CIMB sees e-Shang Redwood (ESR's) current development as a generous unitholder of Sabana Shari'ah Compliant Real Estate Investment Trust (Sabana REIT) as a "forerunner to the potential combination of little to mid-top modern REITs".
"Through its backup e-Shang Infinity Cayman, ESR has risen as a 5.01% unitholder of Sabana REIT. This improvement is absolutely raising eyebrows on the troubled REIT, which as of late delegated Morgan Stanley as its monetary counsel for the key audit of the trust," say CIMB investigators Yeo Zhi Bin and Lock Mun Yee in a Sunday report.
ESR is the second-biggest designer in North Asia with more than US$5 billion ($7.1 billion) of benefits under administration (AUM) crosswise over China, Korea and Japan. It is upheld by private value firm Warburg Pincus, and spotlights on present day coordinations and stockrooms.
"Together with Tong Jingquan's assessed 6% stake, these two unitholders [ESR and Tong Jingquan] aggregately claim around 11% of Sabana REIT, coordinating the 12% stake of Eric Khua's Vibrant Group. Energetic Group additionally possesses 51% of Sabana Real Estate Investment Management, the REIT supervisor, and is Sabana REIT's biggest inhabitant," they include.
Considering that the combination is probably going to be as resource value swaps versus a straight buyout, Lock and Yeo think the expanded merger and securing (M&A) exercises won't make the REIT division fundamentally rerate.
CIMB is consequently looking after its "underweight" rating on the Singapore's REIT part with Mapletree Industrial Trust (MIT) and Parkway Life REIT (PLife REIT) as its favored picks as guarded plays, at target costs of $1.68 and $2.58 individually.
"We trust that ESR comprehends the significance of scale, and that greater top REITs would appreciate operational economies of scale, better access to capital markets and lower capital expenses. From the stock point of view, greater top REITs would have higher exchanging liquidity, more research scope and potentially, enhanced valuations. Likewise, higher AUM would support the estimation of the chief," finish up the investigators.
As at 10.02am, units of MIT and PLife REIT are exchanging at $1.68 and $2.46 individually, while Sabana REIT is up by 7% at 46 pennies.
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