SG Upcoming IPO

ST Group to launch IPO on Catalist Board

By: Samantha Chiew
11/06/19, 06:24 pm

SINGAPORE (June 11): ST Group Food Industries, a food and beverage group headquartered in Australia, has launched its preliminary offer document with Singapore Exchange (SGX) to list on the Catalist Board.

ST Group currently owns the exclusive franchise and licence to six internationally F&B brands or concepts in Australia, Malaysia, New Zealand and United Kingdom.

The brands include its own Pafu and Kurimu in Australia, as well as PappaRich in Australia and New Zealand; NeNe Chicken in Australia and Malaysia; Hokkaido Baked Cheese Tart in Australia and New Zealand; Gong Cha in New Zealand and UK; Ippudo in Australia and New Zealand; and iDarts in Australia.

In addition to the above, the group is also a distributor of digital beer pong system which are mainly installed in bars.

More details in https://www.theedgesingapore.com/st-grou...list-board

I never thought that the local press will pan a company's stock offering. This is the kind of journalism that is useful to retail investors.

...

Is there a need for Ardmore Medical to rush out its IPO?

"Investors should study the risk factors listed in Ardmore's offer document before they take a punt.

One key concern relates to the death of a patient under the care of founder and chief executive Sean Ng. Dr Ng accounts for 42.9 per cent of group revenue and his profit contribution is in the same range."

https://www.businesstimes.com.sg/compani...ut-its-ipo

Indeed, Marissa Lee has been providing critical and brave writing against the norm.
She is also the one wrote critically about Best World.

Hope such efforts are encouraged.
Kudos to Business Times as well to accomodate such.

For Marissa Lee fan boys and girls, you can follow her on twitter:

https://twitter.com/marissaleebt?lang=en

If you're not a BT subscriber, you can occasionally find some of her full BT articles here as well.

REIT IPO with UK properties to launch next week

The Edge Singapore
7/01/2020, 4:19pm

SINGAPORE, (Jan 7): Elite Commercial Real Estate Investment Trust is likely to lodge its prospectus next week.

The portfolio – valued at around £320 million ($567 million) – comprises 97 freehold properties, all in the UK. Some 25% of the properties (by rental income) are in London, with the rest in second and third tier cities across the UK, including Glasgow and Cardiff. These properties are currently in Elite UK Commercial Fund I.

Around 99% of the properties by rental income are occupied by Jobcentre Plus, a unit of the U.K. Government’s Department for Work and Pensions, on 10-year Full Repair and Insurance leases with built-in rent uplifts, which commenced on April 1, 2018 and expire on March 31, 2028.

Since the properties are Jobcentre Plus properties, their locations are in town or city centres, within 5-10 minutes’ walk from transportation nodes. Jobcentre Plus is a UK government-funded employment agency and social security office that can be found in most cities, whose aim it is to help people of working age find employment in the UK.

For risk management, this REIT ticks various boxes. Although there are 97 properties, the REIT has only one tenant, the UK government. UK’s sovereign rating is currently rated Aa2 - the third highest grade. Moody's Investor Service stripped Britain of its top-notch AAA rating in 2013, before downgrading it again in 2017. Still, the tenant’s credit quality is probably the best among Singapore’s 40 REITs and its counterparty risk is almost non-existent.  

The commercial risk is linked to lease renewals. In general, weighted average lease to maturity is around 6.5 years or so. More clarity on lease renewals is likely to be in the prospectus when it is released.  All other REITs with long WALE have some form of commercial risk as most commercial properties are rented to corporates or start-ups.

On the macro front, uncertainties surrounding Brexit are over and the UK has a stable government. In addition, the current government has promised to spend. The Queen’s Speech on Dec 20 included a spending boost for the National Health Service, and infrastructure development with a £100 billion-pound national infrastructure strategy to be set out alongside the government’s first budget, focusing on transport, decarbonisation and digital infrastructure.

More details in https://www.theedgesingapore.com/capital...-next-week

(07-01-2020, 05:43 PM)cyclone Wrote: For risk management, this REIT ticks various boxes. Although there are 97 properties, the REIT has only one tenant, the UK government. UK’s sovereign rating is currently rated Aa2 - the third highest grade. Moody's Investor Service stripped Britain of its top-notch AAA rating in 2013, before downgrading it again in 2017. Still, the tenant’s credit quality is probably the best among Singapore’s 40 REITs and its counterparty risk is almost non-existent.  

