CAPITALAND MALL TRUST (SGX:C38U)
FRASERS CENTREPOINT TRUST (SGX:J69U)
SPH REIT (SGX:SK6U)
MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
STARHILL GLOBAL REIT (SGX:P40U)
Singapore Retail REITs - Negative Impact From New Measures
- The Singapore government has issued an advisory urging Singaporeans to avoid making any non-essential visits to malls and supermarkets.
- We estimate 12-19% FY20F DPU impact from 2 months’ rent rebate to 90% of tenants and loss of 90% variable income until year-end (9 months’ impact).
- Prefer Sheng Siong (SGX:OV8), which could be a beneficiary when people stay at home.
New measures to minimise spread of Covid-19
- Over the weekend, the Singapore government issued an advisory urging its residents to avoid making any non-essential visits to malls and supermarkets. This comes a day after crowds were seen outside some shopping malls as mall operators regulated the number of shoppers to comply with Singapore’s new safe-distancing measures.
- On 27 Mar, Singapore ordered all entertainment venues to close and limited gatherings to less than 10 persons. While malls will remain open, the new measure limits mall capacity to 1 person per 16 sq m of usable space.
Prompt action from REITs after stimulus package announcement
- CapitaLand (SGX:C31) will provide rental rebate of 1.5 months for its shopping mall tenants. This is in addition to the 0.5-month rental rebate for the majority of its tenants announced on 24 Feb 2020.
- SPH REIT (SGX:SK6U) will fully pass on total property tax rebates in a targeted manner to its tenants. SPH REIT Manager’s board of directors will be taking a 10% cut to their fees. CEO Susan Leng and senior staff will also take a pay cut of 10% and 5%, respectively. See SPH REIT Announcements.
- Mapletree Commercial Trust (SGX:N2IU) is committing an additional S$18m of rental relief in a second round (S$11m in the first round) of assistance to its retail tenants. This is on top of the additional property tax rebates announced last Friday. See Mapletree Commercial Trust Announcements.
- Frasers Property (SGX:TQ5) Retail and Frasers Centrepoint Trust (SGX:J69U) will provide additional rental rebates amounting to S$45m for tenants, which is an extension of the Tenant Support Package announced on 26 February 2020. See Frasers Property Announcements.
- On 6 Mar, Starhill Global REIT (SGX:P40U) said that it commenced the process of handing out rental rebates to qualifying tenants at its Singapore properties. See Starhill Global REIT Announcements.
- Tax rebate and extra rent rebate given by the REITs work out to 1-2 months of rent.
Large DPU impact likely in 2020
- The new measures will significantly reduce the density of crowds in the malls, including the suburban malls. Based on our checks with the REITs, these measures will also impact urban malls, which have already seen large declines in shopper traffic and tenant sales.
- Based on our analysis, a 2-month rent rebate given to 90% of the malls’ tenants plus 90% of variable income wiped out for 9 months until year-end and 50% carpark income reduction will reduce REITs’ FY20F DPU by 12-19%.
- Some countries have ordered malls to close. In this situation, REITs’ rental income will be significantly affected as only ~40% of the malls’ income is generated from essential services (F&B and supermarkets) on average. An additional one-month mall closure will reduce our FY20 DPU forecasts by another 6-8% pts.
- Given the lower support granted to malls overseas, retail REITs with overseas presence will be in a worse position as compared to the local-focused mall under these circumstances.
- We prefer Sheng Siong (SGX:OV8), which could be a beneficiary as people stay at home.
EING Kar Mei CFA
CGS-CIMB Research
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LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-03-30
SGX Stock
Analyst Report
2.750
SAME
2.750
3.100
SAME
3.100
1.240
SAME
1.240
2.610
SAME
2.610
0.790
SAME
0.790
