Singapore Retail REITs - DBS Research 2020-08-31: Ready, Set, Shop!

Singapore Retail REITs - DBS Research | SGinvestors.io CAPITALAND MALL TRUST (SGX:C38U) LENDLEASE GLOBAL COMMERCIAL REIT (SGX:JYEU) FRASERS CENTREPOINT TRUST (SGX:J69U)

Singapore Retail REITs - Ready, Set, Shop!




Car park statistics tracked show a steady normalisation of shopper footfall


Shoppers flocking back to malls.

  • The signs are already there for all to see. Our car park tracker and weekly site visits imply that malls are seeing steady foot traffic, while queues for restaurants have returned. Based on data tracked across the past 16 weekends, we saw car park vacancies stabilising at ~27% within Orchard malls and ~35% across suburban malls. This represents a strong momentum in traffic since Circuit Breaker days where vacancies were reported to be at c.25% and c.40% of pre-COVID levels.
  • While both shopper traffic and tenant sales figures reported by the various retail REITs in 2Q20 looked hazy, we do not see this extrapolated for the full year as daily community cases trends towards zero post Circuit Breaker.

Retail mall sales may spring a surprise in 3Q20.

  • While 2Q20 traffic and sales figures shared by various landlords remained lower y-o-y ranging from -18% to -80%, this is expected given the Circuit Breaker. That said, we understand that traffic and sales numbers in July and August 2020 continue to improve, which is a positive sign. If we read through the on-the-ground data-points over the past weeks – long queues at restaurants, shopper and car park traffic at restaurants island-wide, we believe that foot traffic may hit 80-90% of pre-COVID levels (suburban malls) and 70% (Orchard Road/ Harbourfront malls) come 3Q20.


Strong rebound in shopper traffic at retail malls not priced in.

  • While traffic and sales figure reported by the various REITs in 2Q20 appear weak, we believe that the “tide has turned” and if our read-through of the ground is right, we see further compression in gap to COVID-19 traffic and sales figures come 3Q20 with potential for upside.
  • We believe that with borders yet to be reopened, consumers may open their wallets at our local malls, catalysed by attractive marketing and discounts offered by retailers.
  • The worst is over, but the recovery is just underway.


Current valuations have ignored a 21% growth in DPU come FY21F.

  • The retail S-REITs trade at an attractive 0.84x price-to-book, beyond -2 standard deviation (SD) levels on a 10-year historical basis, and a sharp discount to a mean of 1.04x. Book values have remained resilient, falling by c.1.5-3.0% in 1H20, better than expected and further material weakness is unlikely given low interest rates.
  • We project a 19.7% rise in DPU going into FY21 and a forward sector yield of 6.7%. Growth momentum may have been sidelined by investors despite strong support for the sector in the form of
    1. government grants and landlord waivers to assist retailers, and
    2. liquidity shield through income retention
  • which we view as sufficient to see the various REITs through the last lap of the COVID-19 crisis. Traffic is back and should be reflected to a certain extent in the coming results, underpinned by a stabilisation in community spread.


Suburban landlords a safer bet.







Singapore Research DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-08-31
SGX Stock Analyst Report BUY MAINTAIN BUY 2.400 SAME 2.400
BUY MAINTAIN BUY 0.850 SAME 0.850
BUY MAINTAIN BUY 2.950 SAME 2.950



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