Phillip Securities Research Morning Call · Post-Merger, Sabana REIT will become a wholly-owned sub-trust of ESR-REIT and the Enlarged REIT will continue to be managed by the ESR-REIT

Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197501035Z © PhillipCapital 2020. All Rights Reserved. For internal circulation only.

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Phillip Securities Research Morning Call20th July 2020

SATS LTD

Hyphen Pharma

ESR-Sabana REIT

Prime US REIT

Manulife US REIT

Stock Counter Updates

REITS Monthly

SG Weekly

US Office REITS

Macro/Sector Outlook



Tay Wee Kuang

Research Analyst

Phillip Securities Research Pte Ltd

20th July 2020

Hyphens Pharma International LtdBuilding channels to establish business longevity



Company Background

Listed on SGX-Catalist in May 2018

Principal business: sales, marketing and distribution of pharmaceutical and healthcare-related products

Business segments:

Specialty Pharma

Proprietary Brands

Medical Hypermart and Digital

Geographical footprint:

Singapore

Vietnam

Malaysia

Indonesia

Philippines

Hyphens Pharma International Ltd ACCUMULATE (Initiation), TP: S$0.435, Last: S$0.420



Industry value chain for pharmaceutical/medical goods




Hyphens Pharma presence in the value chain


Other intermediaries

Lower value

Higher value



Investment Thesis

I. High loyalty to specialty pharma products and proprietary brands.

Exclusive distributorship for product portfolio

Discerning customers, i.e. medical practitioners such as specialists, GPs, hospitals, pharmacies

II. Expanding retail presence through online and offline channels.

Access to retail sales channel through acquisition of Ocean Health® in 2016, i.e. Watson’s, Guardian etc.

Expanding product portfolio for sell-through

III. Presence as a channel integrator promotes business longevity.

Establish presence throughout the value chain from upstream to downstream activities

Preserve business value by engaging in higher value functions while outsourcing manufacturing and logistics

‘Asset-light’ operation




Risk and Mitigations

I. Dependence on relationships with brand principals for specialty pharma portfolio.

Licensing agreement with brand principals is key within segment

Maintenance of healthy and longstanding working relations

II. Loss of demand from delayed product registrations and renewals.

Product registration to sell within a market typically expire within 2-3 years

Work with supply chain partners so manage inventory and prevent loss of demand through anticipating delays

III. Competition with other brand principals for proprietary brands portfolio.

Competitive environment within dermatology and health supplements segment

Recognition by patents and product training with medical practitioners to mitigate risks




Financial Highlights and Forecasts

I. Revenue

Robust growth for the next 3 years with growth in Specialty Pharma and Proprietary Brands segment

II. Gross Profit Margin

Steady margins over next 3 years

III. Dividends

Distribute 30% of net profit

FY19 distribution of $0.01 per share (2 – 2.5% yield)

Valuation

Discounted Cash Flow Model

WACC: 7.2%

Terminal growth rate: 1.5%

Initiate ACCUMULATE call with TP of $0.435


(S$'000s) FY17 FY18 FY19 FY20e FY21e FY22e

Revenue 112,652 120,930 119,442 131,776 144,982 160,729

Growth 11.6% 7.3% -1.2% 10.3% 10.0% 10.9%

FY17 FY18 FY19 FY20e FY21e FY22e

GP Margin 32.8% 33.7% 35.7% 34.1% 34.5% 34.8%



ESR REITMerger of ESR REIT and Sabana Shari’ah Compliant REIT

Tan Jie Hui

Research Analyst


20th July 2020



ESR REIT– Merger with Sabana REIT(Not covered)

Proposed merger solidifies ESR REIT’s position as the 5th largest industrial S-REIT by AUM.

Post-Merger, Sabana REIT will become a wholly-owned sub-trust of ESR-REIT and the Enlarged REIT will continue to be managed by the ESR-REIT Manager. Merger is expected to be completed by 4Q20.

