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)

Singapore Real estate / Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/ascendas-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:39" rel="noopener">Ascendas Real Estate Investment Trust (AREIT SP)</a> to divest three properties in Australia for ~4.1% NPI yield (BUY; TP S$3.55/unit)</h3>AREIT will divest three logistics properties in Australia for a total of AUD125.1m (S$128.7m). The sale price is ~16.8% higher than the total market valuations of the properties of AUD101.1m as at 31Dec20. The divestments are expected to be completed by 3Q21. AREIT had entered into two separate agreements with unrelated purchasers for the sale of two logistics properties (82 Noosa Street and 62 Stradbroke Street) in Brisbane; and one logistics property (1314 Ferntree Gully Road) in Melbourne. Assuming the divestments were completed on 1Jan20, the annualised proforma impact on AREIT’s NPI would have been a decrease of S$5.1m and DPU would have fallen by S$0.075c for FY20. Net proceeds after divestment costs are expected to be S$124.0m. If the net proceeds were used to repay AREIT’s borrowings as at 31Mar, its gearing will be reduced from 38% to around 37.5%. Post-divestment, AREIT will own 95 properties in Singapore, 34 properties in Australia, 30 properties in the US and 49 properties in the UK/Europe. <table class="table table-striped"><tbody><tr><td style="width: 59.3438px;">Asset</td><td style="width: 48.4375px;">Asset Type</td><td style="width: 45.9375px;">FY20 Gross Revenue</td><td style="width: 59.5781px;">NLA as at 31Dec20</td><td style="width: 59.5625px;">Occupancy as at 31Dec20</td><td style="width: 60.6406px;">Acquisition Date</td><td style="width: 60.6406px;">Acquisition Price</td><td style="width: 101.734px;">Valuation as at 31Dec20(A$1.000:S$0.980)</td><td style="width: 94.9219px;">Sale Price(A$1.00:S$1.029)</td><td style="width: 63.7188px;">Buyer</td></tr><tr><td style="width: 59.3438px;">82 Noosa Street, Brisbane, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$3.3m</td><td style="width: 59.5781px;">38,000sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Oct15</td><td style="width: 60.6406px;">S$66.0m</td><td style="width: 101.734px;">A$53.0m (S$51.9m)</td><td rowspan="2" style="width: 94.9219px;">A$101.6m (S$104.5m)or A$1,624psqm</td><td rowspan="2" style="width: 63.7188px;">SIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners</td></tr><tr><td style="width: 59.3438px;">62 Stradbroke Street, Brisbane, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$2.6m</td><td style="width: 59.5781px;">24,555sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Oct15</td><td style="width: 60.6406px;">S$35.9m</td><td style="width: 101.734px;">A$37.4m (S$36.7m)</td></tr><tr><td style="width: 59.3438px;">1314 Ferntree Gully Road, Melbourne, Australia</td><td style="width: 48.4375px;">Logistics</td><td style="width: 45.9375px;">S$0.5m</td><td style="width: 59.5781px;">16,134sqm</td><td style="width: 59.5625px;">100%</td><td style="width: 60.6406px;">Jun18</td><td style="width: 60.6406px;">S$16.4m</td><td style="width: 101.734px;">A$16.6m (S$16.3m)</td><td style="width: 94.9219px;">A$23.5m (S$24.2m)or A$1,500psqm</td><td style="width: 63.7188px;">China Tube Pty Ltd and Haelram Pty Ltd</td></tr><tr><td colspan="2" style="width: 128.781px;">TOTAL</td><td style="width: 45.9375px;">S$6.4m</td><td style="width: 59.5781px;"> </td><td style="width: 59.5625px;"> </td><td style="width: 60.6406px;"> </td><td style="width: 60.6406px;">S$118.3m</td><td style="width: 101.734px;">A$107.1m (S$104.9m)</td><td style="width: 94.9219px;">A$125.1m (S$128.7m)</td><td style="width: 63.7188px;"> </td></tr></tbody></table>Comments:<ul><li>Taking reference from FY20 AUS Portfolio NPI Margin of 79.0%, the blended NPI yield based on S$128.7m Sale Price would be ~3.9%. Note that comparing the exchange rate adopted for Sale Price vs. Valuation as at 31Dec20, the AUD has strengthen ~5%. Using the 31Dec20 exchange rate, the blended NPI yield would be ~4.1%. Together with its recent divestment of 11 Changi North Way (at S$16.0m), AREIT would have a total divestment proceeds S$144.7m and booking total S$33.8m divestment gain</li><li>Moving forward, we expect AREIT’s DPU to be propelled by both organic and inorganic growth while it reconstitute its portfolio. Notwithstanding the S$1.19bn worth of acquisitions in 1Q21 (estimated to be 1.5% DPU accretive) and the acquisition of remaining 75% of Galaxis (estimated to be 0.40% DPU accretive), the new BTS business park development for Grab as well as UBIX redevelopment (formerly 25 &amp; 27 Ubi Road 4) should start contributing by 2H21 (expected to add S$14.2m to NPI on a full-year basis at 6.4%-7.5% NPI yields)</li><li>We believe AREIT remains in a virtuous cycle of growth. The S$420.0m EFR exercise in 4May21 as well as repayment debt utilizing the divestment proceeds should lower its gearing. With greater financial flexibility, relatively low cost of equity and low interest rate environment, AREIT has further scope for inorganic growth. We have a BUY rating with TP of S$3.55/Unit.</li></ul>

