From Company's Prospectus
1. Business
Description
Retail
exposure, with 2 highly visible and iconic assets – Paragon Mall & Clementi
Mall. Unless
you live in outer space (joking, what I really meant is Singapore), you should
know about these 2 assets – Paragon Mall & Clementi Mall. These 2 assets are
owned by SPH, one of Southeast Asia’s leading media organisation and they have
decided to list these 2 assets into a REIT structure.
Paragon
Mall
From Company's Prospectus
Strategically
located at the heart of Singapore’s premier shopping and tourist precinct. Paragaon Mall is a
premier upscale retail mall that is strategically located at the heart of
Singapore’s premier shopping and tourist precinct, Orchard Road.
From Company's Prospectus
Table below set out a summary of key
selected information of Paragon as at 28 February 2013:
From Company's Prospectus
Clementi
Mall
From Company's Prospectus
Mid-market
suburban mall integrated with a bustling transport hub. Officially opened in
May 2011, Clementi Mall is strategically located in the centre of Clementi town
in the west of Singapore. The retail mall is part of an integrated mixed use
development that enjoys a high footfall as it is connected to the Clementi MRT
station and is also easily accessible by car from the expressways located
directly next to Clementi Mall.
From Company's Prospectus
Table
below set out a summary of key selected information of Clementi Mall as at 28
February 2013:
From Company's Prospectus
Right
of First Refusal (ROFR) for SPH’s property. Currently, SPH Reit holds a ROFR on
SPH other property, The Seletar Mall. The Seletar Mall is a 6-storey mall under
development located in Sengkang estate, a growing residential estate area in
north-eastern Singapore. The mall is expected to be completed in Dec 2014.
From Company's Prospectus
2. Use of Proceeds
From Company's Prospectus
3. Financial
Highlights
Distribution yield
of 5.79% for Projection Year 2014. SPH Reit is targeting a 5.79% distribution
yield for Projection FY2014.
From Company's Prospectus
Note: There is an Income Support Agreement (ISA) for Clementi Mall and this ISA states
that its Vendor, CM Domain, will guarantee the Net Property Income for Clementi Mall. In the event that the Net
Property Income falls below S$31m per annum, the Vendor is obligated to top up
the difference.
This ISA will last for a period from the (1) Listing Date
to the day immediately preceding the 5th anniversary of the Listing Date or the
(2) date when the income support reaches S$20m.
From Company's Prospectus
Straight forward financial
statement. There
is nothing unusual on its financial statement and Paragon continues to be the
major revenue contributor for SPH Reit.
From Company's Prospectus
From Company's Prospectus - Balance Sheet
From Company's Prospectus - Income Statement
From Company's Prospectus - Cash Flow
Valuation is
undemanding compares to peers. According to the prospectus, the NAV for SPH Reit is
S$0.89. At an offering price of S$0.90, it represents a approx. 1% premium.
Although I'm not a fan of paying something higher than its NAV but this
valuation looks totally undemanding compares to its peers. Take a look at the
table below and you will see that the premium you are paying for SPH Reit is so
much lesser than if you are buying Fraser or Capitamall.
Note that although I include Suntec and Starhill in the
comparison table, it is more fair to compare SPH Reit with Fraser and
Capitamall. The reason being is that the earlier 2 names are mixed usage, retail
& commercial, thus the share price is trading at a discount to its NAV. (a
common trend for pure office play REITs)
4. Investment Highlights
Two highly visible
and iconic assets. In
an uncertain and volatile market like today, its is always safer in the investor's mind to buy things that you can touch and feel. Paragon is definitely
one of the most iconic building in Orchard
Road
Undemanding
valuation. Like I
mentioned above, this offering price is not demanding at all compares to your
Frasers and Capitamall. Although I won't say its cheap on a standalone basis,
but comparing apple to apple, I think it is definitely cheap against Fraser and
Capitamall with a higher yield.
Strong sponsor. Recall during the 2008-09 GFC,
REITs was being beaten down due to refinancing concern. However, during the
same period, only those REITs with strong sponsorship were able to get the
necessary refinancing. So with a strong sponsor in SPH, I take some comfort
with it.
5. Investment Risk
The dividend/carry
play is OVER! If
you recall the market action since last year, REITs was the best stock to hold
in SGX as its rally like crazy. The madness continue till May until Mr Ben stay
talking about QE tapering and anything that is offering a decent carry (like
REITs & bonds) stays sell off. Although it has since recovered, a level of volatility
has been introduced into the market and it really seems to me that the carry
play is OVER!! Thus to continue to add on REIT or dividend play to your
portfolio, it might not be worth the long term risk.
Income Support
Agreement. As
mentioned above, the ISA artificially creates a higher income for SPH Reit and
make the overall HEADLINE yield looks higher than it actually is. But then at
guaranteedrisk.blogspot.sg, I take it as my duty to point it out and explain
for myself. This is actually a very common tactics used by a lot of IPO reits,
thus I'm not too concern since I already know what I'm getting into.
6. Technical
Analysis
Paragon and Clementi Mall. Do I need to say more. Technical
support will definitely be strong.
7. Conclusion
Should perform on
launch, but long term holding up to individuals. Frankly I think the carry play is
definitely over. I will look for more growth prospect company to add into my Long
Term portfolio holdings. It is not easy to find but that's why I started this
blog to look for interesting and under-valued play.
Well, I think this should perform on launch and one can look
to flip it if you are not holding it for the longer term.
If you are looking to hold it long term, you should take some
comfort that Frasers and Capitamall trades at a higher premium to NAV and SPH
Reit looks like a safer bet.
8. Timetable
From Company's Prospectus
9. Other
Interesting Fact
Below is a table that shows the rental price for each major
shopping district in the world. I think it is interesting as you will know how
expensive it costs the next time you visit this cities =)
From Company's Prospectus
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