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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<html><body>Singapore's Central Business District (CBD) saw Grade A office rents record the fastest quarterly growth since rents turned around in Q2 2021, according to JLL Singapore in a recent report. 
Grade A office rents in the CBD rose 2.3 per cent to S$10.46 per square foot (psf) per month (pm) in the latest quarter, up from Q4 2021's S$10.23. Rental rates have recovered by 6.9 per cent from its recent lows in Q1 2021. 
Office Reits may also be poised to benefit from a growth in demand for office space as up to 75 per cent of office workers are allowed to return to their workplaces, even as hybrid working continues. 
Listed on SGX are 5 S-Reits with Singapore office properties in their portfolios. They are, Keppel Reit which is a pure-play office S-Reit, and diversified S-Reits CapitaLand Integrated Commercial Trust (CICT), Suntec Reit, Mapletree Commercial Trust (MCT), and OUE Commercial Reit (OUE C-Reit). Keppel Reit in FY21 had a tenant retention rate of 62 per cent and noted that a majority of new and expansion leases were in Singapore. 
Its weighted average signing rent for Singapore office leases was approximately S$10.56 psf pm. 
Building valuations for Marina Bay Financial Centre Towers 1 &amp; 2, One Raffles Quay and Keppel Bay Tower increased due to higher rental rates. 
OUE C-Reit which has a portfolio of 3 office properties in Singapore's CBD noted in its FY21 results that average passing rents of Singapore office properties at Dec 2021 were higher year on year, with OUE Bayfront hitting a high of S$12.49 psf due to the successful renewal of an anchor tenant. The Reit expects positive leasing momentum to continue in 2022, supported by the technology sector amid a limited supply pipeline. 
CICT recently announced its proposed acquisition of 70 per cent interest in 79 Robinson Road which has a building occupancy rate of 92.9 per cent. The acquisition is expected to offer pro forma annualised net property income yield of 4 per cent, distribution per unit accretion of 2.9 per cent, and is expected to complete in Q2 2022. 
Across the broader S-Reits sector, S-Reits demonstrated resiliency amid the backdrop of rising inflation and a rate hike cycle with the iEdge S-Reit Index posting 1.3 per cent total returns in Q1 2022, outperforming the average decline of 4.9 per cent across global Reit hubs. 
Despite rising interest rates, S-Reits have an average distribution yield of 6.3 per cent, around 400 bps spread over Singapore's 10-year government bond yields. The sector has an average gearing ratio of about 37 per cent (current regulatory ceiling is 50 per cent) and has an average 75 per cent of their borrowings pegged at fixed rates (entered directly in fixed rates or hedged through floating-to-fixed interest rate swaps). 
The top 5 performing S-Reits and property trusts in Q1 2022 averaged 14.1 per cent total returns, outperforming STI's 9.6 per cent, and are mainly from the hospitality and office sub-segments. They are: Suntec Reit (+17.6 per cent), Frasers Hospitality Trust (+15.1 per cent), Far East Hospitality Trust (+13.1 per cent), CDL Hospitality Trusts (+13.0 per cent), and Ascott Residence Trust (+11.5 per cent). 
Drivers that potentially drove the sub-segments were the continued reopening theme and relaxation of Covid measures across Singapore and the region, as well as the positive momentum in office rental rates.  REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/singapore-office-s-reits-poised-to-benefit-from-positive-rental-momentum-0"> read </a>the original version.</body></html>


      
    
