S-REITs Weekly - UOB Kay Hian 2020-06-01: Repositioned Our Top 5 Picks

S-REITs Weekly - UOB Kay Hian Research | SGinvestors.io CAPITALAND MALL TRUST (SGX:C38U) FRASERS CENTREPOINT TRUST (SGX:J69U) ASCOTT RESIDENCE TRUST (SGX:HMN) FAR EAST HOSPITALITY TRUST (SGX:Q5T) KEPPEL REIT (SGX:K71U)

S-REITs Weekly - Repositioned Our Top 5 Picks

  • We repositioned our top-5 picks to focus on retail and hospitality REITs, which are the biggest beneficiaries of Phase 2 of reopening post Circuit Breaker. The transition to Phase 2 could occur before end-June if community transmission remains low and stable during the first two weeks of June. Almost the entire economy would reopen during Phase 2.
  • BUY
  • Maintain OVERWEIGHT.



WHAT HAPPENED LAST WEEK


UOBKH S-REIT Index gained 8.2% to 248.3 last week.

  • In the Fortitude Budget announced last Tuesday, cash grants will be provided to offset rental costs of SME tenants (annual turnover not more than S$100m) to be disbursed through their landlords from end-July. The new cash grant is equivalent to 0.8 month’s rent for retail shops and 0.64 month’s rent for industrial and office properties. Together with the Property Tax Rebate announced previously, total government support amounts to two months of rent for SME tenants at retail shops and one month of rent for SME tenants at industrial and office properties.
  • See S-REITs Share Price Performance.

Top outperformer.


Top underperformer.



SPOTLIGHT – REPOSITIONING FOR PHASE 2 OF REOPENING


Earlier start to Phase 2 catalyst for retail REITs.

  • Minister Lawrence Wong, co-chair of multi-ministry taskforce on COVID-19 announced that the government will monitor community transmission during the first two weeks of June and decide on whether to move to Phase 2 by the middle of June. This means that Singapore could make the transition to Phase 2 before the end of June. Phase 2 entails reopening of retail shops, including dining in at F&B outlets subject to cap of five people per group.

Beginning of the end for COVID-19 pandemic.

  • Singapore and China will launch “green lane” for essential travel with clear protocols, including testing of travellers, in early June. The arrangement starts with six provinces and municipalities, such as Shanghai, Tianjin, Chongqing, Guangdong, Jiangsu and Zhejiang, before expanding to other areas. Singapore is also working on finalising guidelines on resumption of essential cross-border travel with Australia, Canada, South Korea and New Zealand.
  • These initiatives are aimed at essential business travel. Mass market travel is expected to take longer time to resume. Thus, our picks for Hospitality REITs focus on defensive qualities, such as resiliency from serviced residences and high fixed rents.

CapitaLand Mall Trust (SGX:C38U) (BUY/ Target Price: S$2.60).


Frasers Centrepoint Trust (SGX:J69U) (BUY/ Target Price: S$2.85).


Far East Hospitality Trust (SGX:Q5T) (BUY/ Target Price: S$0.62).


Ascott Residence Trust (SGX:HMN) (BUY/ Target Price: S$1.16).


Keppel REIT (SGX:K71U) (BUY/ Target Price: S$1.30).


See PDF report attached below for S-REIT peer comparison table.






Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-06-01
SGX Stock Analyst Report BUY MAINTAIN BUY 2.600 SAME 2.600
BUY MAINTAIN BUY 2.850 SAME 2.850
BUY MAINTAIN BUY 1.160 SAME 1.160
BUY MAINTAIN BUY 0.620 SAME 0.620
BUY MAINTAIN BUY 1.300 SAME 1.300



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