RHB Securities 2015-08-31: The REITs Pulsebeat - Weekly Review Report (Part 2 of 3)

Singapore REIT

S-REITs Investment Thesis

A disciplined and cost-conscious management team. Active leasing track record, with over 6% positive rental reversion every year post-GFC.
Possible near-term cannibalisation in Jurong East. All eyes on CMT to strategise the positioning of its three malls there.
Catalysts: Further sponsor injections (Westgate, Bedok Mall etc.)
Risk to TP: More than expected NPI margin decline due to labour crunch and increasing costs.

FCT is the only pure suburban retail play with strong resilience against the rise of the e-commerce business.
Growth of incoming supply of suburban retail space moderating in FY15 (~5.7%) and FY16 (~2.9%), compared to FY14 (~8.5%). In addition, upcoming supply not in close proximity to FCT's malls.
Catalysts: Higher than expected rental reversion driven by international retailers.Sponsor Injections.
Risk to TP: Shift in preference from mall dining to online food delivery service such as foodpanda.

FCOT is the most resilient office REIT, with assets exposed to non-cyclical sub sectors.
Expect higher rental growth rates for Grade B offices as rental spread between Grade A and B narrows.
Catalysts: Higher-than-expected positive rental reversion due to low-based passing rents.
Risk to TP: Foreign currency risk (AUD)

Completion of MBFC Twr 3 acqusition (SGD1.248b) on 16 Dec 14 from sponsor.
Expiry/Depletion of rental support in 2014 (MBFC Twr 1 & 2), 2015 (OFC), 2019 (MBFC Twr 3) may cause dips in DPU.
Catalysts: Better than expected office rentals pick-up.
Risk to TP: Further dips in FY15-16 DPU, following the depletion and expiry of OFC rental support.

Ong Kian Lin | Ivan Looi | http://www.rhbgroub.com/ RHB Securities 2015-08-31

BUY Maintain BUY 2.42 Same 2.42

BUY Maintain BUY 2.22 Same 2.22

BUY Maintain BUY 1.71 Same 1.71

NEUTRAL Maintain NEUTRAL 1.13 Same 1.13