This conclusion makes no sense at all. According to Moody’s own internal research https://www.moodys.com/sites/products/de...425249.pdf, the default rate of a Aa rated entity over a 10 year period (i.e. approximately the time period of the lease) is 0.58%. On a prima facie level, that is low risk for sure, but certainly not at the level one would term “risk is almost non-existent”.
 
In addition to that, there are two additional points we need to take into account when assessing counterparty risk of the REIT that is not captured in a credit rating:
 
Firstly, the UK government is the sole counterparty in this case as opposed to a private entity. Besides defaulting, governments have the additional option of monetary measures to inflate currency in the event that they are facing financial strain. The inflationary measures when taken are a form of partial default through eroding purchasing parity that is not captured under a standard default scenario.
 
Secondly, this REIT has only one single lease counterparty as opposed to most other REITs which have a fairly diversified portfolio tenants. Even if not all their tenants are Aa rated, on a collective portfolio basis their composite risk (as usually defined in corporate finance dimensions of 1) probability, 2) impact and 3) mitigation opportunity) will still be lower than a REIT with only 1 single highly rated exposure.
 
For example if we reference to the same Moody’s research, let’s assume a REIT has a diversified tenant profile of mostly investment graded counterparties with no single entity taking up more than 5% of gross rental income. We are talking about a 0.56% - 4.89% default risk spread across dozens of entities vs a 0.56% across 1 single entity. From a statistical point of view, I can be highly confident that the diversified REIT’s default outcome over 10 years will be roughly equal to the weighted average default profiles of my tenants. In the concentrated REIT, all I can do is pretty much pray hard that I won’t be the “lucky” one to get to be one of the 56 out of 1000 occurrence.
 
Risk measurement and management is a sophisticated discipline and the writer needs to demonstrate better awareness of the basic concepts before making a bold and sweeping statement like this. The Edge is a paid financial publication, not a mass market tabloid, there has to be some minimal standards in their writers’ familiarity with business and financial concepts.

These are good points.

Given the overtly bullish stance, the article may well be sponsored by the people selling the REIT.

I will give credit, however, for their coverage of 1MDB. Particularly, for their willingness to buy Xavier Justo's evidence (for $2m, IIRC) and expose its contents, at the risk of incurring the wrath of the then Najib administration. For a news publication, it probably has always been as much about circulation numbers, as it was about ethical journalism.

(09-01-2020, 08:38 AM)karlmarx Wrote: These are good points.

Given the overtly bullish stance, the article may well be sponsored by the people selling the REIT.

I will give credit, however, for their coverage of 1MDB. Particularly, for their willingness to buy Xavier Justo's evidence (for $2m, IIRC) and expose its contents, at the risk of incurring the wrath of the then Najib administration. For a news publication, it probably has always been as much about circulation numbers, as it was about ethical journalism.

Nothing is risk free. Not even the "risk free" government bonds.
It is, however, fair to say that the default risk with government as the counter-party is almost non-existent.
Government can print money at the risk of depreciating the currency. But this is another issue altogether.

In general as Mobo mentioned, governments can technically non-default LOCAL DEBT by printing money, but purchasing power is already eroded by high or hyper inflation, and FX will hurt the foreign investors. FOREIGN DEBT is another issue all together cause they can't print that.

And governments are sovereign. Actually what it means is that they can literally do what they need to do that is beyond the stated laws as long as the process of overriding is followed, including nationalisation with no compensation. Even in a democracy usually a super majority can already change the constitution.

It's no mean feat that Elliot was able to battle Agentina by starving them of foreign currencies.

So this is very interesting.

If counterparty default risk is "almost non-existent," and if the projected yield is about 7% (which must mean the sponsor bought the properties at an even higher yield), and the leases are longer than usual (8 years, until 2028), then I am very curious.

Is the sponsor crazy to be giving up such a high-yielding and low-risk portfolio of assets, by pricing it at a yield of only 6-7%? It should trade at low 5% or high 4%!

Or maybe there are other reasons that can explain the pricing. With the EHT debacle still fresh on the minds of REIT investors, prospective buyers will surely be taking a closer look at the prospectus.