Sunday 22 September 2019

Short thoughts on Lendlease Global Commercial Reit

Lendlease Global Commercial Reit will be listing on SGX on 2 October 2019. The application for its IPO will be open to public from 25 September 2019 (Wednesday) to 30 September 2019 (Monday). 

Prospectus can be found here

Will keep this article short as the reit has already been covered by many prominent bloggers such as Investment Moats

Key Information

1)Listing Price of $0.88 per unit is 1.08 of its book value of $0.81

2)Currently the portfolio consist of only 2 properties. The first being 313 Somerset and the second being 3 freehold offices in Italy.
313 Somerset currently has 86 years left on its lease.

3) The gearing ratio upon IPO is expected to be 36.4%

4) The forecasted dividend yield is expected to be 5.8% and 6.01% for 2020 and 2021 respectively based on the IPO price of $0.88 per unit.

5) 1,167,946,000 units will be issued, of which Lendlease Trust would hold roughly 27.2% of it, Roughly 33.1% would be available to the public and private placements. Roughly 38.85% would be placed to cornerstone investors which include Blackrock , Fullerton Fund Management and Nikko Asset Management.

What I like about the reit

1) Institutional Investors are onboard, as such there should be a higher corresponding trading liquidity to the company and allow the company to be better priced.

2)313 Somerset sits just on top of the mrt station and it still has 86 years left of lease which means valuations are unlikely to be adjusted too far downwards in the near future should a recession occur. To add on, there has been little sales of retail mall in the Orchard area. The most recent news would be Starhill Global Reit willing to offer above market price for Isetan's share of Wisma Atria, another retail mall which is just up the road.

3) Effective Interest rate is only 1% currently.

What I dislike about the reit

1) With only 2 properties, it is widely estimated that more properties will be injected into the portfolio and this will likely result in more offering of shares.

2) Projected forecast seems too good to be true on first glance. The forecasted financials seems to indicate that revenue would increase 36.7% from 2020 to 2021 and this would result in a corresponding increase in DPU of 38.4% after distribution adjustments. The revenue increase constitutes a 34.3% revenue increase in its Italy property and 37.7% in 313 Somerset. 


313 Somerset
Wisma Atria
Plaza Singapura
Net Property Income Yield
3.1%(2020)/4.32% (2021)
Occupancy Rate
Not shown
Latest Rental Revisions
Not Shown
Not Shown

-If anything, the current valuations of the net property income yield for 313 Somerset remains to be below the current market levels even after a 30% increase to be projected in 2021. With higher yield shopping malls having a positive rental revision, I remain fairly optimistic that the income should be able to deliver as forecasted.

CapitaMall Trust trades at 4.41% dividend yield with a gearing of 34.2% and book value of 1.29
SPH Reit trades at 5.08% dividend yield with a gearing of 26.3% and book value of 1.15
Starhill Global Reit trades at 5.97% dividend yield with a gearing of 36.1% and book value of 0.85

My personal thoughts would be that for Landlease Global Commercial Reit to trade at 5.8% dividend yield with a gearing of 36.4% and book value of 1.08 is actually quite attractive.

However we have to be aware that the property's yield is actually currently below its competitors.

Final Thoughts

-Personally I do not think the IPO would stay underwater for the short run as there would most likely be injection of properties into the reit and it would be problematic if they have to issue shares at a cheaper price. Furthermore, this would make the yield trend towards 6% or even higher which would make the reit even more appealing.

-In the long run, many factors such as interest rate environment as well as the yield of property on its future acquisitions and the reit's ability to increase the property income yield would be important as well. Generally if I were to purchase a reit, i would be betting on inflation, economic growth being positive and interest rates to be stable or low .

-I would be applying for the IPO for the reit though i have not decided the amount i would want to put in yet as i would have to assess my expenses going forward and the equity to cash level before making a decision.

As usual, I would end off the post with a k-pop picture.

Tuesday 3 September 2019

Thoughts on Uni-Asia Group 1H 2019 Results- Expecting a good full year

Uni-Asia Group (SGX: CHJ) actually released results back in August but then i decided to take some time off and gather some of my thoughts first.
-Results can be found here 

Quick Summary
-Interim Dividend of 2 Cents
-Profit of USD 2.9 million or 3.78 usd cents in Q2
-1H 2019 Profit came in at 8.66 usd cents
-Results mainly driven by recognition of certificate of completion by its 3rd Hong Kong Office Project K83. This was previously guided in the Q1 analyst briefing hence its not a surprise.
Previously i wrote about hopefully a 2 cent dividend being announced and it did happen. So I am pretty please with it.
-Overall i would say i am not surprised with the results. It's probably the first or second time i actually think this way for this company as in the previous year there has been too many fair value losses.

Uni-Asia Shipping

Q2 charter income came in roughly the same as Q1.  Having previously estimated a drop of at most 10% in charter income from Q1 to Q2, i am not too surprised with the results. The only concern would be the expenses which shot up from Q1 to Q2 as well as much higher than previous year.

Moving forward(at time of writing its 3 September), the baltic handysize index has jumped from 516 on 31 July to 665 on 3 September. With some ships due for renewal and some with rates pegged to the handysize index, i should see better shipping numbers in Q3 compared to Q2 and Q1. This is because the highest the index reached in Q2 was 516 while in Q1 its 588 but it sharply declined to 294 before recovering to 464 at the end of Q1.

Properties Investment Ex-Japan

With regards to both the projects, more gains should likely be recognized in Q3 and Q4 2019.
The main dilemma facing the company is whether should take continue to invest in Hong Kong should another proposal to invest comes to their table. As they have mentioned its tough to find a good partner in Hong Kong and the returns from its investments have been very good but the current Hong Kong conditions might pose a threat. That is something that the company would have to assess should an opportunity arises.

Irregardless,  i remain positive that these 2 projects would drive the bottom-line for the 2H 2019.

Properties Investment in Japan

With only 1 Alero project sold in 2Q, results came in at close to 0.
Looking at the list of projects, it is unlikely there would be a huge contribution in Q3 2019.

Japan Vista Hotel Management

As a result of lease accounting, it was estimated that the segment would be unprofitable and it did not surprise. 
The encouraging signs would be
1)The segment would be profitable had lease accounting been not accounted for.
2) Higher occupancy rate in Q2 than Q1 and as well as higher than previous year despite having more hotels opened
3) Occupancy rate of 83.8% is highest ever, with Q4 2018 being 83.7% while Q3 2018 was 82.8%

However it is worth noting there will be 1 hotel opening in December 2019(Q4) which means there would be some pre opening expenses recorded again.


-Business Segments showing improvements and with the gain yet to be recognized, i remain largely positive on a very good result in 2H 2019 and subsequently a very good dividend.
-The possible pitfalls that might affect the company's operations will be another sudden downturn in the dry bulk industry or Japan Tourism affected by global economic sentiments.
-Another key area for concern would be the lack of substantial HK Project Drivers in 2020 should the situation in Hong Kong deepens.

With that i would end off my article when a k-pop photo as usual