Singapore REITs - Maybank Kim Eng 2017-06-30: Supply Restraint

Singapore REITs - Maybank Kim Eng 2017-06-30: Supply Restraint Singapore REITs Government Land Sale 2017H2 MAPLETREE INDUSTRIAL TRUST ME8U.SI MAPLETREE LOGISTICS TRUST M44U.SI AIMS AMP CAP INDUSTRIAL REIT O5RU.SI VIVA INDUSTRIAL TRUST T8B.SI ASCENDAS REAL ESTATE INV TRUST A17U.SI ASCENDAS REAL ESTATE INV TRUST A17U.SI CACHE LOGISTICS TRUST K2LU.SI

Singapore REITs - Supply Restraint


Supply growth to pace alongside demand recovery 

  • In the government’s land sale programme for 2H17, the modest growth in land availability remains within our expectations with sites on the confirmed list potentially increasing supply by 9% from 2019. 
  • The smaller plots and other supply measure tweaks are clearly aimed at strengthening SME support, which suggests that the manufacturing upturn remains intact. 
  • We remain constructive on the industrial REITs on bottoming sector fundamentals in 2017, with upside growth levers from acquisitions and redevelopment opportunities. 
  • Ascendas REIT (AREIT) is best geared to the structural recovery and remains our top sector pick.


Modest 2H17 IGLS increase within expectations 

  • The Ministry of Trade and Industry (MTI) on 30 Jun 2017 launched its Industrial Government Land Sales (IGLS) programme for 2H 2017. Eight sites are on the confirmed list and six on the reserve list on a combined site area of 13.9ha. This is up 19% YoY and 24% HoH, but falls below the 10-year historical average of 17.2ha, with land under the confirmed list of 4.51ha at 32% of total IGLS sites, against a historical average of 40%. 
  • We estimate the sites on the confirmed list could potentially yield future supply of 74k sqm in maximum permissible GFA, increasing supply by up to 9% from 2019. 
  • The modest increase in IGLS after declining for three consecutive HY periods is within our expectations, and continues to reflect government efforts in managing industrial land availability to pace alongside a recovering manufacturing growth outlook. This should continue to support both prices and rents as existing supply gets absorbed.


Policy fine-tuning continues to benefit SMEs 

  • The IGLS notably remains targeted at the SMEs, with all sites on the confirmed list zoned B2 on shorter 20-year land tenures, and sized below 0.6ha on average. A set of minimum building specification requirements (including provision of a minimum number of goods lifts and loading bays) introduced in Jan 2012, has also been waived for small IGLS plots (below 1ha), which should help in easing land acquisition and occupancy costs. 
  • Looking ahead, we could see further tweaks aimed to sustain support for SME tenants, which should also reduce pressure on industrial sector landlords in their retention efforts.


Investment thesis intact, AREIT as top pick 

  • We remain positive on the Singapore industrial REITs as we expect sector fundamentals to bottom out in 2017, as supply peaks and manufacturing growth momentum accelerates. 
  • Further ahead, Singapore’s economic re-modeling efforts should steer industrial demand needs towards hi- specs factories and business parks. 
  • AREIT remains our top sector pick on its rising business park AUM contribution, sizeable SGD1.1b debt headroom and strong sponsor pipeline.






Chua Su Tye Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-06-30
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 2.050 Same 2.050
HOLD Maintain HOLD 1.200 Same 1.200
BUY Maintain BUY 1.600 Same 1.600
BUY Maintain BUY 0.950 Same 0.950
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.950 Same 0.950



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