    SREIT asset

Singapore's Central Business District (CBD) saw Grade A office rents record the fastest quarterly growth since rents turned around in Q2 2021, according to JLL Singapore in a recent report.  
Grade A office rents in the CBD rose 2.3 per cent to S$10.46 per square foot (psf) per month (pm) in the latest quarter, up from Q4 2021's S$10.23. Rental rates have recovered by 6.9 per cent from its recent lows in Q1 2021.  
Office Reits may also be poised to benefit from a growth in demand for office space as up to 75 per cent of office workers are allowed to return to their workplaces, even as hybrid working continues.  
Listed on SGX are 5 S-Reits with Singapore office properties in their portfolios. They are, Keppel Reit which is a pure-play office S-Reit, and diversified S-Reits CapitaLand Integrated Commercial Trust (CICT), Suntec Reit, Mapletree Commercial Trust (MCT), and OUE Commercial Reit (OUE C-Reit). Keppel Reit in FY21 had a tenant retention rate of 62 per cent and noted that a majority of new and expansion leases were in Singapore.  
Its weighted average signing rent for Singapore office leases was approximately S$10.56 psf pm.  
Building valuations for Marina Bay Financial Centre Towers 1 &amp; 2, One Raffles Quay and Keppel Bay Tower increased due to higher rental rates.  
OUE C-Reit which has a portfolio of 3 office properties in Singapore's CBD noted in its FY21 results that average passing rents of Singapore office properties at Dec 2021 were higher year on year, with OUE Bayfront hitting a high of S$12.49 psf due to the successful renewal of an anchor tenant. The Reit expects positive leasing momentum to continue in 2022, supported by the technology sector amid a limited supply pipeline.  
CICT recently announced its proposed acquisition of 70 per cent interest in 79 Robinson Road which has a building occupancy rate of 92.9 per cent. The acquisition is expected to offer pro forma annualised net property income yield of 4 per cent, distribution per unit accretion of 2.9 per cent, and is expected to complete in Q2 2022.  
Across the broader S-Reits sector, S-Reits demonstrated resiliency amid the backdrop of rising inflation and a rate hike cycle with the iEdge S-Reit Index posting 1.3 per cent total returns in Q1 2022, outperforming the average decline of 4.9 per cent across global Reit hubs.  
Despite rising interest rates, S-Reits have an average distribution yield of 6.3 per cent, around 400 bps spread over Singapore's 10-year government bond yields. The sector has an average gearing ratio of about 37 per cent (current regulatory ceiling is 50 per cent) and has an average 75 per cent of their borrowings pegged at fixed rates (entered directly in fixed rates or hedged through floating-to-fixed interest rate swaps).  
The top 5 performing S-Reits and property trusts in Q1 2022 averaged 14.1 per cent total returns, outperforming STI's 9.6 per cent, and are mainly from the hospitality and office sub-segments. They are: Suntec Reit (+17.6 per cent), Frasers Hospitality Trust (+15.1 per cent), Far East Hospitality Trust (+13.1 per cent), CDL Hospitality Trusts (+13.0 per cent), and Ascott Residence Trust (+11.5 per cent).  
Drivers that potentially drove the sub-segments were the continued reopening theme and relaxation of Covid measures across Singapore and the region, as well as the positive momentum in office rental rates.   REIT Watch is a weekly column on The Business Times, read the original version.


REIT Watch - Singapore office S-Reits poised to benefit from positive rental momentum

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Lendlease Global Commercial REIT / Equity Capital Markets

<ul>
<li>Lendlease REIT is looking to raise up to US$427m via a private placement and a preferential offering.</li>
<li>The deal is very well flagged as the acquisition was announced in Feb 2022 and the EGM approval for the same was received earlier this month.</li>
<li>In this note, we will run the deal through our ECM framework and talk about the recent updates.</li>
</ul>


Lendlease REIT is looking to raise up to US$427m via a private placement and a preferential offering.
The deal is very well flagged as the acquisition was announced in Feb 2022 and the EGM approval for the same was received earlier this month.
In this note, we will run the deal through our ECM framework and talk about the recent updates.


Lendlease Global REIT Placement - Very Well Flagged but Still Quite a Large One to Digest

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>New Private home sales fell substantially in Feb22 due to lack of new launches</li><li>RBC Investor Services Trust Singapore intends to retire as <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192" rel="noopener">Keppel REIT (KREIT SP)</a> trustee</li><li>GB building’s three strata commercial units launched for sale at S$69m</li></ul>

New Private home sales fell substantially in Feb22 due to lack of new launchesRBC Investor Services Trust Singapore intends to retire as Keppel REIT (KREIT SP) trusteeGB building’s three strata commercial units launched for sale at S$69m

ASEAN Builder's Scoop (8Mar22) - Feb22 New Home Sales Fell Significantly

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<div class="content-caption">Insti investors continue to net buy sreits</div>

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,<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.


