Any of the big SReits with Australian exposure?

Just sharing ith investors here,... the AUD has overtaken the SGD in currency strength, so our REITs with AU assets shld start to have better dpu payouts,...

The AUD has really run-up n the last few weeks,... our forex bets of AUD vs any other currencies shld be working very well, and so will our REITs as in the above.

The RBA will be having its OPR Mtg on Feb 2nd.,... and mkt consensus of a decrease to 0.00% as of now is 75%.

Bro,... means 75% of mkt thinks there will be a cut from the current OCR rate of 0.10% to 0%. And only 25% thinks there will be no cut. 

Sasseyr is today ? I don't think so,.. I marked it down on my calendar as after the CNY !

I'm happy for my results of MLT and PLife REIT this evening,....

I also got triggered with ATH msgs and 10% upward climbs of share prices for my US ctrs - Tsla, Abnb, Moderna, Gdrx, Appl,... that's abt it,..

During a results briefing, when asked whether the manager has heard any more details on Singapore government's moratorium on the building of data centres, Chua Hsien Yang, outgoing CEO of KDC REIT’s manager said, “We have not. Going forward, they do expect the data centres to be a lot greener. They are also encouraging new developers to tap on renewable energy, for example, or that a certain percentage of the power use has to be from renewable sources but of course that itself is a fundamental problem because we don't really have access to a lot of renewable energy in Singapore. So we are not expecting a lot more data centres to be to be built in the short term. The government still has to give guidance to datacentre players in terms of what we can do to help Singapore achieve our carbon emission targets.”

Companies & Markets
Keppel DC Reit's DPU up 27.5%; data centre market likely to get 'very tight' in H2 2021
Rae Wee

27 January 2021
Business Times Singapore
STBT
English
© 2021 Singapore Press Holdings Limited
Singapore

THE local data centre market is expected to "get very tight" towards the second half of the year, said Chua Hsien Yang, chief executive of Keppel Data Centre (DC) Reit's manager, in an earnings call on Tuesday evening.

This is given the current moratorium that the government has imposed on building new data centres in Singapore.

While Mr Chua said that he has not received any updates regarding when the moratorium will be lifted, he understands that the government is looking to make data centres in Singapore a lot greener, and is also encouraging new developers to build in aspects whereby they can tap renewable energy, or derive a certain percentage of the power use from renewable sources.

But given the limited access to renewable energy sources locally, by imposing that condition, "it may not be something that can be fulfilled, so we are not expecting a lot more data centres to be built in the short term", added Mr Chua.

And factoring in the time needed for developments to take effect, supply will continue to be squeezed in the near term.

As it is, Mr Chua noted that Keppel DC Reit's portfolio, which stands at an occupancy rate of 97.8 per cent as at end-December, "hardly (has) any space left for clients to expand".

On Tuesday, Keppel DC Reit reported a distribution per unit (DPU) of 4.795 Singapore cents for the second half of the fiscal year ended December 2020, 27.5 per cent higher than the DPU of 3.76 Singapore cents paid out in the year-ago period.

This lifted the Reit's DPU for FY2020 to 9.17 Singapore cents, some 20.5 per cent higher than the distribution of 7.61 Singapore cents in FY2019.

Distributable income for the period rose by 39.1 per cent year-on-year to S$81.9 million from S$58.9 million, pushing the Reit's distributable income for FY2020 to S$156.9 million, an increase of 38.6 per cent from FY2019.

This growth was supported by full-year contributions from Keppel Data Centre (DC) Singapore 4 and DC1, as well as its new acquisitions in Europe, said the manager.

The distributions for H2 will be paid out to unitholders on March 8.

Similarly, the Reit's gross revenue for H2 grew 42.6 per cent to S$141.6 million from S$99.3 million last year. Net property income also rose 43.1 per cent to S$129.9 million from S$90.8 million.

This comes as it capitalised on strong demand for data centre space by undertaking proactive asset management initiatives to improve portfolio occupancy.

With an aggregate leverage of 36.2 per cent, Keppel DC Reit also has "comfortable debt headroom" for acquisition growth and asset enhancement initiatives.

