Largest IPO in 2 Years Goes Live on 7 March - Mapletree Greater China Commercial Trust

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Largest IPO in 2 Years Goes Live on 7 March

And so, just a quick update about the Mapletree Greater China Commercial Trust that has reignited the attention onto the SG IPO scene.

• S$1.68 billion to be raised in largest REIT IPO
• Last year SGX raised a total of S$4.5 billion which was somewhat a dampener compared to the $9.4 billion raised in 2011. 
• Offer is confirmed to be S$0.93/share
• Highest price of the previously indicated indicative price range of S$0.88 to S$0.93
• Retail offer shares ballot application start on Feb 28
• (for green investors/IPO-applicants, do check out the "Guide to IPO Investing" on this blog regarding the SG IPO application procedures)
• (do also check out "SG IPO Statistics" on this blog for a statistical breakdown of IPOs since 2012)
• Listing date March 7
• Cornerstone investors
• Temasek Holdings
• Morgan Stanley
• Norges Bank Investment Management
• AIA Group subsidiaries
• CBRE Group
• Henderson Global Investors

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Quick Conclusion

As mentioned before, the upper pricing of this IPO is vastly within expectations given the wide search for yield even in this period. With such a brand name and big boys backing this IPO, it is also not surprising that the institutional demand ensured that the IPO be priced at the higher end of the spectrum. 

What this means for us investors is 

• the general assurance of a good fundamentally strong stock. take general with a pinch of salt after what ratings agencies did to our financial system leading to the sub-prime meltdown.
• while knowing that we, as retail investors, are getting it at a much higher premium than did the first cornerstone investors and even the institutions at the placement tranche

All in all, it should impress that if you are fine with the extra premium through the IPO, then this IPO has few fundamental reasons to be avoided. If not, you may want to observe its market equilibrium first before deciding to buy in. My feel is that it is not too late.

I am also skeptically wondering why the IPO is still going ahead at such a suddenly volatile period for the markets. Just my thoughts.

Anyway, I have previously written a more elaborate analysis of the MCGCT IPO that you can find here. Do read it before you make your decision!

Happy and healthy trading people.

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Largest IPO in 2 Years - Mapletree Greater China Commercial Trust

First of many IPOs this year we hope. After a couple of months without a large IPO, the IPO market in Singapore looks set to heat up again with the proposed listing of Mapletree Investment's Mapletree Greater China Commercial Trust. In fact, it is the largest IPO in 2 years.


Summary of offering

• IPO to raise up to S$1.68 billion to purchase 2 China-based commercial property assets from Mapletree Investments
• The biggest IPO of 2013 and the biggest trust IPO since Hutchinson Port Holdings Trust that raised US$5.5 billion in 2011
• Assets are Greater China-based
• Beijing Gateway Plaza
• Hong Kong Festival Walk
• Strong brand name in Singapore with experience in office, logistics, industrial, residential and retail properties
• 45 assets in Singapore
• 20 assets in China
• 9 assets in Hong Kong
• 32 assets in Japan, India, South Korea, Malaysia and Vietnam
• 23 commercial-linked properties
• Figures and numerics
• raising up to S$1.68 billion 
• indicative price range of S$0.88-S$0.93
• Use of proceeds
• No exact break-down so far but cash raised will be used to buy the 2 properties from Mapletree Investments.
• Dividend policy
• Semi-annual
• 5.6-6% for the first year
• 6.1-6.5% for the second year
• 100% of distributable income until March 2015. At least 90% of disctributable income thereafter.
• Cornerstone shareholders
• Temasek Holdings - 851.7-931.6 million shares
• 953.5 million shares to be shared among
• Morgan Stanley
• Norges Bank Investment Management
• AIA Group
• CBRE Group
• Henderson Global Investors
• 776.6 million shares for institutional and retail investors
• Timeline for offering
• 18 Feb - Offer to institutional buyers
• 28 Feb - Offer to public
• 7 Mar - list on SGX

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Commentary

Brand name
Mapletree is pretty much a big brand name in Singapore akin to Ascendas, both of which are government-linked. It is noteworthy to realise that Mapletree Investments manages a portfolio valued at S$19.9 billion. They have ample management experience in office, logistics, industrial, residential and retail.

China + Commercial Experience
The current IPO is a divestment of 2 China-based commercial assets into a REIT. China is not a new destination for Mapletree as they already easily manage 20 assets in China such as the Mapletree AIP in Guangzhou under Mapletree Logistics Trust. Out of these assets, 6 are commercial-related properties - Beijing Gateway Plaza, Hong Kong Festival Walk, Shanghai Silver Court, Nanhai South Station Enterprise City, Minhang Development Project and Nanhai Business City. The rest are mostly logistics and industrial with some residential properties. Having said that, Mapletree also has considerable commercial property experience outside of China with 7 other assets spread over Japan, Vietnam, Malaysia.

Quality of assets
Both are Grade-A offices in the heart of China and Hong Kong with size more than 100,000 sqm. They also consist of some retail space located at the base of the assets. Festival Walk was purchased by Mapletree Investments in 2011 for $2.4 billion.

Current REIT market conditions
REITs are clearly the outright winning category of 2012 as investors flocked to yield havens, resulting in a yield compression that we see today. Even so, REITs have still enjoyed considerable upside to the start of 2013. Mapletree brand name REITs have also done well in the current market conditions, surging even further in the last 2 days upon the announcement of listing of this REIT.

