Singapore REITs - Maybank Kim Eng 2019-01-17: Yielding Growth

Singapore REITs - Maybank Kim Eng Research | SGinvestors.io ASCENDAS REAL ESTATE INV TRUST (SGX:A17U) CDL HOSPITALITY TRUSTS (SGX:J85) FRASERS CENTREPOINT TRUST (SGX:J69U)

Singapore REITs - Yielding Growth

Defensive DPUs: prefer hospitality and industrials for growth & yield catalysts

  • We stay positive on S-REITs on the back of three potential valuation drivers in 2019. These are:
    1. a potential DPU recovery supported by easing supply;
    2. momentum in overseas expansion, which should be further biased towards developed markets; and
    3. still-benign interest rates.
  • We continue to believe that hospitality REITs and industrial REITs are best placed for growth and yields (6.1-7.8%). We see scope for further DPU yield compression with their underlying recovery off a multi-year low base.
  • Our top picks remain
  • Risks are slower-than-expected recovery in demand fundamentals and faster-than-expected rise in interest rates.



Expect DPU recovery, helped by tapering supply



Expect overseas expansion, with clarity on global ambitions

  • S-REITs made headlines last year with their string of overseas acquisitions and notable transactions across segments. Their overseas assets have risen to 5-82% of AUM and are expected to grow further. We expect overseas deals to continue to dominate the investment landscape, which should feature both diversification of location and product.
  • CAPITALAND LIMITED (SGX:C31)’s proposed acquisition of Ascendas-Singbridge, motivated by scale, has wider implications for the sector, in our view. After completion in 3Q19, it will own the largest REITs across the four asset classes, which could spur corporate activity among the large-cap REITs including a more aggressive push into developed markets.


Prefer yield & acquisition-growth levers

  • The REITs have worked their balance sheets hard while demonstrating prudence in increasing fixed-debt ratios; this was in anticipation of rising interest rates. We see further security in DPUs given expectations of still-benign interest rates in 2019-20 on the back of macro uncertainties.
  • We continue to see acquisition-growth levers from a high 25-35% of debt headroom in relation to their AUMs.





Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-01-17
SGX Stock Analyst Report BUY MAINTAIN BUY 2.950 SAME 2.950
BUY MAINTAIN BUY 1.750 SAME 1.750
BUY MAINTAIN BUY 2.550 SAME 2.550



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