Total acquisition cost: S$777.4mn comprising• Consideration units (989.9mn shares; S$396.9mn)

• Implied scheme consideration of S$0.377 per Sabana

unit at a gross exchange ratio = 0.94x payable to

Sabana unit holders• New debt (S$372.2mn)

• Refinancing of Sabana REIT’s borrowings and interest

rate swaps of c. S$295.0m, upfront land premium of

c.S$58.6m and professional fees of c.S$18.6mn• Acquisition fee in units (S$8.3m)

• Payable in 20.7mn ESR-REIT Units to the ESR-REIT

Manager for the Merger based on illustrative issue

price of S$0.401

ESR Sabana ESR-Sabana

No of shares (mn) 3,531 1,053 4,541

Share price (S$) 0.40 0.38 0.40

Market cap (S$mn) 1416 397 1821

NAV (S$mn) 1,449 539 1,988

GFA (mn sqft) 15.1 4.1 19.2

No of properties 57 18 75

AUM (S$bn) 3.2 0.9 4.1

Tenants 343 113 456

NAV/Share (S$) 0.41 0.51 0.44

Proposed DPU yield (%) 6.8% 6.2% 7.0%

Annualised DPU yield (%)

[after retention] 5.9% 2.5% 5.0%

NAV: Net asset value; GFA: Gross Floor Area; AUM: Assets under management;

DPU: Distribution per unit



ESR REIT– Merger with Sabana REIT(Not covered)

Benefits to merger:

• DPU accretion of +3.5% and NAV accretion of +5.2% for ESR unitholders; +12.9% DPU accretion for Sabana unitholders

• Increased exposure to High-Specs and Logistics Segments

• Contribution from Hi-specs and logistics warehouse increased from 40-50%

• Contribution from General industrial decreased from 32% to 27%

• Greater diversification: Reduced concentration of top 10 tenants from 31% to 25% of GRI

• Greater presence in key industrial clusters due to 31.6% increase in no. of properties

• Organic growth: Additional 1.2mn sqft of unutilized GFA from Sabana REIT (1.02.2)

• Lower cost of debt (-25bps), longer WADE (+0.5 years), access to wider pools of capital

• Increased probability of inclusion in key indices due to increased market cap (EPRA Index inclusion threshold: S$1.3bn)

Shareholders No of shares (mn) % Held No of shares (mn) % Held No of shares (mn) % Held

ESR Cayman 325 9.20% 220 20.90% 532 12.20%

Mr. Tong Jinquan 809 22.90% 35 3.30% 841 18.50%

Others 2398 67.90% 798 75.80% 3148 69.30%

ESR Sabana ESR-Sabana



US OFFICE REITSResilience amidst the new normal

Natalie Ong/ Tan Jie Hui

Research Analyst


20 July 2020



US OFFICE REITS

Sector Merits

1. Attractive dividend yields.

2. Collaborative work in a dynamic environment to hold demand for office; long WALEs to support.

3. Office-using jobs less affected by unemployment; Looking forward to a stabilised normal.

4. Office space demand by Top 3 leasing drivers (Tech, financial and professional services) will moderate not abate.

Key Risks

1. Structural change: Weaker economic outlook and takeaways from COVID-19 to push companies towards a more mobile operating model.

2. Leasing and supply headwinds.

Sector BackgroundIn the near-term, the pandemic has resulted is fewer workers in the office and more satellite offices being built up in the suburbs. We believe working from home is not a permanent solution that can replace physical office materially.



US OFFICE REITS

Sector Merits

1. Attractive dividend yields.

SG-Listed US office REITs present attractive yield spreads of 7-8% to the US 10-year treasury yields.

The yields of SG-listed US office REITs also outperform that of both SG office REITS and US-listed US office REITs by 1.7x.

In terms of its risk-reward, we believe that US office REITs are worth the investment in the long run.

Comparison Market Cap (mn) Last Price ($) P/NAV (x) Indicated Yield (%)

Manulife US REIT (USD) 1109 0.71 0.88 8.34

Prime US REIT (USD) 806 0.77 0.86 8.24

Keppel Pacific Oak REIT (USD) 634 0.68 0.84 8.92

Average 850 0.86 8.50

Capitaland Commercial Trust (SGD) 6758 1.75 0.95 4.62

Keppel REIT (SGD) 3662 1.08 0.80 5.19

Average 5210 0.88 4.90

US-Listed office REITs

Alexandra Real Estate Equities (USD) 21685 163.03 2.17 2.60

Boston Properties (USD) 14182 91.28 2.42 4.29

Brandywine Realty Trust (USD) 1780 10.44 1.16 7.28

Corporate Office Properties Trust (USD) 2806 25.02 1.73 4.40

Cousins Properties (USD) 4318 29.07 0.95 4.13

Hudson Pacific Properties (USD) 3619 23.61 1.09 4.23

Mack-Cali Realty Corporation (USD) 1325 14.63 0.92 5.47

SL Green Realty (USD) 3776 48.68 0.74 7.27

Average 6687 1.40 4.96

SG-Listed US office REITs

SG-Listed SG office REITs



US OFFICE REITS

Sector Merits


• According to Gensler’s US Workplace Survey, since 2016, office work has evolved from an individualistic mode (2016: 50%; 2019: 45%) to one that is more learning and collaborative (2016: 50%; 2019: 55%). Employees have spent 14-15% of their work time telecommuting.

