ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)
MAPLETREE LOGISTICS TRUST (SGX:M44U)
FRASERS LOGISTICS & IND TRUST (SGX:BUOU)
FRASERS CENTREPOINT TRUST (SGX:J69U)
MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
Singapore REITs - S-REITs (Us) Against The World
- FED’s mid-cycle insurance cuts positive for REITs.
- We noted a cautious tone among industrial, hospitality players, while retail and office REITS remain confident.
- Logistics (Mapletree Logistics Trust/ Frasers Logistics & Industrial Trust), diversified industrial (Ascendas REIT) and retail REITs (Frasers Centrepoint Trust/ Mapletree Commercial Trust) to perform better in a late economic expansion/contraction cycle.
- Fund raising to pick up in 2H19 as cost of capital remains conducive for inorganic growth.
Defensive picks against volatility.
- The Federal Reserve (FED) delivered a 25bps cut in end Jul’19, but equity markets remain concerned as the ongoing trade war weighs down the economic growth outlook. While S-REITs are not immune against economic downturns, we believe its high earnings visibility from its predictable lease-based income is a highly valued trait in periods of volatility.
- While the FSTREI Index (REIT index) has dipped c.1% since the FED cut, it has outperformed the c.4% drop in the Straits Times Index (STI).
- Given recent weak macro data-points, we continue to prefer the more resilient sub-sectors of retail and diversified industrial & logistics
- REITs that offer relative value are
More cautious tone from industrial and hospitality REITs; logistics focused REITs remain confident.
- Recent on-the-ground feedback appears to suggest that performance q-o-q will be modest, in response to the recent downbeat Singapore macro-economic data. The industrial and hotel REITs appear to have turned most downbeat in recent meetings.
- Most industrial S-REITs now see a slower recovery in rents in 2H19 as tenant expansionary plans take a backseat with only the logistics landlords (MAPLETREE LOGISTICS TRUST (SGX:M44U)/FRASERS LOGISTICS & IND TRUST (SGX:BUOU) with more 3rd party logistics players (3PL) exposure) still seeing expansion.
- With fairly weak 1H19 results, hoteliers in general have also dialed back RevPAR expectations in 2019 from +3% in 1Q19 to flat, and we have cut our estimates in response to that.
Retail and office REITs remain more sanguine.
- We note that foot traffic, tenant sales, and occupancy costs across most retail REIT portfolios have been sticky, and we take comfort that most will continue to see positive reversions, aided by accretive acquisitions.
- Office REITs are still enjoying the benefits of a landlord market, driven by a lack of new competitive supply but we remain cautious of a slight supply bump in 2020 (1.1 m sqft mainly from Chevron House, ASB Tower) which may slow rental growth rates if macroeconomic conditions deteriorate.
Fund raising could ramp-up.
- S-REITs raised close to S$1.5bn of new equity in 1H19 (excluding IPOs), to part fund close to S$2.0bn in acquisitions. We believe equity raisings could ramp up in 2H19 as cost of capital remain conducive for acquisitions.
- We anticipate deals across all major subsectors with the commercial, industrial landlords remaining the most active in 2H19.
- See attached PDF report for complete analysis.
Derek TAN
DBS Group Research
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Rachel TAN
DBS Research
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https://www.dbsvickers.com/
2019-08-16
SGX Stock
Analyst Report
3.400
SAME
3.400
1.850
SAME
1.850
1.40
SAME
1.40
2.950
SAME
2.950
2.250
SAME
2.250
