YoY lower at S$674,000 due to lower number of Puteri Cove Residences units sold. Gross profit plunged 90% YoY to S$56,000. The group booked an increase of S$1.28m in other expenses largely due to an increase in trade receivables written off as a result of cancellation of sales and purchase agreements for Puteri Cove Residences units. Loss per share was S$1.64c, higher than S$1.6c the year before. As at 31Mar, the group's net liability position was S$69.3m. PSTAR said there is uncertainty as to whether the group is able to meet its contractual obligations in the next 12 months as and when they fall due, and hence there is uncertainty over its ability to operate as a going concern for the next 12 months.

ASEAN Builder's Scoop (11May21) - CERT weakening operational metrics