• In the same timeframe, the office market was experiencing positive rent growth and declining vacancies. This shows that telecommuting and office may not be mutually exclusive.



US OFFICE REITS

Sector Merits


• Employers do see merits in a dynamic working environment such as cross-functional collaboration, which lead to mixed responses in their view of needing an office in 3 years.

• According to Moody’s Investor Service, 94% of the larger office leases will only start to expire 4 years from now, which suggests that landlords do have time to adjust to the future of work.

Reduce by more than 25% 3%

Reduce between 16-25% 12%

Reduce between 5-15% 15%

Stay about the same 19%

Increase between 5-15% 26%

Increase between 16-25% 16%

Increase by more than 25% 9%

Office space needs are expected to:

6%

37%

43%

15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

<4 years 4-8 years 8-12 years > 12 years

Lease terms for US office size of 10,000 sqft or more



US OFFICE REITS

Sector Merits

3. Office-using jobs less affected by unemployment; Looking forward to a stabilised normal.

• The unemployment rates for the heavy-weight anchor industries in the office – Financial Activities and Professional & Business services in June was 5.1% and 8.6% respectively, which is the lowest and third lowest amongst the industries.

• Using the 2008 GFC as a recent crisis proxy, business formations in the U.S. grew at a CAGR of 4% over 10 years as the US economy recovered.

500,000

550,000

600,000

650,000

700,000

750,000

800,000

850,000

900,000

950,000

1Q

08

4Q

08

3Q

09

2Q

10

1Q

11

4Q

11

3Q

12

2Q

13

1Q

14

4Q

14

3Q

15

2Q

16

1Q

17

4Q

17

3Q

18

2Q

19

1Q

20

Business formations post-2008 GFC



US OFFICE REITS

Sector Merits

4. Office space demand by Top 3 leasing drivers (Tech, financial and professional services) will moderate not abate.

• The existence of virtual conferencing tools predates COVID, but these sectors still choose to conduct certain functions/elements of business in the flesh implies that these sectors are best served by office premise and explains the pre-disposition for the office environment.

• Structural shifts in the office landscape will be gradual rather than immediate, with the desire for physical collaboration and networking resulting in the maintenance of an office address.

Tech was the dominant leasing driver in 2019



US OFFICE REITS

Key Risks

1. Weaker economic outlook and takeaways from COVID-19 to push companies towards a more mobile operating model

The successful implementation of telecommuting has heightened the possibility of moving towards a premise-light business model.

Additionally, consolidation/downsizing within industries may lead to greater ‘shadow market’ space should current tenants be allowed to sublet their space.

2. Leasing and supply headwinds

Leasing activity fell by 18% QoQ and 14% YoY as businesses take on a more cautious approach with regards to relocations and expansions.

Office vacancy rate increased by 20bps as new supply outpaced demand in 1Q20. Net absorption for the quarter was the lowest since 1Q13.



Prime US REITPrime for resilience

Tan Jie Hui

Research Analyst


20 July 2020



Prime US REIT (BUY, TP: S$0.88, Last: S$0.77)

Investment Merits

1. Attractive FY20 dividend yields at 8.9%, 8% higher than that of US treasury yields.

2. Resilient attributes: Long WALE with minimal lease expiry in FY20, diversified income contribution and built-in rental escalation to support the portfolio’s gross rental and distributable income.

3. Robust balance sheet through proactive capital management with a tax-efficient REIT structure

4. Reputable REIT management team associated with one of the largest U.S. commercial real estate manager.

Prime US REIT (“Prime”) primarily invests in office and real estate-related assets in the US. Prime’s portfolio consists of 12 Class A freehold office properties that are valued at approximately US$1.4 billion, strategically located in 10 primary markets.