During the earnings call, Anthea Lee, deputy chief executive and head of investment of the Reit's manager, said that going forward, "acquisitions will still be the main focus".

The key focus for the year will also still be on third-party acquisitions, and will remain in the Asia-Pacific, Europe and United States markets.

At present, the pipeline of assets that Keppel DC Reit has seen is "very strong", said Mr Chua, adding that "the yields we are looking at are all attractive and they will be DPU-accretive". The pipeline consists of mainly fully-fitted and colocation assets.

Ms Lee also added that the deals the Reit is seeing in the market has cap rates of about 5-7 per cent.

In its outlook, the manager of Keppel DC Reit said it expects the global trend of digitalisation to continue post-pandemic as the digital economy continues to thrive amid the Covid-19 pandemic.

While the manager acknowledged that the resilience and rapid growth of the DC market have attracted more competition for assets and capital, the entry barriers for the sector remain high, especially for quality co-location assets.

"The manager's track record, coupled with the ability to leverage the Keppel ecosystem in providing end-to-end solutions from project development and facilities management to client networking, have ensured that Keppel DC Reit is well-positioned to benefit from the growth of the data centre market," said the manager.

Units of Keppel DC Reit closed at S$2.89 on Tuesday prior to the re-sults announcement, up 1.4 per cent or S$0.04.

Singapore Press Holdings Limited

Companies & Markets
HOCK LOCK SIEW; CapitaLand's pursuit of heft and diversity is not working, it's time to separate growth from value

Ben Paul

27 January 2021
Business Times Singapore
STBT
English
© 2021 Singapore Press Holdings Limited

CAPITALAND has been trying to reposition itself to benefit from the growth of e-commerce and the knowledge economy. But it isn't getting much credit for its effort.

In the wake of Covid-19, the market seems firmly focused instead on the risks of its legacy exposure to shopping malls, offices and serviced residences.

With the benefit of hindsight, CapitaLand's controlling shareholder Temasek Holdings may well have been better off had it not decided to inject Ascendas-Singbridge into the company two years ago.

On Monday, shares in CapitaLand tumbled after announcing negative earnings guidance for FY2020. The stock closed at S$3.27, down 3.82 per cent for the day.

It closed Tuesday at S$3.24, down a further 0.92 per cent.

CapitaLand said in a filing on Friday that it expects to report a loss for FY2020.

Operating profit after tax and minority interests (Patmi) might come in as much as 30 per cent below the S$1,057.2 million chalked up in FY2019, the company said.

Cash Patmi, comprising operating Patmi and portfolio gains, is expected to fall as much as 45 per cent short of the S$1,492.8 million reported the previous year.

CapitaLand went on to state that it expects to recognise fair value losses in the range of S$1.55 billion to S$1.65 billion as compared to a gain of S$674.8 million in FY2019.

The company also expects sharply higher impairment losses in the range of S$800 million to S$900 million, versus S$31.6 million in FY2019.

"The fair value and impairment losses are non-cash in nature, and principally stemmed from the extraordinary events relating to the Covid-19 pandemic that materially affected the CapitaLand group's business during FY2020," the company said in the Friday filing.

"The CapitaLand group's operating and financial performance continues to recover, improving in H2 2020 as compared to H1," the company added.

Yet, it remains unclear if the improved operating performance Capita-Land experienced in H2 2020 will be sustained through FY2021.

In the first place, rates of new Covid-19 infections have picked up around the world resulting in fresh restrictions on movement.

More importantly, trends such as e-commerce and work-from-home, which took off on the back of Covid-19 last year, may not subside much because of the gains in productivity and cost savings that have been realised by some businesses.

This could mean continued pressure on CapitaLand's profitability and net asset value (NAV), even when Covid-19 infections eventually abate.

Repositioning to grow

CapitaLand has made big strides in recent years diversifying away from segments of the real estate sector in danger of falling victim to technological disruption, and gaining exposure to sectors for which change is likely to be a tailwind.

