Singapore Retail REITs - CGS-CIMB Research 2020-12-04: On Track For A Recovery

Singapore REITs - CGS-CIMB Research | SGinvestors.io LENDLEASE GLOBAL COMMERCIAL REIT (SGX:JYEU) FRASERS CENTREPOINT TRUST (SGX:J69U)

Singapore Retail REITs - On Track For A Recovery

  • Tenant sales recovery has been holding up well till Sep-Oct while malls’ carpark vacancy has been trending down in the past 1-2 months.
  • We expect tenant sales to improve further, though rental pressure remains.
  • Sector trading below 5-year mean at 1x P/BV. We prefer Frasers Centrepoint Trust and Lendlease REIT.



Tenant sales and shopper traffic recovery holding up



Malls’ carpark vacancy trending down in past 1-2 months

  • Carpark vacancy of the malls we track has been trending down in the past 1-2 months although not yet back to pre-COVID-19 levels. This indicates that tenant sales and shopper traffic are likely to sustain at current levels or improve from Sep/Oct.
  • We expect shopper traffic and tenant sales to continue to improve in Dec, driven by year-end festivities and sales, as Singaporeans divert their spending from overseas to shopping locally.
  • In 2021F, tenant sales and shopper traffic should be supported by the return of the office crowd as the nation enters phase 3 of its economic reopening. The lack of tourists, however, could cap recovery below pre-COVID-19 levels for touristy malls.


Weak rental reversion inevitable but there could be upside potential

  • Overall, we expect malls’ occupancy rate to remain high at 95-99% but rental reversion would be under pressure near term. We expect low to high single-digit negative rental reversion for FY21F, with downtown malls more impacted than suburban malls.
  • Lease structures would likely build in a higher turnover component in the initial stages, with step-ups in the later stages. Hence, there could be upside potential if the trading environment improves. REITs with fewer lease expiries in 2021 should fare better.
  • We do not expect much impact from rental rebates in 2021F as we believe rebates would be in a much smaller scale as landlords shift their focus from direct rebates to marketing.

Sector trading below mean; we prefer Frasers Centrepoint Trust and Lendlease REIT






EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-12-04
SGX Stock Analyst Report ADD MAINTAIN ADD 0.854 SAME 0.854
ADD MAINTAIN ADD 2.890 SAME 2.890



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