SingaporeAscendas Real Estate Investment Trust (AREIT SP) to divest three properties in Australia for ~4.1% NPI yield (BUY; TP S$3.55/unit)AREIT will divest three logistics properties in Australia for a total of AUD125.1m (S$128.7m). The sale price is ~16.8% higher than the total market valuations of the properties of AUD101.1m as at 31Dec20. The divestments are expected to be completed by 3Q21. AREIT had entered into two separate agreements with unrelated purchasers for the sale of two logistics properties (82 Noosa Street and 62 Stradbroke Street) in Brisbane; and one logistics property (1314 Ferntree Gully Road) in Melbourne. Assuming the divestments were completed on 1Jan20, the annualised proforma impact on AREIT’s NPI would have been a decrease of S$5.1m and DPU would have fallen by S$0.075c for FY20. Net proceeds after divestment costs are expected to be S$124.0m. If the net proceeds were used to repay AREIT’s borrowings as at 31Mar, its gearing will be reduced from 38% to around 37.5%. Post-divestment, AREIT will own 95 properties in Singapore, 34 properties in Australia, 30 properties in the US and 49 properties in the UK/Europe. AssetAsset TypeFY20 Gross RevenueNLA as at 31Dec20Occupancy as at 31Dec20Acquisition DateAcquisition PriceValuation as at 31Dec20(A$1.000:S$0.980)Sale Price(A$1.00:S$1.029)Buyer82 Noosa Street, Brisbane, AustraliaLogisticsS$3.3m38,000sqm100%Oct15S$66.0mA$53.0m (S$51.9m)A$101.6m (S$104.5m)or A$1,624psqmSIRE (Strategic Industrial Real Estate), an Arrow Capital Partners vehicle in cooperation with Altis Property Partners62 Stradbroke Street, Brisbane, AustraliaLogisticsS$2.6m24,555sqm100%Oct15S$35.9mA$37.4m (S$36.7m)1314 Ferntree Gully Road, Melbourne, AustraliaLogisticsS$0.5m16,134sqm100%Jun18S$16.4mA$16.6m (S$16.3m)A$23.5m (S$24.2m)or A$1,500psqmChina Tube Pty Ltd and Haelram Pty LtdTOTALS$6.4m   S$118.3mA$107.1m (S$104.9m)A$125.1m (S$128.7m) Comments:Taking reference from FY20 AUS Portfolio NPI Margin of 79.0%, the blended NPI yield based on S$128.7m Sale Price would be ~3.9%. Note that comparing the exchange rate adopted for Sale Price vs. Valuation as at 31Dec20, the AUD has strengthen ~5%. Using the 31Dec20 exchange rate, the blended NPI yield would be ~4.1%. Together with its recent divestment of 11 Changi North Way (at S$16.0m), AREIT would have a total divestment proceeds S$144.7m and booking total S$33.8m divestment gainMoving forward, we expect AREIT’s DPU to be propelled by both organic and inorganic growth while it reconstitute its portfolio. Notwithstanding the S$1.19bn worth of acquisitions in 1Q21 (estimated to be 1.5% DPU accretive) and the acquisition of remaining 75% of Galaxis (estimated to be 0.40% DPU accretive), the new BTS business park development for Grab as well as UBIX redevelopment (formerly 25 &amp; 27 Ubi Road 4) should start contributing by 2H21 (expected to add S$14.2m to NPI on a full-year basis at 6.4%-7.5% NPI yields)We believe AREIT remains in a virtuous cycle of growth. The S$420.0m EFR exercise in 4May21 as well as repayment debt utilizing the divestment proceeds should lower its gearing. With greater financial flexibility, relatively low cost of equity and low interest rate environment, AREIT has further scope for inorganic growth. We have a BUY rating with TP of S$3.55/Unit.

ASEAN Builder's Scoop (4Jun21) - AREIT Divesting 3 AUS Props for ~4.1% Yield