Its most significant move was arguably the acquisition of Ascendas-Singbridge from Temasek for S$6 billion in 2019.

The transaction -- which CapitaLand partially funded by issuing new shares priced at a steep discount to NAV -- gave it exposure to logistics properties and business parks, and turned it into a much larger and more diversified group with some S$123 billion in assets under management.

Since then, the group has also merged its two flagship real estate investment trusts - CapitaLand Mall Trust and CapitaLand Commercial Trust, which had separately focused on shopping malls and offices - to create CapitaLand Integrated Commercial Trust (CICT).

With a larger and more diversified portfolio, CICT is expected to be better able to raise funds and support CapitaLand's development of integrated commercial projects.

The group is also repositioning CapitaLand Retail China Trust (CRCT) as its key securitisation platform for non-lodging assets in China.

CapitaLand said in November that it is aiming to expand its exposure to "new economy" assets in China over the next few years to S$5 billion from S$1.5 billion. These assets would include business parks, logistics properties and data centres.

CRCT is targeting to have 40 per cent of its portfolio devoted to integrated development, and a further 30 per cent invested in "new economy" assets. The remaining 30 per cent would be invested in retail properties.

Languishing stock

CapitaLand has little to show for all these initiatives though.

Its shares have performed relatively poorly over the past decade, delivering a total return of just 15.2 per cent (dividends reinvested) since the end of 2010. The Straits Times Index has returned 29.9 per cent over the same period.

Much like other major developers, CapitaLand's shares are also trading at a big discount to NAV. At its last close, the stock was at a 31.5 per cent discount to its NAV as at June 30 of S$4.73 per share.

The sell-off it suffered earlier this week demonstrated that CapitaLand is still susceptible to any bad news related to its legacy assets and businesses that may emerge in the months and years ahead.

To be clear, none of this is a criticism of the quality of CapitaLand's assets or management. On the contrary, its assets are close to the best in their respective classes and the company is run by highly competent professionals.

Yet, there is clearly little investor appetite for the group in its current form.

CapitaLand should perhaps consider a restructuring that separates its growth-oriented assets such as logistics and data centres from its value-oriented assets such as shopping malls, offices and serviced residences.

Indeed, looking back now, Temasek might have been better off had it pursued a public listing of Ascendas-Singbridge and taken CapitaLand private, instead of allowing one to acquire the other.

In this fast-changing and uncertain world, companies need clear, growth-oriented stories to win over public investors.

Singapore Press Holdings Limited

Companies & Markets
NEWS ANALYSIS; Balance frequency of property valuation reviews with a longer-term outlook
Raphael Lim

27 January 2021
Business Times Singapore
STBT
English
© 2021 Singapore Press Holdings Limited

Analysts suggest more robust quarterly assessment on impact of crisis on individual assets

Singapore

INCREASING the frequency of property valuation reviews may be a good idea for listed companies in the current pandemic-stricken business environment, some industry watchers said.

But this frequency needs to be balanced against the need to also adopt a long-term outlook when evaluating investments.

On Monday, CapitaLand shares fell as much as 5 per cent as the market attempted to price in a profit warning. The property giant had last week warned it would incur losses for its 2020 financial year, due to revaluations and impairments. Fair value losses are expected to be in the range of S$1.55 billion to S$1.65 billion, representing around 4.7 per cent of the group's investment properties portfolio value.

As the earnings season progresses, other property companies may possibly incur similar losses and have to make similar announcements. This may lead to questions on how much advance warning companies should provide to shareholders.

Industry players noted that listed companies normally value their real estate assets at least once a year, but that dynamic conditions could warrant more frequent reviews.

Png Poh Soon, CBRE's head of valuation and advisory services for Singapore, said the Covid-19 outbreak has caused heightened uncertainty in both local and global market conditions.

"During the early onset of the Covid-19 outbreak, we have seen companies requesting for more frequent valuation updates on a monthly, quarterly and half-yearly basis, so as to keep their investors and Board up to date on their asset values in line with market movement," he said.

