Singapore REITs - Maybank Kim Eng 2020-08-25: Staying With The Winners

Singapore REITs - Maybank Kim Eng Research | SGinvestors.io MAPLETREE LOGISTICS TRUST (SGX:M44U) MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)

Singapore REITs - Staying With The Winners


Industrial REITs a bright spot; raising DPUs, target prices

  • Industrial REITs have outperformed peers YTD and continue to present stronger fundamentals into 2H20. DPU visibility is improving with resilient occupancies underpinned by leasing momentum and low supply. Balance sheets remain strong, with acquisitions in business parks, data centres and logistics assets likely to gain pace in the coming quarters.
  • Structural demand tailwinds should continue to buoy valuations, while liquidity for our preferred large-cap names could see added support, as trading in SGX’s REIT futures gain traction.
  • We revised DPUs and raised target prices for Ascendas REIT (SGX:A17U), Mapletree Industrial Trust (SGX:ME8U) and Mapletree Logistics Trust (SGX:M44U) by 3-8%. They remain our top sector BUYs.



Resilient occupancies, rental recovery

  • DPUs for industrial REITs were relatively resilient in 1H20 amid the pandemic; visibility improved as vacancies compressed further on the back of strong leasing, especially for logistics and business park space.
  • Logistics occupancies improved q-o-q and y-o-y for Mapletree Logistics Trust, ARA LOGOS Logistics Trust (SGX:K2LU) and AIMS APAC REIT (SGX:O5RU), and remain tight at 94-99%. This, and a subdued supply pipeline, should support rental growth into 2021.
  • Ascendas REIT saw a +4.3% rental reversion in Singapore with its business parks and integrated development stronger at +16.3% and +19.8% y-o-y. Against tight supply for new business park space, its properties remain under-rented and should see positive reversion in 2H.


Balance sheets strong, acquisitions to gain pace

  • The regulatory leverage limit was raised from 45% to 50% in Apr 2020, but acquisition activity has been slow. Sector balance sheets are strong, with average leverage at 36.9%, and debt headroom at 13-50% of AUMs. Industrial REITs’ valuations have meanwhile surpassed pre-COVID levels.
  • Low cost of equity particularly for the larger REITs, and borrowing costs, should extend support for DPU-accretive deal opportunities.
  • We expect Ascendas REIT, Mapletree Industrial Trust and Mapletree Logistics Trust to push further on overseas diversification, backed by their visible sponsor pipelines.


Trends reinforced, further re-rating for Mapletree Industrial Trust, Mapletree Logistics Trust






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-08-25
SGX Stock Analyst Report BUY MAINTAIN BUY 2.40 UP 2.250
BUY MAINTAIN BUY 3.40 UP 3.300
BUY MAINTAIN BUY 4.00 UP 3.700



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