Singapore - Comm Properties & REITS 03 (Feb 19 - Dec 22)

[winston]

not vested

Well-Poised To Weather COVID-19 Challenges

Sector Update

Maintain sector OVERWEIGHT;

BUY Manulife US REIT (MUST) and Keppel Pacific Oak US REIT (KORE).

Although COVID-19 infections continue to rise sharply in the US, Singapore-listed US office REITs posted robust 1H20 results, with positive operating metrics.

Concerns remain on the sustainability of this growth, but our comparison shows all three REITs should be able to weather headwinds – backed by asset diversification, long WALE, and healthy balance sheets.

Valuations are cheap, with segmental yields averaging 8.3%, or 280bps higher than office S-REITs.

Source: RHB

https://research.rhbtradesmart.com/view ... 170c43f374

[winston]

Singapore REITs – Extension of stimulus support

The Singapore government unveiled another round of stimulus support amounting to S$8b on 17 Aug.

Adding this to the S$92.9b of stimulus packages over four Budgets, more than S$100b of fiscal boost has been announced.

It is noteworthy that this additional S$8b of fiscal stimulus will be funded by the reallocation of monies from other areas and not drawn on Singapore’s Past Reserves.

The gravity of the Covid-19 pandemic can be seen from the 13.2% YoY decline in Singapore’s 2Q20 real GDP, the worst quarterly performance on record.

The government’s focus remains on supporting and creating new jobs and to provide more assistance to sectors which have been hit the hardest by the Covid-19 pandemic.

As such, it was not surprising that the Jobs Support Scheme (JSS) will be extended by up to seven months and would thus cover wages paid up to Mar 2021.

A S$1b Jobs Growth Incentive (JGI) programme will also be launched to increase efforts to create new jobs for workers, in particular the mature workers.

For the hospitality sub-sector, the government will provide tourism credits amounting to S$320m of SingapoRediscovers Vouchers to revive domestic tourism.

Overall, we would adopt a balanced approach towards investing in the S-REITs sector.

Our top Buy picks are:-
1. Frasers Logistics & Commercial Trust (FLT SP) [BUY; FV: S$1.59]
2. Manulife US REIT (MUST SP) [BUY; FV: US$0.84]
3. Mapletree North Asia Commercial Trust (MAGIC SP) [BUY; FV: S$1.09]
4. CapitaLand Mall Trust (CT SP) [BUY; FV: S$2.29] and
5. ESR-REIT (EREIT SP) [BUY; FV: S$0.45]

Source: OCBC

[winston]

SINGAPORE REITS SECTOR – GLASS HALF EMPTY OR FULL?

Given the widespread impact of the Covid-19 pandemic, central banks around the globe have unleashed unprecedented stimulus measures and this is likely to keep interest rates lower for longer.

We believe this will continue to drive demand for good quality yield instruments such as selective S-REITs.

Although the forward distribution yield of the S-REITs sector has compressed, given that the Singapore government 10-year bond yield has also seen a sharp decline, the current forward yield spread now stands at 457 bps.

This is 0.7 s.d. above the 10-year average of 416 bps. Hence, on a relative basis, we opine that valuations of S-REITs are undemanding.

We believe the worst is over after a difficult 1H20, and are OVERWEIGHT the sector, although we remain cognisant on the uncertainties ahead.

We would adopt a balanced approach towards investing in the S-REITs sector.

We recommend that investors stick with some of the winners such as S-REITs exposed to the logistics and business parks sub-sectors and REITs which have positioned themselves defensively in anticipation of a weaker outlook, but complement these with REITs in beaten down sub-sectors with deep value and supported by strong sponsors.

In this regard, our top Buy picks are:-
1. Frasers Logistics & Commercial Trust (FLT SP) [BUY; FV: S$1.59]
2. Manulife US REIT (MUST SP) [BUY; FV: US$0.84]
3. Mapletree North Asia Commercial Trust (MAGIC SP) [BUY; FV: S$1.09]
4. CapitaLand Mall Trust (CT SP) [BUY; FV: S$2.29] and
5. ESR-REIT (EREIT SP) [BUY; FV: S$0.45].

