UOB Kay Hian recommends new economy plays like A-REIT, FLT and MINT as Omicron variant causes delay in reopening

The new variant, named Omicron, is said to be more contagious with 50 mutations. The current vaccines may offer some protection but their efficacy is also expected to be much reduced. Furthermore, the Omicron variant still can spread among those who have been fully vaccinated and infect those who have recovered from previous Covid-19 infections.

Singapore’s prime minister Lee Hsien Loong has warned that the multi-ministry taskforce may roll back some of the current easing of Covid-19 restrictions should the new variant spread to Singapore.

As pharmaceutical companies work on new vaccines and booster shots, Koh recommends investors switch from reopening plays to focus on new economy plays.

On this, Koh recommends investors stock up on Ascendas REIT (A-REIT), Frasers Logistics and Commercial Trust (FLCT) and Mapletree Industrial Trust (MINT). Koh has also recommended buying into Frasers Centrepoint Trust (FCT) as it “provides resiliency from necessity spending at suburban retail malls”.

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In his report on Nov 29, Koh has given “buy” calls for all, with target prices of $3.83 $1.79 $3.72 and $2.98.

“We expect a knee-jerk reaction to sell S-REITs. The selling pressure is likely to be cushioned by S-REITs’ defensive cash flows,” writes Koh.

“Investors could de-risk by trimming positions in hospitality REITs, such as Ascott Residence Trust (ART), CDL Hospitality Trusts (CDLHT), and Far East Hospitality Trust (FEHT).

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ART and FEHT have been given “buy” calls with target prices of $1.20 and 71 cents respectively, while CDLHT has gotten “hold” at a target price of $1.24

The Straits Times Index (STI) closed 45.69 points lower or 1.44% down at 3,120.58 points on Nov 29.

Photo: Bloomberg