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

Far East Hospitality Trust / Equity Bottom-Up

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The annual Singapore Governance and Transparency Index (SGTI) assesses Singapore-listed companies on their corporate governance disclosure and practices, as well as the timeliness, accessibility and transparency of their financial results announcement, so as to provide investors with greater transparency and accountability.

The SGTI is a collaboration among CPA Australia, NUS Business School's Centre for Governance and Sustainability, and the Singapore Institute of Directors, supported by The Business Times.

The SGTI 2021, which assessed companies based on their annual reports for Financial Year 2020 released by June 15, 2021, is divided into two categories - general category (519 companies) and the Reits and business trusts category (43 trusts). 
The mean overall scores of both categories reached all-time highs of 68.7 (general category) and 85.0 (Reits and business trusts category) respectively. 
In the REITs and Business Trusts category, Ascott Residence Trust moved up from third place last year to claim the top rank with an overall score of 115.3. 
Far East Hospitality Trust, which scored 113.8 points, moved up two positions to second place and Ascendas REIT jumped from eighth place to enter the top three with 111.1 points. 
In the SGTI 2021 press release, it was noted that these trusts had done well in sustainability management and in disclosing policies on the amount of funds they could borrow to invest for higher returns.

In addition, they have a minimum of three full-time key representatives who each has at least five years of experience relevant to Reit management.

The mean overall score of the Reits and business trust category increased by 0.2 point year on year and the bonus points for good disclosure practices increased by 1.3 points to 18.5 points.

One example of good disclosure, given in the press release, is disclosing information on the succession planning for the board and senior management.

The proportion of companies that disclosed this information increased from 6.7 per cent in 2020 to 30.2 per cent in 2021.

On the other hand, the SGTI press release noted that penalties for poor disclosure practices, such as discrepancies in corporate announcements, increased by 0.1 point to 5.1. 
The proportion of REITs and Business Trusts that received penalty points stood at 9.3 per cent, compared to 4.4 per cent a year ago. 
The top 5 REITs and Property Trusts with the most year-on-year improvements in overall scores include: Ascendas India Trust (+22.8 points), Mapletree Commercial Trust (+19.4 points), Ascendas REIT (+16.7 points), ParkwayLife REIT (+15.1 points) and Frasers Logistics &amp; Commercial Trust (+14.9 points).

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REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/governance-and-transparency-scores-of-s-reits-hit-all-time-high">read</a><a href="https://www.businesstimes.com.sg/companies-markets/10-s-reits-yielding-long-term-annualised-returns"> </a>the original version.

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    Top 10 SGTI 2021 ranking under Reits and business trusts category


The annual Singapore Governance and Transparency Index (SGTI) assesses Singapore-listed companies on their corporate governance disclosure and practices, as well as the timeliness, accessibility and transparency of their financial results announcement, so as to provide investors with greater transparency and accountability.

The SGTI is a collaboration among CPA Australia, NUS Business School's Centre for Governance and Sustainability, and the Singapore Institute of Directors, supported by The Business Times.

The SGTI 2021, which assessed companies based on their annual reports for Financial Year 2020 released by June 15, 2021, is divided into two categories - general category (519 companies) and the Reits and business trusts category (43 trusts).  
The mean overall scores of both categories reached all-time highs of 68.7 (general category) and 85.0 (Reits and business trusts category) respectively.  
In the REITs and Business Trusts category, Ascott Residence Trust moved up from third place last year to claim the top rank with an overall score of 115.3.  
Far East Hospitality Trust, which scored 113.8 points, moved up two positions to second place and Ascendas REIT jumped from eighth place to enter the top three with 111.1 points.  
In the SGTI 2021 press release, it was noted that these trusts had done well in sustainability management and in disclosing policies on the amount of funds they could borrow to invest for higher returns.

In addition, they have a minimum of three full-time key representatives who each has at least five years of experience relevant to Reit management.

The mean overall score of the Reits and business trust category increased by 0.2 point year on year and the bonus points for good disclosure practices increased by 1.3 points to 18.5 points.

One example of good disclosure, given in the press release, is disclosing information on the succession planning for the board and senior management.

The proportion of companies that disclosed this information increased from 6.7 per cent in 2020 to 30.2 per cent in 2021.

On the other hand, the SGTI press release noted that penalties for poor disclosure practices, such as discrepancies in corporate announcements, increased by 0.1 point to 5.1.  
The proportion of REITs and Business Trusts that received penalty points stood at 9.3 per cent, compared to 4.4 per cent a year ago.  
The top 5 REITs and Property Trusts with the most year-on-year improvements in overall scores include: Ascendas India Trust (+22.8 points), Mapletree Commercial Trust (+19.4 points), Ascendas REIT (+16.7 points), ParkwayLife REIT (+15.1 points) and Frasers Logistics &amp; Commercial Trust (+14.9 points).