Lower for longer interest rate environment to drive demand for good quality yield instruments

Relative valuations undemanding; OVERWEIGHT on sector

Top BUYs: FLT SP, MUST SP, MAGIC SP, CT SP and EREIT SP

Source: OCBC

[behappyalways]

Singapore retail vacancy rate hits record high of 9.6% in Q2
https://sbr.com.sg/commercial-retail/ne ... h-96-in-q2

[winston]

REITS (OVERWEIGHT)

Stay Defensive Amid Anticipated Volatility; O/W

Sector Update

Keep OVERWEIGHT; REITS to continue outperforming amidst increasing market volatility.

Amidst heightening US-China trade tensions and the US elections in November, we expect higher near-term market volatility.

This, coupled with abundant liquidity and low interest rates, should keep yield instruments like REITS in favour.

While sector valuations are not cheap, we see choice value in small-mid cap REITS with good quality assets and sponsor backing.

Our Top Picks: Suntec REIT, Manulife US REIT, and CDL Hospitality Trust.

Source: RHB

https://research.rhbtradesmart.com/view ... fd2706d4f7

[winston]

not vested

SINGAPORE REITS – SOME ENCOURAGING NEWSFLOW

The Singapore government recently announced an extension in some forms of financial support, given the ongoing impact from the Covid-19 pandemic.

As progress continues to be made in its fight against Covid-19, more details will be given in the weeks ahead on the roadmap and timeline for Phase 3, changes to current regulations on the size of group gatherings and participation at mass events.

While the pace of acquisitions by S-REITs has been slow this year, we see some gradual pickup in activities, with a few S-REITs also announcing an expansion in their investment mandates to diversify their income streams.

We reiterate our OVERWEIGHT stance on the S-REITs sector and continue to recommend investors to adopt a balanced approach towards investing in the sector.

This entails sticking with selective winners exposed to the data centre, logistics and business parks sub-sectors and REITs which have positioned themselves defensively in anticipation of a weaker outlook, but complement these with REITs in beaten down sub-sectors with deep value and supported by strong sponsors.

Following our upgrade of Keppel DC REIT (KDCREIT SP) [BUY; FV: S$3.32] to a ‘Buy’, we add the stock to our preferred picks list.

Our other top Buy picks are: Ascendas REIT (AREIT SP) [BUY; FV: S$3.92], Frasers Logistics & Commercial Trust (FLT SP) [BUY; FV: S$1.59], Manulife US REIT (MUST SP) [BUY; FV: US$0.84], Mapletree North Asia Commercial Trust (MAGIC SP) [BUY; FV: S$1.09], CapitaLand Mall Trust (CT SP) [BUY; FV: S$2.39], and ESR-REIT (EREIT SP) [BUY; FV: S$0.45].

Acquisition pace gradually picking up

Relative valuations remain accommodative

Top BUYs: AREIT SP, FLT SP, KDCREIT SP, MUST SP, MAGIC SP, CT SP and EREIT SP

Source: OCBC

[winston]

SINGAPORE REITS – A TALE OF TWO BASKETS

Given positive developments over the vaccine front, we believe the much beleaguered hospitality and retail REITs, can finally see some light at the end of the tunnel, although volatility in share prices are expected and the road to recovery ahead is likely to be bumpy.

We remain OVERWEIGHT on S-REITs amid a lower for longer interest rate environment, although we are cognisant of the risk of a further potential spike in sovereign bond yields, which could make S-REITs relatively less attractive.

Taking macro and vaccine developments into account, we highlight two S-REIT baskets for yield hungry investors to consider.

The first, a recovery basket to play the improvement in sentiment and recovery prospects of REITs in beaten down sectors. This comprises CapitaLand Integrated Commercial Trust (CICT SP) [FV: S$2.38], Mapletree North Asia Commercial Trust (MAGIC SP) [BUY; FV: S$1.04], Frasers Centrepoint Trust (FCT SP) [BUY; FV: S$2.75], Ascott Residence Trust [BUY; FV: S$1.20] and CapitaLand Retail China Trust [BUY; FV: S$1.35].

The second, a resilient basket comprising of S-REITs which we opine are beneficiaries of secular growth trends which could support outperformance over the medium to longer term. Preferred picks for our resilient basket are Ascendas REIT (AREIT SP) [BUY; FV: S$3.92], Keppel DC REIT (KDCREIT SP) [BUY; FV: S$3.41] Frasers Logistics & Commercial Trust (FLT SP) [BUY; FV: S$1.59], Mapletree Industrial Trust (MINT SP) [FV: S$3.51] and Manulife US REIT (MUST SP) [BUY; FV: US$0.84].

