Singapore Retail REITs - DBS Research 2020-05-29: Near The End Of A Storm

Singapore Retail REITs - DBS Research | SGinvestors.io CAPITALAND MALL TRUST (SGX:C38U) FRASERS CENTREPOINT TRUST (SGX:J69U) MAPLETREE COMMERCIAL TRUST (SGX:N2IU) SPH REIT (SGX:SK6U) STARHILL GLOBAL REIT (SGX:P40U)

Singapore Retail REITs - Near The End Of A Storm

  • Retail S-REITs on an upward trajectory as c.90% of traders plan to resume business by first week of July 2020.
  • Holistic government assistance package to limit retailers’ downside risk, more forward visibility for retail landlords.
  • Sector’s valuation is poised to revert to mean, implying upside in excess of 15-30%.



Worst is over for Singapore retail REITs.

  • We believe that the worst is over for retail S-REITs. With malls expected to resume business in July 2020 and more retail outlets reopening, we believe the sector is returning to operational normalcy. In addition, we believe that downside risks have been greatly minimised with new government grants and assistance for the retail trade.
  • With the worst behind us and retail S-REITs still trading at c.0.9x P/NAV (-1 SD of their 10- year mean), we see favourable risk-reward ratios.
  • We upgrade CapitaLand Mall Trust (SGX:C38U) and Frasers Centrepoint Trust (SGX:J69U) to BUY with revised Target Price of S$2.15 and S$2.65 respectively. SPH REIT (SGX:SK6U) is upgraded to HOLD.


Phased opening of retail malls should be read positively.

  • The planned gradual reopening of the retail malls starting from phase 2 (at the end of June 2020) supported by lower community spread numbers in our view, imply a steeper “recovery curve” back towards pre-COVID-19 levels. We believe that consumers will likely be more confident in heading back to the malls to shop, dine and even hang out, albeit with social distancing measures in place. This momentum, if sustained, bodes well for the retail ecosystem (retailers, landlords and the supporting trades).


More ammunition for retail landlords to assist retailers.

  • Additional grants from the Fortitude Budget will provide more meaningful rental assistance to retailers which are badly affected by mall closures since April 2020. Landlords have provided an estimated 0.8-2.5 months of out-of-pocket rental rebates and may cough up a little more to match the government’s support of two months’ rental.
  • The overall rental support of up to four months is generous, and together with the Job Support Scheme (JSS) for retailers will
    1. set out a clearer pathway to recovery; and
    2. reduce default risks for retailers which need time to find their footing.
  • In addition, we remain comfortable that Retail S-REITs have sufficient buffers to adequately cover their operational cost obligations.


“Dominant malls“to anchor retail malls’ position as heart of the future retail ecosystem.

  • Although shopping has fundamentally changed post COVID-19 with a greater adoption of e-commerce, we believe that retail malls can still remain at the heart of the entire retail ecosystem. We see “dominant malls” rising in importance. These malls continue to offer a diverse offering and experience and are able to capture traffic from their primary catchments supported by transportation infrastructure.
  • With only 11 such malls in Singapore among the REITs, we estimate that Frasers Centrepoint Trust, CapitaLand Mall Trust and Mapletree Commercial Trust (SGX:N2IU) will derive 75%, 52% and 40% of their revenues respectively from these “dominant malls”.






Derek TAN DBS Group Research | Rachel TAN DBS Research | Dale LAI DBS Research | https://www.dbsvickers.com/ 2020-05-29
SGX Stock Analyst Report BUY UPGRADE HOLD 2.15 UP 1.750
BUY UPGRADE HOLD 2.65 UP 2.050
BUY MAINTAIN BUY 2.25 UP 1.900
HOLD UPGRADE FULLY VALUED 0.80 UP 0.700
HOLD MAINTAIN HOLD 0.50 UP 0.450



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