Singapore REITs - OCBC Investment 2016-11-15: Uncertainties post election; time to bargain hunt

Singapore REITs - OCBC Investment 2016-11-15: Uncertainties post election; time to bargain hunt FRASERS CENTREPOINT TRUST J69U.SI

Singapore REITs - Uncertainties post election; time to bargain hunt

  • Subdued DPU performance.
  • Uncertain outlook.
  • Buying opportunities from sell-down.


Most REITs met our expectations 

  • The S-REITs under our coverage have concluded their 3QCY16 results reporting. 
  • Out of the 24 SREITs we cover, only Lippo Malls Indonesia Retail Trust managed to beat our expectations. Cache Logistics Trust and CapitaLand Retail China Trust both fell short, but the remaining 21 met our expectations. 
  • In line with what we had cautioned previously, operational performance was muted, given the challenging operating environment.
  • Overall DPU growth for the REITs under our coverage came in at -0.8% on a YoY basis. However, if we take into account significant one-off items, adjusted DPU would instead have declined by 0.4% YoY, based on our estimates.


Probability of Dec rate hike gathered pace post-U.S. election results 

  • The outlook for the S-REITs sector has become more cloudy post Donald Trump’s victory in the U.S. presidential election. Based on the fed funds futures rate, the probability of a rate hike in Dec has increased to 92%, from 11.8% at the start of July. 
  • Although the median projection of the fed funds rate for 2017 and 2018 was revised downwards by Fed officials during the Sep FOMC meeting, Donald Trump’s expansionary fiscal policy plans may result in interest rates rising faster than previously anticipated. Having said that, this is not without uncertainties as it remains to be seen how aggressively these policies would be pushed through and whether Congress would fully support Trump’s policies.


Maintain OVERWEIGHT on S-REITs 





Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-11-15
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.330 Same 2.330




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