OCBC Investment Research 2015-07-03: MAS Proposals within Market Expectations. Top Picks are Frasers Centrepoint Trust [BUY, S$2.27], Frasers Commercial Trust [BUY, S$1.65] and Starhill Global REIT [BUY, S$0.93]

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Singapore REITS: MAS proposals to strengthen REIT Market 

• After obtaining feedback from market participants, MAS has refined its proposals for strengthening the S-REITs market. 
• Key changes include restricting the gearing limit to 45% of total assets (versus the current cap of 35% for REITs that are not rated and 60% for those with credit ratings) and increasing the development limit to 25% from 10% previously. 
• In addition, to improve transparency and corporate governance, MAS will now require that REIT managers clearly justify each type of fee charged, including disclosing the methodology for computing fees, and that at least half of the Board comprises independent directors, if unit holders do not have the right to appoint the directors. 
• The outcome of the consultation was generally within market expectations and, in terms of long term impact, we believe these changes will promote financial prudence, allow greater business flexibility and enhance investor confidence in the sector. 

• We have a NEUTRAL rating on the S-REITs sector. 
• Our top picks are Frasers Centrepoint Trust [BUY, FV: S$2.27], Frasers Commercial Trust [BUY, FV: S$1.65] and Starhill Global REIT [BUY, FV: S$0.93]. 

(Andy Wong Teck Ching)

Source: http://www.ocbcresearch.com/