OVERWEIGHT rating underpinned by undemanding valuations and improved sentiment

Recovery basket top picks: CICT SP, MAGIC SP, FCT SP, ART SP and CRCT SP

Resilient basket top picks: AREIT SP, KDCREIT SP, FLT SP, MINT SP and MUST SP

Source: OCBC

[winston]

SG: SINGAPORE REITS

Reset, Recover | POSITIVE

Sector Note

We stay constructive on S-REITs in 2021. While a steepening US yield curve typically discriminates yield stocks, capital inflows into the sector will likely sustain, given strong liquidity and visibility of cashflows, underpinned by rising overseas contributions, especially for industrial REIT names.

In the absence of a strong rental upcycle, we expect the market will remain focused
on DPU recovery on the back of its reopening, and the emerging structural trends catalysed by the pandemic.

Prefer Industrial-> Retail-> Office-> Hospitality

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/2 ... 6c53de.pdf

[winston]

Laggard S-REITs Have Potential To Outperform

We have identified five laggard S-REITs overlooked by many investors and have the
potential to outperform in 2021.

Switch to laggard S-REITs. BUY ALLT (Target:S$0.85), FEHT (Target: S$0.74), LREIT (Target: S$0.97), SUN (Target: S$1.75) and UHU (Target: US$0.92), which provide attractive distribution yields of 7.4%, 6.4%,6.2%, 6.3% and 9.5% respectively.

Maintain OVERWEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 642f8d7cad

[winston]

Singapore Office
China Tech Giants soaking up CBD office space

China’s tech giants have signed leases for >100k sf of office space in the CBD at rents of S$10-11psf

The large appetite from China tech giants coupled with tight new supply could reduce overhang concerns arising from downsizing fears

We reiterate that positive factors are slowly playing out, which could offset the impact of potential return of space from flexible work arrangements

KREIT is the key beneficiary (among SREITs) of expansion by China’s tech giants while CICT is the only SREIT with a new office building completing in 2021 (i.e. CapitaSpring)

The Business Times reported today that China Tech giants have signed leases for >100k sf of office space in the CBD at rents of S$10-11psf vs 4Q20 average market rents of S$10.40psf. We had in fact previously highlighted that China Tech giants could spur new demand for Singapore CBD offices.

We understand that Tik Tok, a unit of Byte Dance, has increased its space requirements at One Raffles Quay (owned by KREIT) to 100k sqft, and has also taken up 58k sqft of space at Guoco Tower. Lazada and Alibaba have signed 140k sqft of space, of which 35k sqft would be under flexible space operator JustCo, at 5One Central in Bras Basah Rd.

Our Thoughts

The large appetite from China’s tech giants coupled with tight new supply could further reduce overhang concerns arising from downsizing fears. Given the large appetite from China’s tech giants soaking up some of the available office space in the CBD coupled with tight upcoming new supply could further reduce the overhang arising from downsizing fears leading to falling rents.

With these tech giants signing rents of S$10-11psf to S$11psf, this could be an indicative support level for CBD office rents.

China Tech giants taking up large space in CBD could spur office demand from other IT / business partner firms. The realisation that China’s tech giants are taking up large space in the CBD could spur potential new demand from other IT / business partners / supply chain firms that may want to relocate closer to these tech giants.

Remain positive on office sector as impact from return of office space due to flexible work arrangements could be offset by new demand sources. We reiterate our stance that there are some positive drivers that could partially offset downsizing risks from flexible work arrangements or businesses impacted by COVID-19.

The positives include
i) expanding office space per employee due to safe distancing,
ii) unemployment peaking in 4Q20 and business sentiment to improve in line with economic recovery, and
iii) trade sectors that are still expanding including new demand especially from the tech sector.

Our office picks remain KREIT, CICT and MCT. KREIT has been the key beneficiary (among SREITs) of expansion by China tech companies while CICT is the only SREIT with a new office building completing in 2021 (CapitaSpring with 60% of its space committed / at advanced stage of negotiations).

Source: DBS

https://researchwise.dbsvresearch.com/R ... jjfhkgcfbf