Daily Morning Note – 17 July 2020
Asian stocks looked set to gain Friday despite a volatile session in U.S. stocks on Thursday night that snapped a four-day winning streak. Futures pointed to modest gains in Tokyo and U.S., as markets try to recover from Thursday’s drop.
ESR-Reit and Sabana Reit announced a proposed merger, by way of a trust scheme of arrangement, which will see ESR-Reit acquiring all units of Sabana Reit in exchange for new units in ESR-Reit. The enlarged entity will become the fourth-largest industrial S-Reit by market share based on gross floor area (GFA). By way of illustration, if the scheme becomes effective, each Sabana unitholder will receive 94 new ESR-Reit consideration units for every 100 Sabana units held. The illustrative issue price is S$0.401 per new ESR-Reit consideration unit, and the gross exchange ratio is 0.94 times. The enlarged Reit will have an expanded network of 75 assets with a total GFA of about 19.2 million square feet across Singapore. The proposed merger will be accretive to the distribution per unit on a pro forma basis for ESR-Reit unitholders by 3.5% and for Sabana unitholders by 12.9%.
CDL Hospitality Trusts (CDLHT) has completed the sale of its entire stake in Novotel Singapore Clarke Quay, while Ascott Residence Trust (ART) has sold its interest in the land which includes Somerset Liang Court Singapore. These form part of the transaction for the Liang Court site’s redevelopment – by a consortium comprising real estate heavyweights CapitaLand, City Developments Limited (CDL) and ART – that was announced last November. On the site sits Liang Court mall, mid-scale hotel Novotel and serviced residence Somerset Liang Court Singapore. The ultimate owners – ART’s trustee, Gemini One Trust and two associated companies of CapitaLand – signed a joint development deed to undertake, among other things, the development of the respective components of the project. The upcoming mixed-use development will include a new serviced residence property with a hotel licence, which will be fully owned by ART.
ST Engineering announced that its land systems arm has signed an agreement with state-owned Israel Aerospace Industries (IAI) to set up a joint-venture (JV) company in Singapore. ST Engineering and IAI, one of Israel’s three major aerospace and defence companies, will each have a half stake in the JV. Named Proteus Advanced Systems, the JV will leverage the strengths and track record of its parent companies to market and sell advanced naval missile systems, including a next-generation anti-ship missile system. ST Engineering said it does not expect a material impact on its consolidated net tangible assets per share and earnings per share from the setup of this JV.
Singapore Airlines (SIA) flew just 13,900 passengers in June 2020, down from nearly 1.9 million the same period a year ago – and the group is now expecting a material operating loss for the first quarter of its financial year. The group said group passenger capacity plunged 95.1% year on year in June, although this is a marginal improvement over the 96.2% seen in May. Group passenger capacity is measured in available seat kilometres. In addition, the lower oil prices are expected to have an impact on the group’s profits for the first quarter of FY20/21, which ended in June. This is because the lower capacity projection has reduced expected fuel consumption, rendering more fuel hedges ineffective under applicable financial reporting standards, SIA said.
Keppel Pacific Oak US Reit (KORE) obtained US$115 million five-year term loan facility to pay off its borrowings that are due in November 2021.The loan facility will be used for the early refinancing of KORE’s borrowings, which were obtained during its initial public offering in November 2017, its manager said. KORE has also restructured the interest rate swap in relation to these borrowings.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
Analyst: Chua Wei Ren
Recommended Action: Technical SELL
Ascendas REIT (SGX: A17U) enjoyed a stellar rise since after the slide down in March 2020. Recovery was strong and prices managed to clear the $3.00 hurdle in May 2020. However, recent technicals suggest a correction is coming as prices are approaching nearing a top
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Date: 06 July 2020
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