SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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<div class="content-caption">Insti investors continue to net buy sreits</div>
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<p>The iEdge S-Reit Index recovered 2.5 per cent in total returns over the past 5 sessions (Feb 25, 2022 through to Mar 3, 2022), after a 2 per cent decline seen last Thursday (Feb 24) as global markets saw major moves amid the market volatility.</p>
<p>Despite the dip, the iEdge S-Reit Index has returned 0.6 per cent in total returns for the whole period from Feb 24, 2022 through to Mar 3, 2022.</p>
<p>This means it outperformed the FTSE EPRA Nareit Asia ex-Japan Index which declined 0.7 per cent during the same period.<br><br>Within the S-Reit sub-sectors, gainers were led by the specialised, healthcare and office Reits while decliners were led by hospitality, retail and diversified Reits.</p>
<p>During the period, institutional investors have been a key driver in S-Reits' fund flow activities, accumulating net institutional inflows of S$30.4 million.</p>
<p>Retail investors on the other hand, net sold S$42.6 million for the sector.<br><br>In terms of sub-sectors, institutional flows were driven by inflows seen in diversified S-Reits (+S$16.7 million), specialised/data centre S-Reits (+S$6.9 million), and office S-Reits (+S$6.7 million).</p>
<p>The largest retail outflows were seen in diversified S-Reits (-S$22.8 million), office S-Reits (-S$6.6 million), and industrial S-Reits (-S$5.5 million).</p>
<p>On a year-to-date basis, S-Reits have seen a 2 per cent decline, against the Straits Times Index's 4.4 per cent total returns, while the FTSE EPRA Nareit Asia ex-Japan Index has seen a decline of 2.3 per cent.</p>
<p>Interest rates continue to be a key focus for the sector, as expectations of a rate hike grow.</p>
<p>As the earnings season concludes for the sector, broad based distribution per unit growth and healthy occupancy rates remain a common theme.<br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/green-shoots-for-retail-and-hospitality-s-reits-amid-new-pandemic-phase" target="_blank" rel="noopener">&nbsp;</a><a href="https://www.businesstimes.com.sg/companies-markets/institutional-investors-continue-to-net-buy-s-reits" target="_blank" rel="noopener">read&nbsp;</a>the original version.</em></strong></p>


Insti investors continue to net buy sreits

The iEdge S-Reit Index recovered 2.5 per cent in total returns over the past 5 sessions (Feb 25, 2022 through to Mar 3, 2022), after a 2 per cent decline seen last Thursday (Feb 24) as global markets saw major moves amid the market volatility.
Despite the dip, the iEdge S-Reit Index has returned 0.6 per cent in total returns for the whole period from Feb 24, 2022 through to Mar 3, 2022.
This means it outperformed the FTSE EPRA Nareit Asia ex-Japan Index which declined 0.7 per cent during the same period.  Within the S-Reit sub-sectors, gainers were led by the specialised, healthcare and office Reits while decliners were led by hospitality, retail and diversified Reits.
During the period, institutional investors have been a key driver in S-Reits' fund flow activities, accumulating net institutional inflows of S$30.4 million.
Retail investors on the other hand, net sold S$42.6 million for the sector.  In terms of sub-sectors, institutional flows were driven by inflows seen in diversified S-Reits (+S$16.7 million), specialised/data centre S-Reits (+S$6.9 million), and office S-Reits (+S$6.7 million).
The largest retail outflows were seen in diversified S-Reits (-S$22.8 million), office S-Reits (-S$6.6 million), and industrial S-Reits (-S$5.5 million).
On a year-to-date basis, S-Reits have seen a 2 per cent decline, against the Straits Times Index's 4.4 per cent total returns, while the FTSE EPRA Nareit Asia ex-Japan Index has seen a decline of 2.3 per cent.
Interest rates continue to be a key focus for the sector, as expectations of a rate hike grow.
As the earnings season concludes for the sector, broad based distribution per unit growth and healthy occupancy rates remain a common theme.  REIT Watch is a weekly column on The Business Times,&nbsp;read&nbsp;the original version.

