UOB Kay Hian’s analyst Jonathan Koh has maintained their “overweight” rating on Singapore REITS (S-REITs), noting that there are “healthy signs” that inflationary pressures have moderated.
Koh keeps his “buy” call with target prices of $1.41 for CDL Hospitality Trust (CDLHT), $2.42 for Frasers Centrepoint Trust (FCT), 76 cents for Far East Hospitality Trust (FEHT), $1.06 for Keppel REIT, 80 cents for Lendlease Global Commercial REIT JYEU (LREIT) and $2.69 for Mapletree Industrial Trust ME8U (MINT).
In his analyst note on Dec 1, Koh names US REITs, Keppel Pacific Oak US REIT, Prime US REIT OXMU , Digital Core REIT, United Hampshire US REIT ODBU , as his top performers. The REITS have gained 38.6%, 32.3%, 21.8% and 15.1% respectively.
Meanwhile, well-liked blue chips Lendlease Global Commercial REIT (LREIT), Mapletree Logistic Trust (MLT) and FEHT also rallied 18.6%, 9.5% and 9.3% respectively, he says.
On the other hand, Koh names Parkway Life REIT as a top underperformer. He notes that Mapletree Pan Asia Commercial Trust N2IU (MPACT) and CapitaLand Integrated Commercial Trust C38U (CICT), which are well diversified across geographies and asset classes, also saw smaller gains of 3.0% and 3.4% respectively.
Hospitality REITs, namely Frasers Hospitality Trust ACV (FHT), CapitaLand Ascott Trust HMN (CLAS) and CDLHT saw softer rebounds of -1.0%, 2.8% and 4.1% respectively, he adds.
See also: RHB initiates coverage on CSE Global with ‘buy’ call with TP of 58 cents.
The analyst underscores some key developments in the REIT sector for November. Keppel entered into an agreement to acquire Wilkie Edge at Selegie Road from a joint venture between Lian Beng Group and Apricot Capital. The 12-storey retail and office complex of Wilkie Edge has a net lettable area of 154,500 square feet (excluding 154-unit Citadines Mount Sophia owned by CLAS).
Koh says that the agreed pricing is $350 million or $2,265 per square foot, which translates to net yield of 3%. Keppel Capital is expected to enhance Wilkie Edge to improve net yield, he adds.
Founder and chairman of Fragrance Group, James Koh, acquired two ageing freehold industrial buildings, which could be redeveloped into modern industrial properties. One of these is a five-storey industrial building at 3 New Industrial Road, purchased from Kimly 1D0 Construction for $61 million, while the other is a low-rise industrial building at 3 Kallang Pudding Road for $40 million.
See also: Suntec REIT biggest beneficiary from MAS’s ‘looser’ leverage, ICR rules: OCBC
Meanwhile, visitor arrivals in Singapore increased 37.8% y-o-y but eased 0.4% m-o-m to 1,125,948 in Oct, reaching 74% of pre-pandemic levels. Indonesia was the top source market (180,881), followed by China (122,764) and India (94,332).
Koh says that the Singapore Tourism Board expects visitor arrivals to reach 12 million -14 million in 2023, as compared to the 6.3 million in 2022.
Finally, Koh notes that FTSE ST Real Estate Investment Trusts Index (FSTREI) surged 6.6% in November, outperforming the Straits Times Index (STI)’s “meagre” 0.1% gain. The analyst highlights that minutes for the Federal Open Market Committee meeting on Nov 1 showed policy makers agreeing to proceed carefully on future rate decisions.
“US consumer price index eased 0.5 percentage points (ppts) m-o-m to 3.2% in October, indicating continued disinflation, while the yield for 10-year Singapore government bonds receded 43 basis points m-o-m to 2.95% in November,” says Koh.
