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><a href="https://www.smartkarma.com/entities/suntec-reit" target="_blank" data-smartkarma-citation="entities:151" rel="noopener">Suntec REIT (SUN SP)</a> issues 5yrs S$150m perpetual securities at 4.25% pa; Perps are back this year as funding alternatives</h3>SUN has priced S$150m of subordinated perpetual securities at 4.25% pa for five years. After the first reset date of 15Jun26, the new rate will be equivalent to the Swap Offer Rate, its successor rate, or if there is no successor rate, an alternative reference rate, with respect to the reset date plus the initial spread of 3.29%. The net proceeds from the issue will be used for refinancing its existing borrowings, financing or refinancing its acquisitions or investments and financing any asset enhancement works. The perpetuals will be issued under its US$2bn Euro Medium Term Securities Programme. Distributions under the perpetuals shall be payable semi-annually in arrears on 15Jun and 15Dec in each year, commencing on 15Dec21.Comments: Perps are back and we have seen 3 SREITs issuing perps so far this year with an average coupon of 3.2-4.2%. We think perps are good funding alternatives for SREITs on top of traditional bank loan, bond, or equity – as long as they are not utilized as “financial engineering” to make deals look accretive on acquisitions. However, important metrics to look at 1) perps as % equity – anything above 10% can be perceived as “high” by the market; and 2) look-through gearing – preferably remains below the statutory limit of 50%.  <table class="table table-striped"><tbody><tr><td style="width: 154.422px;"> </td><td style="width: 165.188px;">SUN</td><td style="width: 161.375px;">LREIT</td><td style="width: 163.016px;">MINT</td></tr><tr><td style="width: 154.422px;">Date of Issue</td><td style="width: 165.188px;">7-Jun-21</td><td style="width: 161.375px;">27-May-21</td><td style="width: 163.016px;">3-May-21</td></tr><tr><td style="width: 154.422px;">Size</td><td style="width: 165.188px;">S$150,000,000</td><td style="width: 161.375px;">S$200,000,000</td><td style="width: 163.016px;">S$300,000,000</td></tr><tr><td style="width: 154.422px;">Rate</td><td style="width: 165.188px;">15Jun21 - 15Jun26: 4.25% 31Jan23 onwards : 3.290% + Swap Offer Rate/Successor Rate/Alternative Reference Rate</td><td style="width: 161.375px;">4.2% Pa</td><td style="width: 163.016px;">3.15% Fixed Rate Pa</td></tr><tr><td style="width: 154.422px;">Financial  Calendar Referenced</td><td style="width: 165.188px;">FY20</td><td style="width: 161.375px;">1H21</td><td style="width: 163.016px;">FY21</td></tr><tr><td style="width: 154.422px;">Total Perps as % of Equity</td><td style="width: 165.188px;">6.0</td><td style="width: 161.375px;">16.7</td><td style="width: 163.016px;">7.2</td></tr><tr><td style="width: 154.422px;">Total Perps as % of Debt</td><td style="width: 165.188px;">7.3</td><td style="width: 161.375px;">36.6</td><td style="width: 163.016px;">13.2</td></tr><tr><td style="width: 154.422px;">(Debt + Perps) (S$ '000)</td><td style="width: 165.188px;">4,976,461</td><td style="width: 161.375px;">745,769</td><td style="width: 163.016px;">2,571,100</td></tr><tr><td style="width: 154.422px;">Total Asset (S$ ‘000)</td><td style="width: 165.188px;">11,227,408</td><td style="width: 161.375px;">1,577,523</td><td style="width: 163.016px;">6,391,619</td></tr><tr><td style="width: 154.422px;">Look-through Gearing Ratio</td><td style="width: 165.188px;">44.3%</td><td style="width: 161.375px;">47.3%</td><td style="width: 163.016px;">40.2%</td></tr></tbody></table>

SingaporeSuntec REIT (SUN SP) issues 5yrs S$150m perpetual securities at 4.25% pa; Perps are back this year as funding alternativesSUN has priced S$150m of subordinated perpetual securities at 4.25% pa for five years. After the first reset date of 15Jun26, the new rate will be equivalent to the Swap Offer Rate, its successor rate, or if there is no successor rate, an alternative reference rate, with respect to the reset date plus the initial spread of 3.29%. The net proceeds from the issue will be used for refinancing its existing borrowings, financing or refinancing its acquisitions or investments and financing any asset enhancement works. The perpetuals will be issued under its US$2bn Euro Medium Term Securities Programme. Distributions under the perpetuals shall be payable semi-annually in arrears on 15Jun and 15Dec in each year, commencing on 15Dec21.Comments: Perps are back and we have seen 3 SREITs issuing perps so far this year with an average coupon of 3.2-4.2%. We think perps are good funding alternatives for SREITs on top of traditional bank loan, bond, or equity – as long as they are not utilized as “financial engineering” to make deals look accretive on acquisitions. However, important metrics to look at 1) perps as % equity – anything above 10% can be perceived as “high” by the market; and 2) look-through gearing – preferably remains below the statutory limit of 50%.   SUNLREITMINTDate of Issue7-Jun-2127-May-213-May-21SizeS$150,000,000S$200,000,000S$300,000,000Rate15Jun21 - 15Jun26: 4.25% 31Jan23 onwards : 3.290% + Swap Offer Rate/Successor Rate/Alternative Reference Rate4.2% Pa3.15% Fixed Rate PaFinancial  Calendar ReferencedFY201H21FY21Total Perps as % of Equity6.016.77.2Total Perps as % of Debt7.336.613.2(Debt + Perps) (S$ '000)4,976,461745,7692,571,100Total Asset (S$ ‘000)11,227,4081,577,5236,391,619Look-through Gearing Ratio44.3%47.3%40.2%

ASEAN Builder's Scoop (8Jun21) - SREITs Perps Are Back as Funding Alternatives