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)

Myanmar 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: 162.6pt;"> </td><td style="width: 162.5pt;">ECWREIT</td><td style="width: 162.5pt;">SASSR</td><td style="width: 162.5pt;">BHGREIT</td></tr><tr><td style="width: 162.6pt;">Period</td><td style="width: 162.5pt;">1Q21</td><td style="width: 162.5pt;">1Q21</td><td style="width: 162.5pt;">1Q21</td></tr><tr><td style="width: 162.6pt;">Gross Revenue (S$ m)</td><td style="width: 162.5pt;">30.8 (+30.9% YoY)</td><td style="width: 162.5pt;">EMA Rental Income: 34.1 (+23.4% YoY)</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">NPI (S$ m)</td><td style="width: 162.5pt;">27.7 (+30.9% YoY)</td><td style="width: 162.5pt;">EMA Rental Income (Excluding straight-line adjustments): 32.3 (+27.8% YoY)</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">DPU (S$ c)</td><td style="width: 162.5pt;">1.53</td><td style="width: 162.5pt;">1.759 (+31.9% YoY)</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">NAV per Unit (S$)</td><td style="width: 162.5pt;">0.91</td><td style="width: 162.5pt;">0.922</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">P/B (x)</td><td style="width: 162.5pt;">0.81</td><td style="width: 162.5pt;">1.00</td><td style="width: 162.5pt;">0.64(Based on 4Q20 NAV)</td></tr><tr><td style="width: 162.6pt;">Occupancy (%)</td><td style="width: 162.5pt;"> 99.1</td><td style="width: 162.5pt;">93.5</td><td style="width: 162.5pt;">92.1</td></tr><tr><td style="width: 162.6pt;">Reversion (%)</td><td style="width: 162.5pt;"> NA</td><td style="width: 162.5pt;">Not Disclosed</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">Gearing (%)</td><td style="width: 162.5pt;">38.3</td><td style="width: 162.5pt;">27.6</td><td style="width: 162.5pt;">35.6</td></tr><tr><td style="width: 162.6pt;">Cost of Debt (%)</td><td style="width: 162.5pt;">4.1</td><td style="width: 162.5pt;">3.3</td><td style="width: 162.5pt;">3.8</td></tr><tr><td style="width: 162.6pt;">1 Yr Fwd Yield (%)</td><td style="width: 162.5pt;">7.76</td><td style="width: 162.5pt;">7.46</td><td style="width: 162.5pt;">NA</td></tr><tr><td style="width: 162.6pt;">Debt Hedged (%)</td><td style="width: 162.5pt;">100% of offshore facilities</td><td style="width: 162.5pt;">Not Disclosed</td><td style="width: 162.5pt;">60% of offshore loans</td></tr><tr><td style="width: 162.6pt;">Target Price</td><td style="width: 162.5pt;">Under Review</td><td style="width: 162.5pt;">NA</td><td style="width: 162.5pt;">NA</td></tr><tr><td style="width: 162.6pt;">Rating</td><td style="width: 162.5pt;">Under Review</td><td style="width: 162.5pt;">NA</td><td style="width: 162.5pt;">NA</td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/ec-world-reit" target="_blank" data-smartkarma-citation="entities:22842" rel="noopener">EC World Reit (ECWREIT SP)</a> 1Q21 DPU +32.3% YoY; Robust growth but DI retention persist with retained DI snowballing to S$5.49m</h3><ul><li>Both revenue and NPI grew by 30.9% YoY in 1Q21 to S$30.8m (26.9% BB est.) and S$27.7m (28.1% BB est.), respectively, mainly due to absence of rental rebates in 1Q20 and strengthening of RMB. In RMB terms, gross revenue and NPI were 26.0% and 26.1% YoY higher, respectively</li><li>1Q21 DPU increased 32.3% YoY or 7.4% QoQ to S$1.532c (26.9% BB est.), mainly due to absence of rental rebates given. ECWREIT continued to retain 10% of DI in 1Q21 (vs. 10% in 4Q20 and 5% in 1Q20) on a conservative view of uncertainties arising from prolonged COVID-19 pandemic globally and for general working capital purpose</li><li>ECWREIT has secured renewal of major lease at Hengde Logistics, extending WALE to 3.2 years (by GRI) from 3.1 years as at 31Mar21. ~11.8% of GRI will be due for renewal for the remaining of FY21E</li><li>Portfolio occupancy remains robust at 99.1% (vs. 99.3% in 4Q20 and 96.7% in 3Q20)</li><li>On 30Apr, ECWREIT announced an incident of a displacement and collapse of a berth at Chongxian Port Investment that resulted in the damage of two gantry cranes located within the vicinity of the berth. Due to the location of the damaged area, the operations at the damaged berth and the 2 adjacent berths have been suspended. The rest of the port operation is not affected. The cause of the incident is still being investigated. ECWREIT is working closely with the insurer to assess the quantum of revenue loss and property damage recoverable by insurance claims</li><li>Portfolio gearing stands at 38.3% (vs. 38.1% in 4Q20 and 38.6% in 1Q20) with average cost of debt of 4.1% pa. (vs. 4.2% in 4Q20 and 4.3% in 1Q20) and 100% of offshore facilities hedged</li><li>ECWREIT currently trades at 7.76% FY21E yield and 0.81x P/B.</li></ul>Comments: 1Q21 revenue and NPI came in at 26.5% and 26.0% of our full-year FY21E estimates, respectively. Meanwhile, 1Q21 DPU came in at 27.5% of FY21E estimates. Note that we have assumed a 10% DI retention for FY21E, the higher than expected 1Q21 DPU was due to a lower 1Q21 tax rate at 24.7% (vs. our projected 38.0%). Including 1Q21’s S$1.38m, total retained DI since 1Q20 has amounted to S$5.49m (or S$0.681c per Unit). Port Logistics had done well in 1Q21, with revenue increasing 40.4% YoY to S$12.7m, and NPI increasing 41.8% YoY to S$11.9m (NPI margin +0.9pp. YoY to 93.5%). E-commerce Logistics has also recorded a strong 1Q21 growth, with revenue and NPI rising 32.4% and 30.9% YoY to S$14.7m and S$12.7m, respectively (NPI margin -1.0% to 86.5%). On the other hand, Specialised Logistics was muted in 1Q21, with Revenue and NPI flattish YoY at S$3.4m and S$3.1m, respectively (NPI margin +0.7pp. to 90.7%). While insurance claims could offset the revenue loss and restoration costs somewhat, we are cognizant that Chongxian Port Investment contributed to ~27% and ~28% of FY20 Revenue and NPI, respectively. We are currently reviewing our recommendations for ECWREIT.