REIT Watch is a weekly column on The Business Times, read the original version.





REIT Watch - Governance and transparency scores of S-Reits hit all-time high

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The 10 best performing S-Reits and property trusts with over a 10-year listing history have averaged 12.5 per cent in 10-year annualised total returns. On an absolute basis across the 10-year period, these 10 trusts have generated total returns averaging 240 per cent as Reits continue to be an asset class of choice for the longer horizon.

Comparatively, the 10 have also outperformed major Asia-Pacific Reit markets which have yielded 10.3 per cent in average total returns for the same period. 
Of the 10, the top five trusts Mapletree Industrial Trust, Mapletree Logistics Trust, Mapletree Commercial Trust, ParkwayLife REIT and AIMS APAC REIT, were also among Asia Pacific’s 20 best performing REITs with a longer trading history. 
Three of these are S-Reits sponsored by Mapletree Investments, which owns and manages over S$66 billion of data centre, industrial, lodging, logistics, mixed-use, multifamily, office, residential and retail properties. 
Mapletree Industrial Trust (MINT) listed in October 2010 with an initial investment portfolio of 70 Singapore industrial properties valued at S$2.1 billion including business parks, flatted factories, stack-up/ramp-up buildings and light industrial buildings. 
Today, the trust has tripled in portfolio with assets under management of S$6.7 billion across 114 properties in Singapore and North America. In terms of asset mix, MINT has also diversified with acquisitions into high-tech buildings and data centres making up 20.9 per cent and 39.8 per cent respectively. Its latest acquisition of 29 data centres in the United States makes it one of the largest owners of data centres among Asia-Pacific Reits.

Mapletree Logistics Trust (MLT) was one of the first Mapletree Group S-Reits to be listed in July 2005 and was the first Asia-focused logistics Reit. Its portfolio of properties has swelled from 15 properties worth S$422 million to 163 properties worth S$10.7 billion across nine countries in the Asia-Pacific.

MLT now has a diversified tenant base of 752 customers with close to 75 per cent of its portfolio serving consumer-related sectors.

Mapletree Commercial Trust (MCT) listed in April 2011 with three properties located in Singapore valued at S$2.8 billion. Its enlarged portfolio value has since trebled and comprises five Singapore properties worth S$8.7 billion.

ParkwayLife Reit (PLife) listed in August 2007 with just three properties in Singapore - Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital with a combined value of S$775 million. Fourteen years on, it has almost trebled its portfolio value at S$1.99 billion across 53 properties in Singapore, Japan and Malaysia and considers itself to be one of the largest listed healthcare Reits in Asia.

PLife recently completed its third strategic recycling initiative with a divestment of a non-core asset and acquired two nursing homes in Japan, increasing its geographical coverage and further diversification of age-care tenants.

Some may remember Aims Apac Reit as MacarthurCook Industrial Reit which listed in April 2007 with a portfolio of 12 industrial properties in Singapore valued at S$316 million.

The Reit has since rebranded itself in 2019 and has grown over five times in size with a portfolio value of S$1.7 billion across 28 properties in Singapore and Australia.

Its tenant base of 188 tenants has also diversified across the years, and include resilient sectors such as logistics and warehouses, bio-medical and life science, telecommunications and data centre operators accounting for seven out of its top 10 tenants. REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/10-s-reits-yielding-long-term-annualised-returns">read </a>the original version.
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    10 best performing trusts


The 10 best performing S-Reits and property trusts with over a 10-year listing history have averaged 12.5 per cent in 10-year annualised total returns. On an absolute basis across the 10-year period, these 10 trusts have generated total returns averaging 240 per cent as Reits continue to be an asset class of choice for the longer horizon.

Comparatively, the 10 have also outperformed major Asia-Pacific Reit markets which have yielded 10.3 per cent in average total returns for the same period.  
Of the 10, the top five trusts Mapletree Industrial Trust, Mapletree Logistics Trust, Mapletree Commercial Trust, ParkwayLife REIT and AIMS APAC REIT, were also among Asia Pacific’s 20 best performing REITs with a longer trading history.  
Three of these are S-Reits sponsored by Mapletree Investments, which owns and manages over S$66 billion of data centre, industrial, lodging, logistics, mixed-use, multifamily, office, residential and retail properties.  
Mapletree Industrial Trust (MINT) listed in October 2010 with an initial investment portfolio of 70 Singapore industrial properties valued at S$2.1 billion including business parks, flatted factories, stack-up/ramp-up buildings and light industrial buildings.  
Today, the trust has tripled in portfolio with assets under management of S$6.7 billion across 114 properties in Singapore and North America. In terms of asset mix, MINT has also diversified with acquisitions into high-tech buildings and data centres making up 20.9 per cent and 39.8 per cent respectively. Its latest acquisition of 29 data centres in the United States makes it one of the largest owners of data centres among Asia-Pacific Reits.

