Lippo Malls Indonesia Retail Trust (D5IU)
Background & Portfolio:
LMRT owns over 30 properties across Sumatra, Java, Bali and Sulawesi with a portfolio valuation of S$1.92 billion as of FY17. With a total Net Lettable area of 910,582 sqm, its portfolio achieved 93.7% occupancy with 3,363 tenants. Its top tenants are mostly departmental stores and supermarkets such as: Carrefour, Hypermart, Foodmart and Matahari Department Store.
The performance of LMRT suffered in recent months due to negative effects of foreign exchange exposure and new tax regulation. The Indonesia Rupiah weakened 9.4% against Singapore Dollar in 3Q 2018 vs 3Q 2017.
The government announced a new tax regulation introduced in January 2018, mandated a 10% tax on service charges and utilities recovery charges notwithstanding that such collection of income and maintenance of the malls are outsourced to 3rd parties. In addition, its net property income was further impacted as a result of higher total operating property expenses incurred in 2018.
Recently, its parent holding company and largest shareholder PT Lippo Karawaci was given a downgrade in credit rating by credit agencies Fitch and Moody’s. This announcement negatively impacted LMRT as market concerns over its financial backer amidst challenging macro environment in Indonesia.
OUE Commercial Real Estate Investment Trust(TS0U)
Background & Portfolio:
OUE C-REIT’s portfolio comprises of OUE Bayfront and One Raffles Place in Singapore, as well as Lippo Plaza in Shanghai and OUE Downtown, a recently refurbished landmark property comprising Grade A offices, a retail podium as well as serviced residences. OUE C-REIT’s total assets-under-management is approximately S$4.4 billion
over 2.0 million sq ft of NLA.
OUEC- REIT’s share price reacted negatively to the recent rights issue to part-fund the
purchase of the OUE Downtown office.
In 3Q18, OUE C-REIT reported an NPI decline of 5.1% yoy, driven by lower revenue (-4.8% yoy) due to lower occupancy while distributable income fell 10.8% yoy due to higher interest expenses. DPU of 0.55 Scts fell 52.2% yoy and 48.1% qoq due to an enlarged unit base from the recent rights issue. Aggregate leverage rose slightly qoq to 41.4% while weighted average debt cost was stable at 3.5% and 75% of its debt was on fixed rates.
Portfolio occupancy of 94.9% was slightly lower than the 95.2% achieved in 2Q18. Lippo
Plaza’s occupancy fell to 90.6% due to the departure of a retail tenant in 2Q18. Overall,
3.5% of gross rental income is due for renewal in 2018, with another 23.9% in FY19.
EC World Real Estate Investment Trust (BWCU)
Background & Portfolio:
EC World REIT is the first Chinese specialised logistics and e-commerce logistics REIT listed on SGX. With its portfolio of seven properties located predominantly in one of the largest e-commerce clusters in the Yangtze River Delta, EC World REIT offers investors unique exposure to the logistics and e-commerce sectors in China.
EC World REIT owns seven assets in China (six in Hangzhou, one in Wuhan) were valued at S$1.33bn at end-3Q18, spread over 747,173 sq m of net lettable area. The largest asset by value is the Chongxian Port Investment, accounting for 33% of portfolio AUM and 46.8% of 9M19 net property income. This is followed by Hengde Logistics (22% of AUM) and Phase 1 Beigang Logistics (19% of AUM). In terms of asset value by trade sector, an estimated 47.6% of portfolio value is derived from port logistics, 30.5% from e-commerce
and 21.9% from specialised logistics.
For 3Q18, EC World REIT’s gross revenue was S$23.9 million which was marginally higher (+0.1%) compared to 3Q 2017. Net property income (“NPI”) was S$22.2 million or S$0.1 million (+0.5%) higher compared to 3Q 2017. The increases in gross revenue and NPI were mainly due to contribution from the newly acquired Wuhan Meiluote which was partially offset by a weaker RMB.
Online retail sales in China grew 27.0% y-o-y, compared to with a 9.3% growth in total retail sales of consumer goods for the first nine months of 2018. In the same period, Hangzhou’s GDP grew 7.3% y-o-y, surpassing the national average by 0.5%. Its ecommerce sector grew 15.0%, contributing to 23% of GDP.
Total retail sales of consumer goods increased 9.6% to RMB410.1 billion, while online retail sales increased 23.2% to RMB340 billion. Wuhan continued on its 7th quarter of economic growth with GDP registering 8.3% growth. Total retail sales grew 10.4% for the first nine months of 2018 to RMB486.3 billion with online retail sales increasing 34.6% to RMB40.8 billion.
Despite the positive outlook, EC World REIT trades near its 52-low with 8.9% yield. The stock is also trading at 0.8x 9M18 P/BV. This represents a 5.42% spread over China’s 10-year government bond yield of 3.38% and 6.4% over the Singapore government bond
yield of 2.39%.
Soilbuild Business Space REIT (SV3U)
Background & Portfolio:
Soilbuild REIT owns a portfolio of business parks and industrial properties used by industries engaging in manufacturing, engineering, logistic, warehousing, electronics, marine, oil & gas, research and development and value-added knowledge-based activities. Its portfolio of properties includes Solaris, a landmark development in one-north, Eightrium @ Changi Business Park, Tuas Connection, West Park BizCentral and Bukit Batok Connection. Soilbuild REIT’s portfolio has a net lettable area of 3.69 million square feet and an occupancy rate of 87.2% as at 30 September 2018.
Soilbuild REIT also owns 2 properties in Australia, 14 Mort Street is a 8-storey commercial office building prominently located within the city of Canberra, Australia and Inghams Burton, a production and processing facility which includes high clearance cold room, modern office and workshop facilities, ancillary buildings and expansive hardstand areas.
The performance of this REIT is highly dependent on the domestic and Australian economic activity. Yoy gross revenue and net property income for 3Q2018 fell 3.6% and
8.8% respectively mainly due to the divestment of KTL Offshore, lower contribution from West Park BizCentral and Eightrium and was partially offset by higher revenue from the conversion of Solaris into a multi-tenanted property on 15 August 2018.
The manager completed more than 110,000 sq ft of renewals, forward renewals and new leases in 3Q FY2018. In YTD FY2018, 665,000 sq ft of leases were signed despite the soft leasing environment. In 3Q FY2018, new take-up has boosted the occupancy of Eightrium by 0.8 percentage points to 89.3% whereas non-renewals resulted in a 2.3 percentage point dip in occupancy at Tuas Connection. Portfolio occupancy rate fell marginally
from 87.6% in 2Q FY2018 to 87.2% in 3Q FY2018.
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