Key Risks

1. Debilitated economy to slow leasing activities for Prime in 2020.

2. Weakness in co-working spaces




Investment Merits

1. Attractive FY20 dividend yields at 8.9%, 8% higher than that of US treasury yields.

Prime is currently trading at

0.86x by P/NAV.

Our forward dividend yield for

Prime in FY20e and FY21e is

8.9% and 9.5% respectively.

Comparison Manulife US REIT Prime US REIT Keppel Pacific Oak US REIT

Market Cap (US mn) 1109 806 634

Indicated Yield (%) 8.34 8.24 8.92

P/NAV 0.88 0.86 0.84




Investment Merits

2. Long portfolio WALE of 4.9 years (SREITs: 2-3 years) with minimal lease expiry in FY20 (5.7% by GRI)

5.7%9.1% 8.9%

17.3%15.5%

43.5%

6.0%8.9% 8.0%

15.7% 15.7%

45.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

FY20 FY21 FY22 FY23 FY24 FY25 andbeyond

GRI NLA

Lease expiries are also well

staggered, with a maximum of

17.3% of leases expiring in the

next 4 years.




Investment Merits

2. Diversified income contribution and built-in rental escalation to support the portfolio’s gross rental and distributable income.

GRI by market

GRI by sector mix

Leases with inbuilt rental escalation (1-3%) Others

Leases with in-built rental escalation

13.4%

12.8%

13.5%

12.9%9.4%

7.9%

8.6%

7.6%

7.7%6.2%

Salt Lake City AtlantaWashington DC DenverSacramento St LouisOakland PhiladelphiaDallas San Antonio

15.1%

12.5%

9.0%

8.4%8.5%5.9%

6.1%

4.0%

4.6%

6.4%

4.2%

15.3%

FinanceCommunicationsAccomodation & FoodLegalReal EstateProfessional, Scientific, Tech ServicesMining, O&GHealthcareScientific R&DInformation ServicesGovernmentOthers




Investment Merits

3. Robust balance sheet through proactive capital management….

63

160 160

105

0

20

40

60

80

100

120

140

160

180

FY20 FY21 FY22 FY23 FY24 … FY29

Debt (US$mn)

Prime continues to maintain its gearing ratio at

a healthy level of 33.7% and interest coverage

ratio of 5.8x.

There will be no refinancing required until 2024

as extension options are available for both the

loans maturing in FY22 and FY23.

89% of the debt is locked into fixed interest

rates.

Weighted average interest rate for the portfolio

is now 2.8%.




Investment Merits

3. … With an efficient tax structure.

Prime’s headline tax expenses mostly reflect

deferred tax expenses, which will only be

realized upon sale of the properties in the

portfolio.

Additionally, Prime’s REIT structure has no

tax leakage through federal income or

withholding taxes, provided that the

unitholders comply and furnish the required

documents for Portfolio Interest Exemption.




Investment Merits

3. … With an efficient tax structure.

Prime’s headline tax expenses mostly reflect

deferred tax expenses, which will only be

realized upon sale of the properties in the

portfolio.

Additionally, Prime’s REIT structure has no

tax leakage through federal income or

withholding taxes, provided that the

unitholders comply and furnish the required

documents for Portfolio Interest Exemption.




Investment Merits

4. Reputable sponsor and management team associated with one of the largest U.S. commercial real estate managers.

Associated with KBS, KBS Asia Partners

(KAP) is the sponsor of Prime. To date,

KBS has registered $41.7bn worth of

transactional volume with over $8bn of

AUM since inception.

KBS has presence in all the states that

Prime has presence in, and has

successfully managed properties through

4 disruptive events.

Separately, Prime will also be able to

benefit from KBS’ deal sourcing, deal

screening and deal execution capabilities

for inorganic growth opportunities.




COVID-19 update:

No rent forgiveness; rent collections for May and June are at 99%, with June’s collections on track.

Tenant Industry Sector Credit Rating Property % of CRI

1 Charter Communications Communication Moody's: Ba1 Village Center Station I & II 9%

2 Goldman Sachs Finance

Moody's: A3

S&P: BBB+

Fitch: A 222 Main 6%

3 Sodexo Operations Accommodation & Food S&P: A- One Washingtonian Center 6%

4 Wells Fargo Bank Legal Private Firm 222 Main; Village Center Station I 4%

5 Holland & Hart Finance

Moody's: a1

S&P: A+ 171 17th Street 4%

6 State of California Government

Moody's: Aa2

Fitch: AA Park Tower 3%

7 Arnall Golden Gregory Legal Private Firm 171 17th Street 3%

8 Whitney, Bradley & Brown Professional Services Private Firm Reston Square 3%

9 Apache Corporation Mining, Oil & Gas

S&P: BB+

Fitch: BBB Promenade 2%

10 WeWork Real Estate Fitch: CCC+ Tower I at Emeryville 2%

As of date, only 11 rental deferments

are provided to small retail tenants

which contribute less than 1% of the

GRI.