• Mapletree Commercial (listed 2011) - $1.445 15 Feb closing price compared to IPO offer of $0.88
• Mapletree Industrial (listed 2010) - $1.390 15 Feb closing price compared to IPO offer of $0.93
• Mapletree Logistics (listed 2005) - $1.240 15 Feb closing price compared to IPO offer of $0.68

And, for a tabulation of all SG-listed IPOs' performance since 2012, do visit "SG IPO Statistics" on this HealthyTrading blog. It presents an easy snapshot of all the IPOs at a glance for your analysis and comparisons.

For those of you gunning for this Mapletree Greater China Commercial Trust IPOs, check out my blog page on "Guide to IPO Investing" to help you navigate around especially if you are a new investor or new to the IPO bidding system of SGX. Do not waste time; time is ticking away to those offer deadlines!

Also, do bookmark this page // add Healthytrading blog to Twitter // subscribe to RSS feed // subscribe to email feeds to receive the LATEST IPO/market news that will move your money. Links are available all on the right of the page (at the navigation bar).

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Singapore Property Cooling Measures - Buy on Dip?

Current Market Theme:

Mass market residential property to be worst hit given the additional measures aimed to further curb speculation in this category by hot money flowing through the financial system. Measures seem most drastic in the 7th round of property cooling but as with all past measures, it has shown that the government's steps have been well balanced and aimed to prevent a sudden collapse in prices in the near future should monetary easing start to reduce worldwide.

Going by history, as long as hot money is kept circulating in the global financial system (highly likely given the tepid growth experienced in US and Europe), property counters will still enjoy upside albeit less pronounced in the near future. Effects of measures present a buying opportunity to accumulate property counters.

[Previous post: Weekly Update - NOL, Yangzijiang, Swiber]

1. Capitaland

• Gap down on Monday, first day of the week, declining to a day low of  $3.61 before returning to $3.73.
• MACD - positive divergence declining and MACD turned downwards for the first time in 6 months.
• RSI (25w) - hit 70% to face resistance.
• Would be buyers at ~$3.45 after testing $3.42 key support to catch the property momentum.

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2. Keppeland

• Faced key resistance at $4.38 last week. Gaped down opening today at $3.97 to close at same price.
• MACD - MACD turning downwards after peaking at highest levels in 2 years.
• RSI (25w) - hit 70% to face resistance.
• Prices are currently sandwiched in the middle of nowhere between key support and resistances. Would be buyers at ~$3.6 when prices cool down further as that coincides with the 20w average.

3. Ho Bee

• Big dip on first day of the week, erasing almost 6.5% off its share prices. Prices seem firmly support at $1.8 levels.
• MACD - MACD turning downwards with 3 weeks of declining positive divergence.
• RSI (25w) - Overbought RSI finally heading down for some cooling.
• Expect to buy at ~$1.8. Possible to wait for $1.8 resistance to be tested before entering. 

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4. Wing Tai

• Big dip on first day of the week, erasing almost 10% off its share prices.
• MACD - MACD turning downwards after weeks of low positive divergence.
• RSI (25w) - Overbought RSI finally heading down for some cooling.
• Expect to buy at ~$1.7. Possible to wait for $1.7 resistance to be tested before entering. 

Time to be Bullish on Property Counters?

It is of no coincidence that the Straits Times rightly mentioned about 'Property Stocks Outperform(ing)' in the Saturday's (29 June) papers; this is something that I had been highlighting since end May and even more strongly in the last 2 weeks. 

• "Focus on the supply & demand + momentum" - Strong real estate supply and demand 25 June
• "Weekly stock call - Ho Bee Properties" - 19 June
• "Weekly stock picks - CapitaMalls Asia and Ezion Holdings" - 11 June
• "Weekly stock picks - Yangzijiang and Capitaland" - 28 May

Again, acutely pointed by the article is that the FTSE property index is up 20% YTD. I have also plotted all key indices in a plot below that clearly illustrates the outperformance of the property stocks index as well as highlight some other outstanding and (possibly) undervalued sectors. 

If we go deeper into the reasons for this strong showing by the property sector, it is also not difficult to derive its strong fundamentals and technicals (supply and demand).

1. If you buy the fact that the STI is rebounding pretty strongly, with large cap counters beginning to re-challenge its first half of the year highs, there is a strong premise to do so with the property counters as traditionally, they are the leaders of any bull rally/rebound/correction. 
2. Past week of property news have focused on the resilient residential prices, rebounding commercial and industrial rental yields. To put it simply, despite all the cooling measures, demand for property is still very very high from the spare liquidity in the hands of Singaporeans. Some may argue that the commercial sector still faces a tough time ahead while prime residential is still reeling from the recent stamp duty imposed on foreign buyers, they are really just smaller issues in the bigger sphere of this property sector. Here are some of the published articles between 25 June to 30 June on the property market 
1. (iOCBC Research) SG Residential Sector: Upgrade to Overweight - Mass-market prices to stay buoyant
2. (ST) Bigger homes making a comeback after shoebox craze
3. (ST) Healthy demand for good class bungalows here
4. (ST) Private resale home prices inch up again in May
5. (PropertyGuru) Suburban condo prices resilient: NUS study
6. (ST) Industrial sites draw new players
3. Cooling measures are meant to prevent a bubble from occuring and not to cause a huge deterioration in prices (a hard landing). The finance ministry will not allow that to happen either. More importantly, the absence of a property bubble gives further insurance to everyone albeit slower capital yields that the market has incidentally overdiscounted.
4. Over the last 12 months, the overall new and resale property prices are still higher by almost 5%. Source: PropertyGuru

Fundamentally, the sector is strong with key counters having huge diversification across segments (residential, commercial and industrial). They are also big players around the regions with strong balance sheets and cash kitties. Technically, proposition of property counters doing well has been well and truly validated by the stock market over the last 2-3 weeks and there is little sign that they will be headed for a crash as many predicted after the last cooling measures.