Similarly Tan Keng Chiam, executive director and head of valuation and advisory services at Colliers International, said it is advisable that companies review and update valuations more regularly, such as quarterly or half yearly, in times of rapidly changing market conditions, and where the assets' values have a significant impact on the company's financial status. This would allow for more accurate reporting of the firm's financial position.

At the same time, there is a need to be circumspect about the scale of reviews and disclosures.

RHB analyst Vijay Natarajan, who covers real estate, said it makes sense for companies to come out and make disclosures when they expect to see material impacts to key assets following discussions with valuers.

However, he does not think that an increase in frequency of full valuations is necessary.

Mr Natarajan noted that most companies do valuations at least annually, with some Reits doing so twice a year. Having frequent valuation exercises may not be ideal given the potential volatility to stock price and to the market, with also cost considerations, he added.

"Doing a full set of valuations, I think, is not needed on a quarterly basis," Mr Natarajan said, noting that the uncertainty in the progress of Covid-19 last year, and changing outlook on business conditions from quarter to quarter, may have resulted in fluctuations and volatility.

Ng Kian Hui, audit partner and head of audit & assurance at BDO, also cautioned against a short-term perspective on valuation, as it should reflect future earnings potential rather than adjustments for events that may not permanently impact the business.

He added that industry players would need to determine the long-term impact to avoid short-term swings in value from quarter to quarter.

While more frequent disclosures may benefit investors, Mr Ng also said it may not be realistic to expect full valuation reports each quarter, given the time needed.

Instead, management could do a more robust quarterly assessment on the impact of the crisis on individual assets, rather than simply take a macroeconomic view on how valuations may broadly be affected. This could be carried out in desktop reviews together with external valuers, who have the necessary expertise to provide a basis for any adjustments.

In any case, the impact of revaluations for properties may be less severe in 2021.

Collier's Mr Tan noted that with the government measures, the market is experiencing some stability not seen in past crises, with prices and rentals gradually moderating, unlike steep corrections in the past.

"Going forward, we have to monitor the various initiatives taken by our government to mitigate the risk of the situation and hopefully, we can continue to manage it well to 'punch above our weight' to give the investment community confidence that this is a place that will support their business," he said, adding that this could spur the economic recovery that is required to sustain asset values.

For 2021, Mr Natarajan noted that the general outlook seems to be that valuations have stabilised, with a possibility that valuations could improve slightly as the economy picks up.

"I would say that 2020 is a one-off year," he said. "I wouldn't be overly concerned (over property revaluations) unless the outlook for the world changes dramatically."

For 2021, there is a possibility that valuations could improve slightly as the economy picks up, say experts.

Singapore Press Holdings Limited

Companies & Markets
HOCK LOCK SIEW; Isetan could pay dearly for dragging its heels on sale of Wisma Atria space
Anita Gabriel

26 January 2021
Business Times Singapore
STBT
English
© 2021 Singapore Press Holdings Limited
ISETAN Singapore, controlled by Japan's largest department store chain Isetan Mitsukoshi, surely took its own sweet time.

The Singapore-listed retailer, hard hit by slipping sales and less footfall traffic owing to the Covid-19 pandemic, called for a trading halt last Friday and subsequently said it was exploring options on its investment property at Wisma Atria. Isetan also said that it may appoint property agents and valuers to assist in "commencing exploratory discussions on the matter with third parties".

On Monday, investors popped the sparkling sake on the long-awaited news and chased the stock all the way to S$4.72 or 35 per cent higher within minutes of its trading resumption. The counter eventually settled at S$4.20 - 20 per cent or 70 Singapore cents up at the day's close.

Here's the thing about Isetan's latest move - what took the Japanese so long?

Wish come true

For long, disenchanted Isetan shareholders have lobbied hard for Isetan to unlock the value of its investment in Wisma Atria - a prime asset in Singapore's busiest shopping belt. With the proceeds from the sale - they hoped - the company would reward them by way of a capital distribution and make good on years of disappointing returns.

There was an added sense of urgency to such calls as the asset has a 99-year lease which expires in March 2061 and hence, faces the risks of value erosion.