Mapletree Logistics Trust (MLT) was one of the first Mapletree Group S-Reits to be listed in July 2005 and was the first Asia-focused logistics Reit. Its portfolio of properties has swelled from 15 properties worth S$422 million to 163 properties worth S$10.7 billion across nine countries in the Asia-Pacific.

MLT now has a diversified tenant base of 752 customers with close to 75 per cent of its portfolio serving consumer-related sectors.

Mapletree Commercial Trust (MCT) listed in April 2011 with three properties located in Singapore valued at S$2.8 billion. Its enlarged portfolio value has since trebled and comprises five Singapore properties worth S$8.7 billion.

ParkwayLife Reit (PLife) listed in August 2007 with just three properties in Singapore - Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital with a combined value of S$775 million. Fourteen years on, it has almost trebled its portfolio value at S$1.99 billion across 53 properties in Singapore, Japan and Malaysia and considers itself to be one of the largest listed healthcare Reits in Asia.

PLife recently completed its third strategic recycling initiative with a divestment of a non-core asset and acquired two nursing homes in Japan, increasing its geographical coverage and further diversification of age-care tenants.

Some may remember Aims Apac Reit as MacarthurCook Industrial Reit which listed in April 2007 with a portfolio of 12 industrial properties in Singapore valued at S$316 million.

The Reit has since rebranded itself in 2019 and has grown over five times in size with a portfolio value of S$1.7 billion across 28 properties in Singapore and Australia.

Its tenant base of 188 tenants has also diversified across the years, and include resilient sectors such as logistics and warehouses, bio-medical and life science, telecommunications and data centre operators accounting for seven out of its top 10 tenants.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - 10 S-Reits yielding long-term annualised returns