Apart from Sodexo, Apache and

WeWork, majority of Prime’s top 10

tenants are established tenants. All of

Prime’s top 25 tenants which constitute

64% by CRI have paid 100% of April’s

and May’s rent.

Amidst uncertainty in the outlook for co-

working spaces, it may comfort

investors to know that the rents from all

co-working entities (WeWork + 3

smaller operators) have been collected.




Key risks:

1. Debilitated economy to slow leasing activities for Prime in 2020.

We expect leasing activities to weaken as businesses are impacted by the recent escalation of events from COVID-19.

Greater investor caution and selectivity coupled with lockdown inconveniences will increase the time required to close new leases.

2. Weakness in co-working spaces.

Demand for co-working spaces is expected to remain soft, which poses uncertainty to Prime’s income stream.

Nevertheless, the total proportion of co-working spaces in the portfolio is only 3.7%.

Initiate coverage on Prime US REIT with a BUY rating and a TP of $0.88.

Our DDM-derived target price is based on a five-year projection, cost of equity of 9.96% and terminal growth rate of 2%. It translates to a FY20e dividend yield of 8.9% and a total return of 24%.



Manulife US REITQuality that speaks for itself

Natalie Ong

Research Analyst


20 July 2020



Manulife US REIT (BUY, TP: S$0.80, Last: S$0.71)

Investment Merits

1. Favourable portfolio attributes - Income visibilityand growth embedded in the portfolio.

2. Attractive valuations of 0.88x P/NAV near -2standard deviation (SD) level, 3.28% yield spreadat +1 SD level.

3. Continued relevance and demand for office space;demand for office to moderate not abate.




1. Favourable portfolio attributes -Income visibility and growth embedded in the portfolio.

Occupancy of 96.5%

Long WALE of 5.7 years

Built-in rental escalation (c.2% p.a.)

Low expiries (4.4%/6.4% FY20/FY21)

High tenant retention of 76% in FY19




2. Attractive valuations of 0.88x P/NAV near -2 standard deviation (SD) level, 3.28% yield spread at +1 SD level.




2. Attractive valuations of 0.88x P/NAV near -2 standard deviation (SD) level, 3.28% yield spread at +1 SD level.

The high collectability of rents (only 2% of rental

deferments provided in April)

S&P Global Ratings: 22% of loans on lodging

properties in CMBS deals were delinquent as of

June, followed by 17% for retail properties but

only 2.2% for office buildings

Longer leases in the US office market to provide

support for leasing demand




3. Continued relevance and demand for office space; demand for office to moderate not abate.

Top 3 leasing drivers (tech, financial and

professional services) have a predisposition for

the office workplace setting

Physical interaction viewed as the most effective

mode for mentoring, collaboration, and innovation

Work trend study show that the physical face-to-

face mode of collaboration is as valued as virtual

collaboration.




3. Continued relevance and demand for office space; demand for office to moderate not abate.

Top 3 leasing drivers (tech, financial and

professional services) have a predisposition for

the office workplace setting

Physical interaction viewed as the most effective

mode for mentoring, collaboration, and innovation

Work trend study show that the physical face-to-

face mode of collaboration is as valued as virtual

collaboration.



Singapore REIT MonthlyReady for the next phase

Natalie Ong

Research Analyst


20 July 2020



FTSE REIT Index outperforming STI

OVERWEIGHT (Maintained)

INDEX RETURN (%)

1MTH 3MTH YTD 1YR

FSTREI RETURN (3.1) 17.8 (7.6) (4.9)

FSTREH RETURN (4.5) 3.4 (19.1) (19.0)

STI RETURN (4.5) 5.2 (15.6) (16.7)

FSTREI VS. STI

Source: Bloomberg, PSR

10-year SGS (%) & 3-month SOR (%)


Natalie Ong (+65 6212 1849)

Research Analyst

[email protected]

550

650

750

850

950

Jul-19 Oct-19 Jan-20 Apr-20 Jul-20FSTREI IndexSTI (rebased)FSTREH Index (rebased)

