S-REITs Weekly - UOB Kay Hian 2020-06-08: 4.5% Gain On Optimism Of Reopening Post-Circuit Breaker

S-REITs Weekly - UOB Kay Hian Research | SGinvestors.io UNITED HAMPSHIRE US REIT (SGX:ODBU)

S-REITs Weekly - 4.5% Gain On Optimism Of Reopening Post-Circuit Breaker

UOBKH S-REIT Index gained 4.5% to 259.5 last week (1-Jun to 5-Jun).

  • The Ministry of Foreign Affairs (MFA) and the Ministry of Trade & Industry (MTI) announced that the Singapore-China "fast lane" arrangement to facilitate essential businesses and official trips between the two countries will commence on 8 June. Travel between Singapore and six Chinese provinces and municipalities (Shanghai, Tianjin, Chongqing, Guangdong, Jiangsu and Zhejiang) will reopen and gradually expand to other provinces and municipalities.
  • Travellers have to undergo pre-departure COVID-19 tests and obtain a certificate of having tested negative. Travellers have to undergo a second COVID-19 test upon arrival at the destination country but must remain isolated for 1-2 days while waiting for test results. Travellers must adhere to a controlled itinerary supervised by the host company or government agency for the first 14 days. They have to use the contact tracing mobile app for the duration of their stay. Travellers need not be quarantined.

Top outperformers:

Top underperformers:


Latest US payroll numbers indicate recovery on easing of lockdown.

  • Non-farm payroll employment added 2.5m jobs and unemployment rate improved 1.4ppt m-o-m to 13.3% in May, reflecting a recovery in economic activities curtailed in March and April. The numbers were a pleasant surprise and a stark contrast to consensus estimate of 8.3m job losses and spike in unemployment rate to 19.5%. Restaurants and bars added 1.4m jobs, accounting for half of the new jobs created in May. Construction, education, health services and retail trade also contributed. Most encouragingly, 73% of those who lost their jobs in May expect the layoffs to be temporary.

Northeast region gradually easing restrictions.

  • According to USA Today, the State of New York has reopened low-risk businesses and recreational activities since 15 May. Western New York entered Phase 2 on 3 June and New York City is on track to enter Phase 1 on 8 June. New Jersey allowed retail stores to reopen for curb-side pick-up services on 18 May. Non-essential businesses will reopen with 50% capacity restrictions on the transition to Phase 2 on 15 June.
  • Maryland lifted its stay-at-home order on 15 May. It lifted restrictions on non-essential businesses as the state entered Phase 2 on 5 June. Massachusetts is scheduled to move to Phase 2 of reopening on 8 June. New York, New Jersey, Maryland and Massachusetts accounted for 33.8%, 28.3%, 11.7% and 8.1% of base rental income (81.9% in aggregate).

Manageable impact on cash flow.

  • United Hampshire US REIT (SGX:ODBU)’s retail tenants have progressively commenced operations following the easing of the lockdown. 50% of retail tenants that were previously closed in April reopened in May. Retail tenants open for business accounted for 87% of total base rental income in May (70% of the retail rental income is leased to essential businesses, such as grocery stores, warehouse clubs, home improvement stores and convenience stores). United Hampshire US REIT has collected 82% and 77% of base rents from retail tenants for the months of April and May respectively.

Self-storage business unaffected by COVID-19 pandemic.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-06-08
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