Note that Isetan ceased its own retail activities at Isetan Wisma Atria in 2015 and converted the store into an investment property for earning rental income. Since then, its flagship store Isetan Scotts at Shaw House has marked its presence in the Orchard strip as a department store.

While the sting from the outbreak has worsened Isetan's financials, its waning performance preceded the pandemic.

The retailer's topline has more than halved over five years to S$112 million in FY2019. Earnings have also declined over the same period with the last two spent in the red. Losses in the retail business have been widening - S$36 million in 2019 from S$21.2 million in 2018 and S$9.4 million in 2017.

If first half ended June 2020 is a gauge, annualised revenue could tumble to S$68 million. Isetan made a loss of S$317,000 for the first six months from a profit of S$1.6 million a year ago on the back of a 40 per cent drop in revenue to S$34 million.

And so, it's easy to appreciate the stock's giddy reaction to the news. A sale - if it happens - could be sweet. For one, as at end-2018, the fair value of Isetan's stake in Wisma Atria as determined by an independent valuer stood at S$290.7 million - higher than Isetan's market capitalisation of S$144 million on Monday's close.

Ardent suitor

Isetan Wisma Atria has had one long-standing suitor - YTL's Starhill Global Reit (SGReit) which has a portfolio of assets in Singapore, Australia, Malaysia, China and Japan worth some S$3 billion. SGReit, which also counts another prized Orchard property Ngee Ann City as an asset, owns nearly 74 per cent of Wisma Atria's total share value of strata lots while the rest is owned by Isetan.

After eyeing the asset for some time, SGReit's manager made a direct overture two years ago and plonked a non-binding expression of interest (EOI) to acquire Isetan's share of the leasehold asset. Isetan had said then that it was reviewing the EOI contents and evaluating whether the proposal was in line with its long-term strategy. Nothing came out of it. It isn't clear if SGReit is still keen on the asset or if that ship has sailed.

Those were better days - pre-pandemic - when Isetan, with zero debt and some S$39 million in cash (as at end-2019) deemed it had options. It was also widely known then that Isetan's parent Isetan Mitsukoshi was more keen to hold on to the "strategic asset" as part of a long-term strategy rather than part with it.

Isetan also reiterated last July that the upcoming Orchard Station on the Thomson-East Coast MRT Line interchange (expected to be completed in 2021) would improve the valuation of the property and its leasing opportunities.

So, what led to the change of heart?

Times are a-changing

The brick and mortar retail sector, already faced with headwinds from online rivals, has been upended by the pandemic.

Cautious spending and the worst recession on record (Singapore's GDP shrank 5.8 per cent in 2020) has dealt a big blow to Singapore's retail sector. The fallout has led to the collapse of Robinsons, the "grande dame" of the city state's department stores with a history of 162 years.

Singapore is projected to have a long and uneven recovery and as much depends on the vaccine rollout globally, the travel outlook remains uncertain. For malls like Wisma Atria which derive a chunk of total receipts from tourists (one analyst said this could be as much as 30 per cent), the prognosis is unclear for now.

Isetan faces other immediate challenges - it needs to find a replacement tenant for Level 4 of Isetan Wisma Atria after it terminated the food and beverage anchor tenant. Its parent company is not spared from the pandemic pains as the outbreak flares up in Japan and has prompted lockdowns and travel bans.

The retailer's full year ended Dec 2020 results could shed some light on what had led the Japanese to finally budge. In its latest statement, Isetan said it was evaluating all options regarding Isetan Wisma Atria and no definitive decision or agreement has been made or entered into.

The real estate mantra "location, location, location" could hold Isetan in good stead as it puts the asset on the block, not least as malls in Singapore's prime location Orchard remain an attractive, long-term business proposition. But bear in mind - Isetan Wisma Atria has a ticking clock. The retailer should be aware - now more than ever - that its options are narrowing.

Singapore Press Holdings Limited

Aims dividend has been in downtrend for last few years.

They are trying to smokescreen the reducing DPU with "Total Distribution CAGR 4.4%"   
Value killing management.