-0.5

0.5

1.5

2.5

3.5

4.5

2003 2005 2007 2009 2011 2013 2015 2017 2019MASB10Y Index SORF3M Index

OVERWEIGHT (Maintained)

INDEX RETURN (%)

1MTH 3MTH YTD 1YR

FSTREI RETURN (3.1) 17.8 (7.6) (4.9)

FSTREH RETURN (4.5) 3.4 (19.1) (19.0)

STI RETURN (4.5) 5.2 (15.6) (16.7)

FSTREI VS. STI


10-year SGS (%) & 3-month SOR (%)


Natalie Ong (+65 6212 1849)

Research Analyst

[email protected]

550

650

750

850

950

Jul-19 Oct-19 Jan-20 Apr-20 Jul-20FSTREI IndexSTI (rebased)FSTREH Index (rebased)

-0.5

0.5

1.5

2.5

3.5

4.5

2003 2005 2007 2009 2011 2013 2015 2017 2019MASB10Y Index SORF3M Index



Price performance by sector

Healthcare Hospitality Retail Commercial Industrial Diversified

Change YTD -5.4% -35.8% -20.3% -20.1% 4.9% -21.8%



SREIT Dividend Yield at +0.19 s.d. level


Dividend yield: 4.5%

2019 Ave: 4.6%

Div. yield spread: 3.6% (+0.19 SD level)

2019 Ave: 2.6%

FED rate: 0% - 0.25%, after150bps cut

3M SOR: 0.15% (Sep 2014 lows)

10YSGS: 0.9%



Retail – Recovery in Phase 2

The RSI (Ex MV) was weighed down trade sectors

- department store (-93.7%), Fashion (-89.2%)

and Jewellery (-96.9%) sales fell most

pronouncedly. The only positives were the FMCG

segments, supermarkets (+50.9%) and mini-marts

and convenience stores (+8.6%).

Within the F&B index, the Fast Food Outlet

segment, which were early adopters of food

delivery services. fell 25.7% compared to

Restaurants (-69.2%), caterers (-44.6%) and other

food outlets (-41.3%).

Source: CEIC, PSR

RSI

(excl. motor

vehicles)

RSI

(Dept stores)

RSI

(Supermarkets)

RSI

(Fashion)

F&B Index

May-20 -46.4 -93.7 50.9 -89.2 -50.8

May-19 -2.0 -4.6 -0.7 -1.5 2.5



Hospitality – Lingering fears will impede recovery

RevPAR for the Upscale segment improved the

most (2.2ppts MoM) rest of sectors 2 to 3.5ppts

improvement in RevPARs

The Upscale segment slashed average room

rates by 70% YoY, the deepest discount across

the segments. Occupancy doubled for the month

of May, which rose from 31.9% to 71.3%

(COVID-related business)

Hotels can apply to reopen for staycation booking

from 3 July 2020

However, we are expecting hoteliers to give

significant discounts to achieve the sweet spot

Source: CEIC, PSR

RevPAR per

room/nightAverage Luxury Upscale Mid-tier Economy

May-20 41 44 53 43 32

May-19 169 358 192 137 83

YoY% -75.84% -87.82% -72.54% -69.02% -61.25%

Visitor Arrivals Hotel RevPAR

(S$)

Hotel Occupancy

(%)

Hotel Average

Room Rate (S$)

May-20 880 41 57.0 72

May-19 1,487,758 169 82.0 207

YoY% -99.94% -75.84% -65.26%



PSR Calls

3M Daily

Average

Volume

Share

Price S$

P/NAV

(x)PSR Rating

Target Price

S$

FY20e DPU

cents

FY21e DPU

cents

FY20e DPU

Yield

FY21e DPU

Yield

Total

return

Ascott Residence Trust 9.4 1.00 0.8 ACCUMULATE 1.25 6.87 8.14 6.9% 8.2% 32.5%

CapitaLand Mall Trust 23.2 2.04 1.0 BUY 2.33 10.78 12.81 5.3% 6.3% 19.5%

Frasers Centrepoint Trust 3.9 2.41 1.1 ACCUMULATE 2.61 9.88 13.56 4.1% 5.6% 12.4%