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

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The Straits Times Index (STI) gained more than 5 per cent in the 2022 year to date (YTD) till Feb 24, while the iEdge S-Reit Index declined close to 4 per cent during the same period amid expectations of rate hikes.

During last week's Thursday (Feb 24) session after Russia's announcement of a military operation in Ukraine, the STI and iEdge S-Reit Index dipped more than 3 per cent and close to 2 per cent respectively. Despite the decline, the STI maintained its position as one of the best performing indices globally in 2022.

Similarly, the iEdge S-Reit Index is also one of the most resilient Reit benchmarks this year, outperforming the FTSE EPRA Nareit Developed Index which declined more than 8 per cent in the 2022 YTD till Feb 24. 
S-REITs with positive total returns during this period include Suntec REIT (8.9 per cent), Sabana Industrial REIT (5.9 per cent), CapitaLand Integrated Commercial Trust (3.6 per cent), Far East Hospitality Trust (1.7 per cent), Keppel REIT (1.7 per cent), Ascott Residence Trust (1.7 per cent), First REIT (0.5 per cent) and ARA US Hospitality Trust (0.4 per cent), while Sasseur REIT and Daiwa House Logistics Trust returned flat for the period. 
Retail investors continued to drive fund flow activities in the S-Reits and property trusts sector, accumulating net retail inflows of S$350 million in the 2022 YTD till Feb 24, while institutional investors have seen net outflows of S$250 million for the sector.

However, during Thursday's session, the S-Reits sector garnered more than S$30 million of net inflows from institutional investors. 
S-REITs which saw the most net institutional inflows during this session include – CapitaLand Integrated Commercial Trust (+S$14 million), Ascendas REIT (+S$6 million), Suntec REIT (+S$5 million), Mapletree Industrial Trust (+S$4 million) and Mapletree North Asia Commercial Trust (+S$3 million). 
The S-Reits' earnings season is largely complete, with optimistic outlook and improving distribution per unit (DPU) a common theme.

CapitaLand Integrated Commercial Trust posted distributable income of S$675 million for the full year FY21, an increase of more than 80 per cent from FY20's distributable income of S$369 million. The trust remains optimistic about its outlook for 2022, noting that its portfolio valuation as at end-2021 improved 3.5 per cent year on year, signifying an improving outlook for Singapore's retail and office market.

Suntec Reit reported its full year FY21 results last month and announced a DPU of 8.666 cents, which was 17 per cent higher than its FY20 DPU. The increase in DPU was a result of higher distribution income, driven by contributions from the 2 newly acquired assets in London and higher income from Suntec City Mall.

The Reit noted that the recovery of retail business at Suntec City Mall has been encouraging with December 2021 tenant sales exceeding that of December 2019.

ARA US Hospitality Trust, which reported its full year FY21 results last week, posted distributable income of US$2.0 million. This follows from reporting no distributable income in FY20.

The trust saw continued strong recovery in the US hospitality industry in H2 2021, riding on the success of a widespread vaccination programme and the reopening of the markets across the country.  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"> </a><a href="https://www.businesstimes.com.sg/companies-markets/s-reits-remain-optimistic-about-2022-growth-0">read</a><a href="https://www.businesstimes.com.sg/companies-markets/green-shoots-for-retail-and-hospitality-s-reits-amid-new-pandemic-phase"> </a>the original version.

 
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    SREITs


The Straits Times Index (STI) gained more than 5 per cent in the 2022 year to date (YTD) till Feb 24, while the iEdge S-Reit Index declined close to 4 per cent during the same period amid expectations of rate hikes.

During last week's Thursday (Feb 24) session after Russia's announcement of a military operation in Ukraine, the STI and iEdge S-Reit Index dipped more than 3 per cent and close to 2 per cent respectively. Despite the decline, the STI maintained its position as one of the best performing indices globally in 2022.