REIT Watch - Institutional Investors Continue to Net Buy S-Reits

Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li>SCCM | <a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> – Mixed FY21; Office will be key to revival (BUY; TP SGD2.24/share)</li><li>SCCM | <a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> – On a solid organic growth path (BUY; TP S$1.65/Unit)</li><li>SCCM | <a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934" rel="noopener">ESR-REIT (EREIT SP)</a> – Steady performance with new acquisitions in sight (BUY; TP S$0.55/Unit)</li></ul>

SCCM | Capitaland Integrated Commercial Trust (CICT SP) – Mixed FY21; Office will be key to revival (BUY; TP SGD2.24/share)SCCM | AIMS APAC REIT (AAREIT SP) – On a solid organic growth path (BUY; TP S$1.65/Unit)SCCM | ESR-REIT (EREIT SP) – Steady performance with new acquisitions in sight (BUY; TP S$0.55/Unit)

ASEAN Builder's Scoop (4Feb22) - CICT Office Will Be Key to Revival

<div><div><div><div><ul><li>Solid set of results-  3Q22 revenue grew by 14.5% YoY to S$36.8m and 3Q22 NPI jumped 14.8% YoY to S$27.1m.</li></ul><div><div><div><ul><li>Rising occupancy rate and +ve rent reversions-  6.1% of portfolio NLA had secured new leases and renewal leases with overall rent reversion at +0.2% in 3Q22 (+2.1% in 2Q22) and higher occupancy rate at 97.6% in 3Q22 (2Q22: 97.3%).</li></ul><div><div><div><div><ul><li>Lower share of fixed-rate debts- The share of fixed-rate debts has declined to 57% and ~90% of total debts will mature during FY24-27E.</li></ul></div></div></div></div></div></div></div></div></div></div></div>

Solid set of results-  3Q22 revenue grew by 14.5% YoY to S$36.8m and 3Q22 NPI jumped 14.8% YoY to S$27.1m.Rising occupancy rate and +ve rent reversions-  6.1% of portfolio NLA had secured new leases and renewal leases with overall rent reversion at +0.2% in 3Q22 (+2.1% in 2Q22) and higher occupancy rate at 97.6% in 3Q22 (2Q22: 97.3%).Lower share of fixed-rate debts- The share of fixed-rate debts has declined to 57% and ~90% of total debts will mature during FY24-27E.

AIMS APAC REIT (AAREIT SP) - On a Solid Organic Growth Path

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<p>We raised our TP to S$1.63/unit to account for the recent Woolworths HQ acquisition, higher rental growth (driven by Logistics sector) and robust occupancies from existing portfolio, as well as a potential S$100m EFR in FY23E. We estimate DPU growth to stay flattish in FY22E and increase by +5.6% in FY23E (post-dilution effect). AAREIT currently trades at an attractive FY22E P/B of 1.07x (vs Industrial peers of 1.39x) and offers a total return of 20% (13.4% upside potential and 6.6% FY23E yield). Reiterate BUY.</p>
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We raised our TP to S$1.63/unit to account for the recent Woolworths HQ acquisition, higher rental growth (driven by Logistics sector) and robust occupancies from existing portfolio, as well as a potential S$100m EFR in FY23E. We estimate DPU growth to stay flattish in FY22E and increase by +5.6% in FY23E (post-dilution effect). AAREIT currently trades at an attractive FY22E P/B of 1.07x (vs Industrial peers of 1.39x) and offers a total return of 20% (13.4% upside potential and 6.6% FY23E yield). Reiterate BUY.





AIMS APAC REIT: Mixture of Inorganic and Organic Growth Warrant an Upgrade

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    <div class='content-caption'>SREIT that have kicked off the reporting season</div>
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<p>Five S-REITs have kicked off this quarter’s reporting season with the release of financial results for the quarter or business updates, before the market opened last Friday. The five are SPH REIT, AIMS APAC REIT, Ascendas REIT, Sabana REIT, Suntec REIT.<br><br>
These five S-Reits have reported increased distributions per unit (DPU) and improved operating metrics amid a cautiously optimistic outlook for the year end.</p>

<p>SPH Reit kicks off with improved full-year results led by gradual market recovery in both of its markets in Singapore and Australia. It noted that tenant sales in its Australia portfolio have recovered to pre-Covid levels despite a seven-day lockdown in July.<br><br>
It announced fiscal 2021 DPU at 5.4 cents, increasing 98 per cent year on year and 3.6 per cent away from its previous fiscal year 2019 DPU (pre-Covid).</p>

<p>AIMS Apac Reit announced 4.75 cents in DPU to be distributed for first half FY2022, an 18.8 per cent increase from a year ago, buoyed by higher net property income which rose 19.4 per cent to S$47.7 million year on year.</p>

<p>The Reit recently announced its proposed acquisition of Woolworths Headquarters in New South Wales, Australia, which will be its largest asset across its entire portfolio.<br><br>
Ascendas Reit in its business update observed improved portfolio occupancy rates of 91.7 per cent and positive rental reversions, with the completion of Grab's headquarters at one-north, Singapore.</p>

<p>It noted improved occupancy levels across its Singapore and Australia properties while lower to flat levels in its United States and United Kingdom/Europe properties.</p>