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) ECWREITSASSRBHGREITPeriod1Q211Q211Q21Gross Revenue (S$ m)30.8 (+30.9% YoY)EMA Rental Income: 34.1 (+23.4% YoY)Not DisclosedNPI (S$ m)27.7 (+30.9% YoY)EMA Rental Income (Excluding straight-line adjustments): 32.3 (+27.8% YoY)Not DisclosedDPU (S$ c)1.531.759 (+31.9% YoY)Not DisclosedNAV per Unit (S$)0.910.922Not DisclosedP/B (x)0.811.000.64(Based on 4Q20 NAV)Occupancy (%) 99.193.592.1Reversion (%) NANot DisclosedNot DisclosedGearing (%)38.327.635.6Cost of Debt (%)4.13.33.81 Yr Fwd Yield (%)7.767.46NADebt Hedged (%)100% of offshore facilitiesNot Disclosed60% of offshore loansTarget PriceUnder ReviewNANARatingUnder ReviewNANAEC World Reit (ECWREIT SP) 1Q21 DPU +32.3% YoY; Robust growth but DI retention persist with retained DI snowballing to S$5.49mBoth revenue and NPI grew by 30.9% YoY in 1Q21 to S$30.8m (26.9% BB est.) and S$27.7m (28.1% BB est.), respectively, mainly due to absence of rental rebates in 1Q20 and strengthening of RMB. In RMB terms, gross revenue and NPI were 26.0% and 26.1% YoY higher, respectively1Q21 DPU increased 32.3% YoY or 7.4% QoQ to S$1.532c (26.9% BB est.), mainly due to absence of rental rebates given. ECWREIT continued to retain 10% of DI in 1Q21 (vs. 10% in 4Q20 and 5% in 1Q20) on a conservative view of uncertainties arising from prolonged COVID-19 pandemic globally and for general working capital purposeECWREIT has secured renewal of major lease at Hengde Logistics, extending WALE to 3.2 years (by GRI) from 3.1 years as at 31Mar21. ~11.8% of GRI will be due for renewal for the remaining of FY21EPortfolio occupancy remains robust at 99.1% (vs. 99.3% in 4Q20 and 96.7% in 3Q20)On 30Apr, ECWREIT announced an incident of a displacement and collapse of a berth at Chongxian Port Investment that resulted in the damage of two gantry cranes located within the vicinity of the berth. Due to the location of the damaged area, the operations at the damaged berth and the 2 adjacent berths have been suspended. The rest of the port operation is not affected. The cause of the incident is still being investigated. ECWREIT is working closely with the insurer to assess the quantum of revenue loss and property damage recoverable by insurance claimsPortfolio gearing stands at 38.3% (vs. 38.1% in 4Q20 and 38.6% in 1Q20) with average cost of debt of 4.1% pa. (vs. 4.2% in 4Q20 and 4.3% in 1Q20) and 100% of offshore facilities hedgedECWREIT currently trades at 7.76% FY21E yield and 0.81x P/B.Comments: 1Q21 revenue and NPI came in at 26.5% and 26.0% of our full-year FY21E estimates, respectively. Meanwhile, 1Q21 DPU came in at 27.5% of FY21E estimates. Note that we have assumed a 10% DI retention for FY21E, the higher than expected 1Q21 DPU was due to a lower 1Q21 tax rate at 24.7% (vs. our projected 38.0%). Including 1Q21’s S$1.38m, total retained DI since 1Q20 has amounted to S$5.49m (or S$0.681c per Unit). Port Logistics had done well in 1Q21, with revenue increasing 40.4% YoY to S$12.7m, and NPI increasing 41.8% YoY to S$11.9m (NPI margin +0.9pp. YoY to 93.5%). E-commerce Logistics has also recorded a strong 1Q21 growth, with revenue and NPI rising 32.4% and 30.9% YoY to S$14.7m and S$12.7m, respectively (NPI margin -1.0% to 86.5%). On the other hand, Specialised Logistics was muted in 1Q21, with Revenue and NPI flattish YoY at S$3.4m and S$3.1m, respectively (NPI margin +0.7pp. to 90.7%). While insurance claims could offset the revenue loss and restoration costs somewhat, we are cognizant that Chongxian Port Investment contributed to ~27% and ~28% of FY20 Revenue and NPI, respectively. We are currently reviewing our recommendations for ECWREIT.

ASEAN Builder's Scoop (12May21) - ECWREIT strong growth despite retention