Similarly, the iEdge S-Reit Index is also one of the most resilient Reit benchmarks this year, outperforming the FTSE EPRA Nareit Developed Index which declined more than 8 per cent in the 2022 YTD till Feb 24.  
S-REITs with positive total returns during this period include Suntec REIT (8.9 per cent), Sabana Industrial REIT (5.9 per cent), CapitaLand Integrated Commercial Trust (3.6 per cent), Far East Hospitality Trust (1.7 per cent), Keppel REIT (1.7 per cent), Ascott Residence Trust (1.7 per cent), First REIT (0.5 per cent) and ARA US Hospitality Trust (0.4 per cent), while Sasseur REIT and Daiwa House Logistics Trust returned flat for the period.  
Retail investors continued to drive fund flow activities in the S-Reits and property trusts sector, accumulating net retail inflows of S$350 million in the 2022 YTD till Feb 24, while institutional investors have seen net outflows of S$250 million for the sector.

However, during Thursday's session, the S-Reits sector garnered more than S$30 million of net inflows from institutional investors.  
S-REITs which saw the most net institutional inflows during this session include – CapitaLand Integrated Commercial Trust (+S$14 million), Ascendas REIT (+S$6 million), Suntec REIT (+S$5 million), Mapletree Industrial Trust (+S$4 million) and Mapletree North Asia Commercial Trust (+S$3 million).  
The S-Reits' earnings season is largely complete, with optimistic outlook and improving distribution per unit (DPU) a common theme.

CapitaLand Integrated Commercial Trust posted distributable income of S$675 million for the full year FY21, an increase of more than 80 per cent from FY20's distributable income of S$369 million. The trust remains optimistic about its outlook for 2022, noting that its portfolio valuation as at end-2021 improved 3.5 per cent year on year, signifying an improving outlook for Singapore's retail and office market.

Suntec Reit reported its full year FY21 results last month and announced a DPU of 8.666 cents, which was 17 per cent higher than its FY20 DPU. The increase in DPU was a result of higher distribution income, driven by contributions from the 2 newly acquired assets in London and higher income from Suntec City Mall.

The Reit noted that the recovery of retail business at Suntec City Mall has been encouraging with December 2021 tenant sales exceeding that of December 2019.

ARA US Hospitality Trust, which reported its full year FY21 results last week, posted distributable income of US$2.0 million. This follows from reporting no distributable income in FY20.

The trust saw continued strong recovery in the US hospitality industry in H2 2021, riding on the success of a widespread vaccination programme and the reopening of the markets across the country.   REIT Watch is a weekly column on The Business Times, read the original version.

 



REIT Watch - S-Reits remain optimistic about 2022 growth

Singapore

Keppel REIT operates as a commercial real estate investment trust. The Trust owns and invests in a portfolio of income-producing office buildings and related real estate assets. Keppel REIT offers its services in Asia and Australia.

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Keppel REIT (KREIT SP)

REIT Watch - Singapore office S-Reits poised to benefit from positive rental momentum

Singapore's Central Business District (CBD) saw Grade A office rents record the fastest quarterly growth since rents turned...

Singapore Exchange Ltd (SGX)

Lendlease Global REIT Placement - Very Well Flagged but Still Quite a Large One to Digest

Lendlease REIT is looking to raise up to US$427m via a private placement and a preferential offering. The deal is very well flagged.

Sumeet Singh

ASEAN Builder's Scoop (8Mar22) - Feb22 New Home Sales Fell Significantly

RBC retires as KREIT's trustee; MREIT nets ~PHP2bn in FY21; RLC expanding Antipolo mall; Kampung Baru redevelopment takes shape

SCCM Asia Research

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

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...

Singapore Exchange Ltd (SGX)

REIT Watch - S-Reits remain optimistic about 2022 growth

The Straits Times Index (STI) gained more than 5 per cent in the 2022 year to date (YTD) till Feb 24, while the iEdge S-Reit...

Singapore Exchange Ltd (SGX)

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