S-REIT Tracker
CAPITALAND RETAIL CHINA TRUST
SGX:AU8U
ASCENDAS REAL ESTATE INV TRUST
SGX:A17U
DASIN RETAIL TRUST
SGX:CEDU
CACHE LOGISTICS TRUST
SGX:K2LU
KEPPEL DC REIT
SGX:AJBU
Singapore REITs - Monthly Tracker (july 2018)
- FTSE S-REIT Index declined 3.3% YTD. Sector yield spread over the benchmark 10-year SGS (10YSGS) yield remains below the -1SD level at 294bps.
- 3-month SOR crept up to 1.59% as at end June 2018, close to 10-year highs.
- Remain NEUTRAL on S-REITs sector.
SECTOR SNAPSHOT
S-REIT yield spread compressed 30bps YTD in June.
- Despite the rise in the S-REIT dividend yield, the much larger rise in the 10YSGS yield YTD has led the yield spread to compress further to 294bps in June. This is below the -1SD range – historical average is 361bps.
- The 10YRSGS yield currently stands at 2.53%. Bloomberg consensus forecasts for the 10YSGS yield at the end 2018 and 2019 are at 2.62% and 2.88%, respectively. This will be a headwind for S-REITs.
3-month SOR near 10-year highs in June.
- Currently at 1.59%, the 3-month SOR is near 10- year highs. Flow-through to higher near-term financing costs largely mitigated as 31 out of 40 of all S-REITs, have at least 70% hedged against interest rates. Bloomberg consensus forecasts for the 3-month SOR at the end of 2018 and 2019 are at 1.78% and 2.17%, respectively.
Retail REITs:
- Retail sales (excluding motor vehicle sales) continued to be lacklustre with the Retail Sales Index inching up just 2.3% y-o-y in May. Competition for the consumer dollar remains intense. Taobao held its first home pop-up store in Singapore in June, which offered free local shipping on all items showcased.
- Amazon will also be launching its largest one-day sales event, Prime Day, for the first time here on July 16.
Commercial REITs:
- Two major transactions were Capitaland Commercial Trust (CCT)’s divestment of Twenty Anson [see report: CapitaLand Commercial Trust - Portfolio Reconstitution Continues With Twenty Anson Sale] and Frasers Commercial Trust’s divestment of 55 Market Street.
- CCT had demonstrated effective capital recycling as can be seen from its higher entry yield from its acquisition of Asia Square Tower 2, which has a longer remaining lease and lower committed occupancy of 88%. Co-working concept continues to expand, with the opening of WeWork’s regional flagship space at 71 Robinson in June, just six months after establishing its maiden local presence at Beach Centre.
- Only upcoming Grade A Office supply this year will be 18 Robinson, which spans 145,000sqft.
Industrial REITs:
- Against the backdrop of the ongoing merger & acquisition activity between ESR-REIT and Viva Industrial Trust, ARA Asset Management has acquired the remaining shares in the REIT manager and property manager of Cache Logistics Trust from CWT, thus ending the sponsor-REIT relationship between CWT and Cache.
- Hot on the heels was Mapletree Logistics Trust acquiring five modern, ramp-up logistics properties in Singapore from CWT for about S$778.3mn. These five properties were formerly in the right of first refusal portfolio from CWT to Cache Logistics Trust.
- Frasers Logistics & Industrial Trust is selling an Australian property for A$90.5mn (S$90.5mn). AIMS AMP Capital Industrial REIT will be spending S$13mn on enhancing its NorthTech industrial building in Woodlands.
Hotels REITs:
- A hotel owner-operator mentioned that hotel occupancy levels were buoyant in May and June, partly stemming from the flock of tourists and journalists who arrived here for the Trump-Kim summit in June. Apart from the one-off event, we expect visitor arrivals to rise, albeit on a more gradual pace, following the heightened awareness of Singapore as a tourist destination post the Trump-Kim summit.
INVESTMENT ACTIONS - Remain NEUTRAL on S-REITs sector
Top-down view
- We like the Commercial, Industrial and Hospitality sub-sectors due to tapering supply after the surge in supply in the prior two to three years. We are cautious on the Retail sub-sector as retail sales and shopper footfall both remain lacklustre, due to e-commerce competition.
Tactical bottom-up view
- For investors with concerns on rising interest rates, look for REITs with:
- Low gearing;
- High-interest coverage;
- Long weighted average debt to maturity; and
- A high proportion of debt on fixed interest rates
Other news in the past month
- Ascendas Hospitality Trust is acquiring three hotels in Osaka, Japan from a third party, for JPY10,290mn (S$126.1mn), which will be fully-funded by debt.
- The CEO of Cromwell E-REIT’s Manager, Philip Levinson, has resigned.
- The CFO of Sasseur REIT’s Manager, Richard Tan Liat Chew, has retired and will be superseded by deputy CFO Fred Chee Kin Yuen.
- Mr Chong Kee Hiong, CEO and executive director of OUE Hospitality Reit's manager and trustee-manager, will be stepping down with effect from July 15.
Tara Wong
Phillip Securities Research
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https://www.stocksbnb.com/
2018-07-16
SGX Stock
Analyst Report
1.660
Same
1.660
2.910
Same
2.910
0.970
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0.970
0.910
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0.910
1.51
Same
1.51
