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Singapore REITs - OCBC Investment 2020-12-15: Phase 3 Here We Come; Recovery Basket Likely To Outperform In The Near-term

Singapore REITs - OCBC Investment Research | SGinvestors.io CAPITALAND INTEGRATED COMM TR (SGX:C38U) FRASERS CENTREPOINT TRUST (SGX:J69U) MAPLETREE NORTH ASIA COMM TR (SGX:RW0U) ASCOTT RESIDENCE TRUST (SGX:HMN)

Singapore REITs - Phase 3 Here We Come; Recovery Basket Likely To Outperform In The Near-term




PM Lee announced that Phase 3 reopening will commence on 28 Dec

  • Singapore’s Prime Minister Lee Hsien Loong announced in a nation address on 14 Dec that Phase 3 of the reopening will commence on 28 Dec 2020.
  • Capacity limits in public places such as malls, attractions and places of worship will be relaxed. Groups of up to eight people for social gathering will be allowed, up from the current maximum of five. PM Lee also reiterated the need for Singapore to re-open its borders in a safe and controlled manner given the importance of trade and tourism to the economy.


Vaccinations a key enabler to recovery and road to normalcy

  • PM Lee highlighted that the government has set aside more than S$1b for COVID-19 vaccines and made efforts to sign advance purchase agreements and make early down-payments. For instance, the usage of approved by the Health Sciences Authority. As such, the first shipment of this vaccine is expected to arrive in Singapore by the end of the month. This will make Singapore one of the first countries to obtain the Pfizer-BioNTech vaccine, with other vaccines expected to arrive in the coming months.
  • The government will make COVID-19 vaccinations free for all Singaporeans and long-term residents who are currently here. The vaccinations will happen in phases, and it is expected that there will be sufficient vaccines for everyone in Singapore by 3Q21 if all goes to plan. Other measures already put in place such as social distancing and mass testing will continue alongside the vaccinations to help ensure that the virus is kept under control. These could continue for possibly a year or longer, according to PM Lee.
  • We view these latest developments as a huge positive, as the roadmap to recovery and return to normalcy appears more visible now, although the journey ahead is likely to remain bumpy. We see room for a further re-rating in the valuations of retail REITs, and to a smaller extent hospitality REITs as borders will only be gradually re-opened.


Retail sector recovery to gain momentum once Phase 3 kicks in

  • According to Google Mobility reports, visitation to Retail and Recreation facilities (e.g. restaurants, cafés, shopping centres) in Singapore has shown a gradual and steady improvement since Jul, although currently it is still down 13% (as at 7 Dec) as compared to the baseline. We expect this recovery to continue once Phase 3 kicks in.
  • Meanwhile, latest data on the percentage change in retail sales (excluding motor vehicles) came in -11.2% y-o-y and flat on a m-o-m seasonally adjusted basis for the month of Oct (Sep:-12.6% y-o-y). E-commerce penetration rate was 10.5%, or 12.6% if we exclude motor vehicles. Current run-rates have been relatively stable since Jul.


Recovery basket likely to outperform in the near-term; continued pull-back in Resilient basket creates buying opportunities for investors with longer-term investment horizons






OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-12-15
SGX Stock Analyst Report BUY MAINTAIN BUY 2.380 SAME 2.380
BUY MAINTAIN BUY 2.750 SAME 2.750
BUY MAINTAIN BUY 1.04 SAME 1.04
BUY MAINTAIN BUY 1.200 SAME 1.200


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