<p>Last Friday, Ascendas Reit announced the proposed acquisition of 11 last mile logistics properties in Kansas City, US for S$207.8 million, marking its first entry into the US logistics market and complementing the Reit's existing portfolio.</p>

<p>The Kansas portfolio is 92.6 per cent occupied by 27 customers from industries including third-party logistics, wholesale distribution, manufacturing and healthcare.</p>

<p>The 11 properties were reported to have strong retention rates, with current tenants in place for an average of 12.5 years.</p>

<p>Sabana Reit's business updates reported improved portfolio occupancy rates of 85.3 per cent, its highest level since early 2018 when the Reit's refreshed strategy was first announced.</p>

<p>The Reit also updated that it has renewed leases with positive rental reversion of 7.8 per cent, which is the sixth time it has achieved positive reversion over the past seven quarters.</p>

<p>The removal of its syariah compliance was completed on Oct 21.</p>

<p>Suntec Reit inked 22 per cent higher distributable income from operations and announced 2.232 cents in third quarter 2021 DPU to unitholders which is 20.8 per cent higher year on year.</p>

<p>The Reit expects the return of Singapore's workforce to increase over time and positive rent reversion for its office portfolio for full year 2021.</p>

<p>In its local retail portfolio, it observed improved footfall during the first two weeks of Covid 'Stabilisation Phase' in October compared to earlier periods and expects mall occupancy to be on track to remain around 95 per cent by end 2021.<br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/improved-operating-metrics-and-dpus-as-s-reits-kick-off-reporting"> read </a>the original version.</em></strong></p>
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    SREIT that have kicked off the reporting season


Five S-REITs have kicked off this quarter’s reporting season with the release of financial results for the quarter or business updates, before the market opened last Friday. The five are SPH REIT, AIMS APAC REIT, Ascendas REIT, Sabana REIT, Suntec REIT.  
These five S-Reits have reported increased distributions per unit (DPU) and improved operating metrics amid a cautiously optimistic outlook for the year end.

SPH Reit kicks off with improved full-year results led by gradual market recovery in both of its markets in Singapore and Australia. It noted that tenant sales in its Australia portfolio have recovered to pre-Covid levels despite a seven-day lockdown in July.  
It announced fiscal 2021 DPU at 5.4 cents, increasing 98 per cent year on year and 3.6 per cent away from its previous fiscal year 2019 DPU (pre-Covid).

AIMS Apac Reit announced 4.75 cents in DPU to be distributed for first half FY2022, an 18.8 per cent increase from a year ago, buoyed by higher net property income which rose 19.4 per cent to S$47.7 million year on year.

The Reit recently announced its proposed acquisition of Woolworths Headquarters in New South Wales, Australia, which will be its largest asset across its entire portfolio.  
Ascendas Reit in its business update observed improved portfolio occupancy rates of 91.7 per cent and positive rental reversions, with the completion of Grab's headquarters at one-north, Singapore.

It noted improved occupancy levels across its Singapore and Australia properties while lower to flat levels in its United States and United Kingdom/Europe properties.

Last Friday, Ascendas Reit announced the proposed acquisition of 11 last mile logistics properties in Kansas City, US for S$207.8 million, marking its first entry into the US logistics market and complementing the Reit's existing portfolio.

The Kansas portfolio is 92.6 per cent occupied by 27 customers from industries including third-party logistics, wholesale distribution, manufacturing and healthcare.

The 11 properties were reported to have strong retention rates, with current tenants in place for an average of 12.5 years.

Sabana Reit's business updates reported improved portfolio occupancy rates of 85.3 per cent, its highest level since early 2018 when the Reit's refreshed strategy was first announced.

The Reit also updated that it has renewed leases with positive rental reversion of 7.8 per cent, which is the sixth time it has achieved positive reversion over the past seven quarters.

The removal of its syariah compliance was completed on Oct 21.

Suntec Reit inked 22 per cent higher distributable income from operations and announced 2.232 cents in third quarter 2021 DPU to unitholders which is 20.8 per cent higher year on year.

The Reit expects the return of Singapore's workforce to increase over time and positive rent reversion for its office portfolio for full year 2021.

In its local retail portfolio, it observed improved footfall during the first two weeks of Covid 'Stabilisation Phase' in October compared to earlier periods and expects mall occupancy to be on track to remain around 95 per cent by end 2021.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Improved operating metrics and DPUs as S-Reits kick off reporting

Singapore

AIMS APAC REIT is a real estate investment trust. The Trust's principal investment objective is owning and investing in a diversified portfolio of income-producing industrial real estate assets throughout Asia Pacific, including warehousing and logistics, manufacturing, business parks and hi-tech spaces.

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AIMS APAC REIT (AAREIT SP)

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