Singapore REITs - Maybank Kim Eng 2019-09-18: Raising Limits, Adding 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) FAR EAST HOSPITALITY TRUST (SGX:Q5T) MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Singapore REITs - Raising Limits, Adding Growth


Acquisition growth levers arising




S-REITs acquisitive, overseas deals up DPU visibility

  • S-REITs have been acquiring assets since 2015, especially overseas. Contributions from their overseas investments have risen steadily from 27% in 2014 to 60% of total investments in 1H 2019. Overseas assets (mostly freehold, backed by longer WALEs and favourable annual rental-escalation clauses) comprise 5-84% of AUMs and we expect this to grow.
  • Currency risks are well-managed with low balance sheet exposure. For S-REITs under coverage, a 5% variation in respective market currencies against the SGD impacts DPUs by up to 11%.


Balance Sheets strong, higher debt headroom adds to growth

  • The sector’s 35% average leverage as at end-Jun 2019 remains below the 45% regulatory limit while interest-coverage ratios are healthy at 5.7x on average. S-REITs have extended their debt maturities in recent years, while maintaining their fixed-debt ratios (now just above 81.0% on average) due to lower interest rates over the past year.
  • Further interest rate cuts could support DPU upside. We estimate debt headroom at between 11-39% of their AUMs, which could rise to 21-53%.


Growth skewed to industrial REITs pushing overseas

  • A wider compression in yields across office, retail and hospitality assets have spurred capital-recycling efforts in Singapore but industrial S-REITs have pushed faster overseas for growth, as supply-led fundamentals are positive but demand recovery remains soft.
  • We see a positive-carry for assets in Europe and the US, hence opportunities for further DPU-accretive deals.


Top S-REIT BUYs


ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)

  • Largest and most liquid industrial S-REIT. Rising overseas exposure to offset lower Singapore contributions near term. We continue to favour its scale and see it as the best proxy for a recovering industrial sector, given its concentrated business-park and high-spec portfolio, which contributes 60% to AUM.
  • Following its UK entry and a stronger sponsor pipeline after the CAPL-Ascendas Singbridge merger, further diversification is possible which could provide upside to our FY19-21E 3.0% DPU CAGR.
  • Report on Ascendas REIT:

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)


CDL HOSPITALITY TRUSTS (SGX:J85)


FAR EAST HOSPITALITY TRUST (SGX:Q5T)


FRASERS CENTREPOINT TRUST (SGX:J69U)


MANULIFE US REIT (SGX:BTOU)


See attached PDF report for complete analysis.






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-09-18
SGX Stock Analyst Report BUY MAINTAIN BUY 3.300 SAME 3.300
BUY MAINTAIN BUY 1.800 SAME 1.800
BUY MAINTAIN BUY 2.800 SAME 2.800
BUY MAINTAIN BUY 0.800 SAME 0.800
BUY MAINTAIN BUY 2.500 SAME 2.500



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