Dasin Retail Trust1 0.2 0.79 0.6 ACCUMULATE 0.91 5.00 5.62 6.3% 7.1% 21.5%

CapitaLand Commercial Trust 16.6 1.77 1.0 ACCUMULATE 1.91 7.67 9.12 4.3% 5.2% 12.2%

IREIT Global Trust2 0.7 0.75 0.9 BUY 0.77 5.47 5.54 7.3% 7.4% 10.7%

Ascendas REIT 13.2 3.30 1.5 ACCUMULATE 3.29 16.74 17.06 5.1% 5.2% 4.8%

Keppel DC REIT 7.0 2.67 2.3 NEUTRAL 2.31 8.99 9.55 3.4% 3.6% -10.1%

EC World REIT 1.2 0.66 0.7 BUY 0.77 5.92 6.33 9.0% 9.7% 26.6%

Note: 3M Daily Average Volume is

calculated based on the total Source: Bloomberg, PSR, updated 8 July 20201 Covered by PSR under a paid research agreement

2 Covered by PSR under the ‘Research Talent Development Grant Scheme’ administered by SGX



Paul Chew

Head Of Research


20th July 2020

SATS Ltd4Q20 Results

A long road to recovery



SATS Ltd (SELL (Downgraded), TP: S$1.95, Last: S$2.88)

Positives

• Responding with aggressive cost cuts. Excluding thegovernment grant of S$21.9mn (2 months) in 4Q20, SATS hasmanaged to lower staff cost by 16% YoY, more than the 8%,including government grants.

• Other sources of revenue. Some of the new areas of revenueincludes wholesale supplier to cloud kitchens catering tohome deliveries. Another source of revenue was cruisecentre support to house foreign workers in cruise ships..

Negatives

• No final dividend. The was no final dividend compared with13 cents a year ago. The company needs to be prudent andretain cash due to the uncertainties.

Outlook: 4Q20 results was below guidance of $15-20,m profit due to the write-offs. SATS is temporarily closing Inflight Catering Centre 1 (ITC 1)and consolidate operations at ITC 2. 1Q20 guidance is for a net loss of S$50mn.

Downgrade to SELL from NEUTRAL: Why our sell recommendation?

1.No clear visibility the steepness or duration of recovery. IATA forecast is 2023 recovery in air traffic to 2019 levels;

2. Absence of dividend yield and net loss to persist, we are using price to book to value. Average of 1.35x during the global financial crisis in 2009 asa benchmark;



Timing and steepness of the recovery is unclear

0

400

800

1200

1600

2000

2006 2007 2009 2010 2012 2013 2015 2017 2018 2020

SIA: Passengers Carried (000s - 3MMA)

Source: CEIC, PSR

-100%

-80%

-60%

-40%

-20%

0%

20%

2006 2008 2010 2012 2014 2016 2018 2020

SG: Changi Airport Activity(3MMA - YoY)

Freight Traffic Passengers Traffic



Week 30 - Phillip Singapore Weekly

Paul Chew

Head Of Research


20th July 2020



Week 30 – Tactical Views

https://www.poems.com.sg/education/events-seminars/

https://www.poems.com.sg/education/events-seminars/



COVID-19 Watch: Still rising globally…but not all

Source: CEIC, WHO, PSR; *Large economies (Asia/Europe) - China, Germany, UK, Spain, Italy, France,

Japan, S Korea

5,640

196

0

1,000

2,000

3,000

4,000

5,000

6,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

21-Feb 13-Mar 3-Apr 24-Apr 15-May 5-Jun 26-Jun 17-Jul

COVID-19 New daily cases: CH, KR, Italy (7DMA)

China S Korea Italy - RHS

0

50,000

100,000

150,000

200,000

250,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

COVID-19 New Daily Cases (7DMA)

Large Economies United States World (RHS)



COVID-19 Watch: Singapore cases still contained

Source: PSR, MOH

56

59

0

20

40

60

80

100

120

29-Jan-20 26-Feb-20 25-Mar-20 22-Apr-20 20-May-20 17-Jun-20 15-Jul-20

SG: Daily new Community

1 week before Daily Cases 7 Day Moving AverageCi

rcui

t Bre

aker

: 7 A

pr

Phas

e 1:

2 Ju

ne

Phas

e 2:

19

June



Activity indicators – Singapore moving sideways

-80

-60

-40

-20

0

21-Feb 10-Mar 28-Mar 15-Apr 3-May 21-May 8-Jun 26-Jun 14-Jul

SG: Google Mobility Trend (7DMA)

