ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)
KEPPEL DC REIT (SGX:AJBU)
MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)
ASCENDAS INDIA TRUST (SGX:CY6U)
KEPPEL REIT (SGX:K71U)
Singapore REITs - When The World Sneezes…
- The New Year cheer has been thwarted with a turn in sentiment following the outbreak of the coronavirus.
- Maintain our preference in Industrial (Ascendas REIT, Mapletree Industrial Trust, Mapletree Logistics Trust and Keppel DC REIT) for resilience and sustainable growth.
- Frasers Centrepoint Trust’s resilience will stand out; Ascendas India Trust’s execution on its robust growth pipeline will drive further re-rating.
- Keppel REIT amongst office names preferred for its value and potential acquisitions/developments to surprise positively.
Preferred picks holding up despite uncertainty.
- The New Year cheer was very soon thwarted with a turn in sentiment following the outbreak of the coronavirus in the middle of January. While FSTREI Index (REIT Index) rose 6.6% since the low in December 2019, it has fallen 3.5% since 17 January 2020, when a few cases of coronavirus outside China were reported. At this point, the FSTREI index is up 2.0% since the start of 2020, outperforming the STI which is down 2.1%. Its relative high yield spreads of 3.1%, coupled with c.3.0% growth, will continue to attract investors to seek shelter in S-REITs in the mist of heightened volatility.
- Given the uncertainty brought about by the recent travel ban and likely lower growth prospects going forward, we maintain our preference for subsectors with structural growth themes in place and are less elastic to economic gyrations.
- We maintain our preference for industrial REITs (Ascendas REIT (SGX:A17U), Mapletree Industrial Trust (SGX:ME8U), Mapletree Logistics Trust (SGX:M44U) and Keppel DC REIT (SGX:AJBU)) while remaining cautious on hospitality and selected retail S-REITs which are more sensitive to tourist arrivals.
- Selectively, we prefer Frasers Centrepoint Trust (SGX:J69U) for its resilience as a pure play suburban landlord and Ascendas India Trust (SGX:CY6U) for its robust inorganic growth pipeline. We like Keppel REIT (SGX:K71U) for its pure office play and its relative value amongst its peers. The ability to deploy capital to accretive acquisitions or developments will surprise investors, underpinning longer-term NAV growth.
Industrial sector remains our favourite; offering a potent mix of earnings growth and resilience.
- We still favour the industrial sector, especially REITs with a heavy weightage within the data centres (Mapletree Industrial Trust (SGX:ME8U), Keppel DC REIT (SGX:AJBU)), business parks (AREIT, Ascendas India Trust (SGX:CY6U)) and logistics space (Mapletree Logistics Trust (SGX:M44U)) which we believe can continue to deliver a sweet mix of resilience and industry-leading c.5.0% growth in distributions for FY2020.
- In addition, recent meetings indicate that most S-REIT managers remain on the hunt for more inorganic growth, which we believe consensus has yet to price in.
Wait for a better entry opportunity for Hospitality S-REITs.
- While we had previously pitched Hospitality as a “dark horse” for 2020, the onset of the virus spread made us relook this call as we see near-term earnings risks given the vulnerability of the sector to tourism demand. While share prices have fallen by an average of 7.6% since 20 January 2020, we will only turn buyers near the -1 SD P/NAV level which, based on our current levels. See S-REITs share price performance.
Derek TAN
DBS Group Research
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Singapore Research Team
DBS Research
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Rachel TAN
DBS Research
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https://www.dbsvickers.com/
2020-02-04
SGX Stock
Analyst Report
3.450
SAME
3.450
2.400
SAME
2.400
3.000
SAME
3.000
1.650
SAME
1.650
1.450
SAME
1.450
