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Singapore Retail REITs - UOB Kay Hian 2022-09-13: Recovery From Downtown Malls, Resiliency From Suburban Malls

Singapore Retail REITs - UOB Kay Hian Research | SGinvestors.io MAPLETREE PANASIA COM TRUST (SGX:N2IU) FRASERS CENTREPOINT TRUST (SGX:J69U) CAPITALAND INTEGRATED COMM TR (SGX:C38U) LENDLEASE GLOBAL COMMERCIAL REIT (SGX:JYEU)

Singapore Retail REITs - Recovery From Downtown Malls, Resiliency From Suburban Malls

  • Retailers and F&B operators are back operating at full capacity after the economy reopened in Apr 22. Penetration for e-commerce has receded. Pick-up in visitor arrivals is an added catalyst for downtown malls in 2H22. Downtown malls offer better upside from reopening, while suburban malls are more defensive.
  • Maintain OVERWEIGHT. We have BUY recommendations on



Singapore retailers are operating at full capacity without restrictions now.

  • Safe distancing between individuals and the cap on group size of 10 persons for dining in at F&B establishments were lifted on 26 Apr 22. Wearing of masks is no longer required indoors starting 29 Aug 22. Masks are only mandatory in two settings:
    1. healthcare facilities, such as ambulances, hospitals, polyclinics and residential care homes, and
    2. public transport, such as the MRT, LRT, buses and boarding areas.
  • Consumer spending picking up. Retail sales excluding motor vehicles grew 18.1% y-o-y in Jul 22, the 4th consecutive month of double-digit growth. It increased 10.4% y-o-y volume-wise after adjusting for inflation at 7.0%. On a seasonally adjusted basis, retail sales expanded 0.5% m-o-m. F&B generated strong growth of 41.9% y-o-y driven by restaurants (easing of restrictions) and food caterers (return of large-scale events). Apparel & footwear, department stores, watches & jewellery, cosmetics & healthcare and recreational goods registered double-digit growth of 68.3%, 42.9%, 41.7%, 25.5% and 16.9% y-o-y respectively.
  • Online retail sales have normalised lower. Penetration of e-commerce has declined from the peak of 24.5% during Circuit Breaker in May 20 to 12.7% in Jul 22. Physical stores continue to provide irreplaceable shopping touchpoints and experience. They remain relevant to consumers in the densely populated Singapore.


Orchard Road catching up on recovery.

  • Orchard Road is expected to see stronger recovery due to:
    1. recovery of air travel and the return of more tourists in 2H22, and
    2. employees patronising downtown malls after they return to work in their offices.
  • Suburban malls have registered healthy growth in rents since 2021 and should see modest recovery in 2H22. F&B operators are the key driver for demand of retail space. Supermarkets and gyms are expanding to capitalise on growth in consumption. CBRE expects more meaningful recovery in retail rents in 2023.
  • Tourists returning to shop at Orchard Road. Singapore abolished the requirement for pre-departure COVID-19 tests and fully reopened its international borders on 26 Apr 22. Visitor arrivals have increased 34% m-o-m to 726,601 in Jul 22, reaching 40.3% of pre-pandemic levels. Indonesia was the top source of arrivals, followed by India, Australia and Malaysia.
  • Visitor arrivals are expected to recover with the Formula 1 Singapore Grand Prix in September and Tour de France Singapore Criterium in October. The return of MICE activities with more than 66 international events in 2H22 will also bring back business travellers.
  • Suburban malls fundamentally more attractive. Rents for Orchard Road have stabilised at S$34.20psf/month for the 4th consecutive quarter in 2Q22. Rents for suburban malls maintained its gradual upward trend and increased 1.3% y-o-y to S$30.20psf/month. The gap in rents between Orchard Road and suburban malls continues to narrow. Occupancy for suburban malls has improved 1.1ppt y-o-y to 93.7% in 2Q22 compared with trough of 89.3% during the Circuit Breaker in 2Q20.


Limited upcoming supply.

  • Many projects experienced delays in construction and there were no significant completions in 1H22. The supply of new retail space is limited at 1.59m sf between 2H22 to 2025, equivalent to average annual supply of 0.40m sf over the next four years (51% below average completion of 0.82m sf over the past five years in 2017-21).
  • Outside central region (Pasir Ris Mall: 288,100sf) and fringe areas (Woodleigh Mall: 208,000sf) accounted for 44.5% and 34.5% of future supply.


CapitaLand Integrated Commercial Trust (SGX:C38U)



Frasers Centrepoint Trust (SGX:J69U)



Lendlease Global Commercial REIT (SGX:JYEU)



Mapletree Pan Asia Commercial Trust (SGX:N2IU)


Sector Catalysts

  • Recovery in shopper traffic and tenant sales with the easing of COVID-19-related restrictions.
  • Limited new supply for retail space during 2H22-25.


Sector Risks

  • Escalation of geopolitical tension and trade conflict between the US and China.





Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-09-16
SGX Stock Analyst Report BUY MAINTAIN BUY 2.220 SAME 2.220
BUY MAINTAIN BUY 2.740 SAME 2.740
HOLD MAINTAIN HOLD 2.340 SAME 2.340
BUY MAINTAIN BUY 0.990 SAME 0.990



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