CB/Phase 1/Phase 2 Retail & recreation Workplaces

0

20

40

60

80

100

120

19-Jan 9-Feb 1-Mar 22-Mar 12-Apr 3-May 24-May 14-Jun 5-Jul

SG: Apple Mobility Trends (7DMA)

CB/Phase 1/Phase 2 Driving Transit

Source: https://www.google.com/covid19/mobility/

https://www.apple.com/covid19/mobility ;

https://www.google.com/covid19/mobility/

https://www.apple.com/covid19/mobility



Activity indicators – United States starting to weaken

Source: https://www.google.com/covid19/mobility/

https://www.apple.com/covid19/mobility ;

-60

-40

-20

0

20

2-Mar 20-Mar 7-Apr 25-Apr 13-May 31-May 18-Jun 6-Jul

US: Google Mobility Trend (7DMA)

Retail & recreation Workplaces

0

20

40

60

80

100

120

140

19-Jan 9-Feb 1-Mar 22-Mar 12-Apr 3-May 24-May 14-Jun 5-Jul

US: Apple Mobility Trends (7DMA)

Driving Transit

https://www.google.com/covid19/mobility/

https://www.apple.com/covid19/mobility



SG: Electronic exports rebound, construction doldrums

Source: CEIC, PSR

-40%

-20%

0%

20%

40%

2008 2010 2012 2014 2016 2018 2020

SG: Total and Electronic Exports

NODX - 3MMA (YoY) Electronics - 3MMA (YoY)

10,000

20,000

30,000

40,000

2007 2008 2010 2011 2013 2014 2016 2017 2019

SG: Construction demand (S$mn - T12M)

Contracts Awarded Contracts Billed



Coronavirus Aid, Relief, and Economic Security Act (CARES Act) -$2.2t

Type US$bn Comment Outlook

Unemployment benefit(FPUC,PEUC,PUA)

260 Extended the duration (+13 weeks), expanded the eligibility and added $600 per week (to the typical half weekly wages) + end Jul20 completed

Likely extend but at lower amount (e.g. $40k)

One-Time payments

270 $1,200 for adults and $500 for every child/dependent + maximum $6000/family + earn less than $99k/year

Reduce the income eligibility

Paycheck Protection Program (PPP)

670 Small busines loans/grants + cover 2.5 months of payroll cost (up to $10mn) + turn to grant if proceeds cover payroll, rent, etc + less than 500 employees to be eligible

Lower the employee cap to 100 staff

State Assistance

150 States need to balance their budget. Current huge revenue shortfall has led layoffs and furloughs.

Large rift between both parties

Source: Media, FPUC (Federal Pandemic Unemployment Compensation)

Both parties want it:

Republicans because

election year

Democrats because of

the social aid

Coviod-19 still raging

and economy at risk

Expectations is $1tr

stimulus

Extend current aid

programmes



The information provided in this seminar is solely for educational purposes and should not be considered as financial advice. The views, statements and opinions expressed in this seminar

are solely the views, statements and opinions of the presenter made in his/her personal capacity and do not represent the views, statements or opinions of nor are they made on behalf of

Phillip Securities Pte Ltd (PSPL).

The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections,

expectations and opinions (collectively the “Research”) contained in this presentation are based on such information and are expressions of belief only. PSPL has not verified this

information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such

information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply

any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the

use of the information or Research made available, even if it has been advised of the possibility of such damages.

This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person.

You should seek advice from a financial adviser regarding the suitability of the investment products mentioned, taking into account your specific investment objectives, financial situation or

particular needs, before making a commitment to invest in such products.

Disclaimer



RESEARCH EQUITY TEAM

Head of ResearchPaul Chew [email protected]

REITs | PropertyNatalie Ong Pei [email protected]

Small-Mid Cap

Tan Jie Hui

[email protected]

Banking| Financials | Healthcare Tay Wee [email protected]

Technical AnalystChua Wei Ren [email protected]

Credit Analyst (Bonds)Timothy [email protected]

Research AdminSiti Nursyazwina [email protected]

mailto:[email protected]








Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents. 58

Analysts

Paul Chew, Head of Research

Natalie Ong, REITs | Property

Tay Wee Kuang, Banking & Financial | Healthcare

Tan Jie Hui, Small Mid Cap

Timothy Ang, Credit (Bonds)

Chua Wei Ren, Technical

Siti Nursyazwina, Research Admin

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