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

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 97.4pt;"> </td><td style="width: 97.4pt;">KDCREIT</td><td style="width: 97.45pt;">MAGIC</td><td style="width: 97.4pt;">ART</td><td style="width: 97.45pt;">KORE (US$)</td><td style="width: 97.4pt;">PREIT</td><td style="width: 97.45pt;">LMRT</td></tr><tr><td style="width: 97.4pt;">Period</td><td style="width: 97.4pt;">2Q21</td><td style="width: 97.45pt;">1Q22</td><td style="width: 97.4pt;">1H21</td><td style="width: 97.45pt;">1H21</td><td style="width: 97.4pt;">2Q21</td><td style="width: 97.45pt;">2Q21</td></tr><tr><td style="width: 97.4pt;">Gross Revenue (S$ m)</td><td style="width: 97.4pt;">68.5 (+7.5% YoY)</td><td style="width: 97.45pt;">103 (+10.0% YoY)</td><td style="width: 97.4pt;">185.0 (-11.2% YoY)</td><td style="width: 97.45pt;">68.38 (-3% YoY)</td><td style="width: 97.4pt;">29.6 (-2.3% YoY)</td><td style="width: 97.45pt;">49.65 (+81.3% YoY)</td></tr><tr><td style="width: 97.4pt;">NPI (S$ m)</td><td style="width: 97.4pt;">62.8 (+6.9% YoY)</td><td style="width: 97.45pt;">78.3 (+14.3% YoY)</td><td style="width: 97.4pt;">82.1 (-7.3% YoY)</td><td style="width: 97.45pt;">40.58 (-3.1% YoY)</td><td style="width: 97.4pt;">27.4 (-2.8% YoY)</td><td style="width: 97.45pt;">31.8 (+148% YoY)</td></tr><tr><td style="width: 97.4pt;">DPU (S$ c)</td><td style="width: 97.4pt;">2.462 (+7.5% YoY)</td><td style="width: 97.45pt;">Not Disclosed</td><td style="width: 97.4pt;">2.050 (+95.2% YoY)</td><td style="width: 97.45pt;">3.16 (+1.9% YoY)</td><td style="width: 97.4pt;">3.38 (+0.7% YoY)</td><td style="width: 97.45pt;">0.09 (-18.2% YoY)</td></tr><tr><td style="width: 97.4pt;">NAV per Unit (S$)</td><td style="width: 97.4pt;">1.21</td><td style="width: 97.45pt;">1.238</td><td style="width: 97.4pt;">1.19</td><td style="width: 97.45pt;">0.82</td><td style="width: 97.4pt;">1.98</td><td style="width: 97.45pt;">0.0955</td></tr><tr><td style="width: 97.4pt;">P/B (x)</td><td style="width: 97.4pt;">2.12</td><td style="width: 97.45pt;">0.83</td><td style="width: 97.4pt;">0.85</td><td style="width: 97.45pt;">0.95</td><td style="width: 97.4pt;">2.38</td><td style="width: 97.45pt;">0.64</td></tr><tr><td style="width: 97.4pt;">Occupancy (%)</td><td style="width: 97.4pt;">98.0</td><td style="width: 97.45pt;">99.8 (Festival Walk)92.9 (Gateway Plaza)99.7 (Sandhill Plaza)98.2 (Japan Properties)95.7 (The Pinnacle Gangnam)</td><td style="width: 97.4pt;">Mid-50</td><td style="width: 97.45pt;">90.5</td><td style="width: 97.4pt;">99.7</td><td style="width: 97.45pt;">83.4</td></tr><tr><td style="width: 97.4pt;">Reversion (%)</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">-34 (Festival Walk)-27 (Gateway Plaza)-4 (Sandhill Plaza)+0.2 (Japan Properties)</td><td style="width: 97.4pt;">Portfolio RevPAU: S$60 (-14% YoY)</td><td style="width: 97.45pt;">+5.4</td><td style="width: 97.4pt;">Not Disclosed</td><td style="width: 97.45pt;">3.4</td></tr><tr><td style="width: 97.4pt;">Gearing (%)</td><td style="width: 97.4pt;">36.7</td><td style="width: 97.45pt;">41.8</td><td style="width: 97.4pt;">35.9</td><td style="width: 97.45pt;">37.1</td><td style="width: 97.4pt;">37</td><td style="width: 97.45pt;">42.5</td></tr><tr><td style="width: 97.4pt;">Cost of Debt (%)</td><td style="width: 97.4pt;">1.5</td><td style="width: 97.45pt;">1.87</td><td style="width: 97.4pt;">1.6</td><td style="width: 97.45pt;">2.82</td><td style="width: 97.4pt;">0.56</td><td style="width: 97.45pt;">6.47</td></tr><tr><td style="width: 97.4pt;">1 Yr Fwd Yield (%)</td><td style="width: 97.4pt;">3.91</td><td style="width: 97.45pt;">6.8</td><td style="width: 97.4pt;">4.16</td><td style="width: 97.45pt;">7.77</td><td style="width: 97.4pt;">2.97</td><td style="width: 97.45pt;">5.5 (annualized 1H21)</td></tr><tr><td style="width: 97.4pt;">Debt Hedged (%)</td><td style="width: 97.4pt;">67</td><td style="width: 97.45pt;">82</td><td style="width: 97.4pt;">50</td><td style="width: 97.45pt;">84.7</td><td style="width: 97.4pt;">82</td><td style="width: 97.45pt;">80.6</td></tr><tr><td style="width: 97.4pt;">Target Price</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">N/A</td><td style="width: 97.45pt;">N/A</td></tr><tr><td style="width: 97.4pt;">Rating</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">NA</td><td style="width: 97.45pt;">N/A</td><td style="width: 97.4pt;">N/A</td><td style="width: 97.45pt;">N/A</td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) KDCREITMAGICARTKORE (US$)PREITLMRTPeriod2Q211Q221H211H212Q212Q21Gross Revenue (S$ m)68.5 (+7.5% YoY)103 (+10.0% YoY)185.0 (-11.2% YoY)68.38 (-3% YoY)29.6 (-2.3% YoY)49.65 (+81.3% YoY)NPI (S$ m)62.8 (+6.9% YoY)78.3 (+14.3% YoY)82.1 (-7.3% YoY)40.58 (-3.1% YoY)27.4 (-2.8% YoY)31.8 (+148% YoY)DPU (S$ c)2.462 (+7.5% YoY)Not Disclosed2.050 (+95.2% YoY)3.16 (+1.9% YoY)3.38 (+0.7% YoY)0.09 (-18.2% YoY)NAV per Unit (S$)1.211.2381.190.821.980.0955P/B (x)2.120.830.850.952.380.64Occupancy (%)98.099.8 (Festival Walk)92.9 (Gateway Plaza)99.7 (Sandhill Plaza)98.2 (Japan Properties)95.7 (The Pinnacle Gangnam)Mid-5090.599.783.4Reversion (%)NA-34 (Festival Walk)-27 (Gateway Plaza)-4 (Sandhill Plaza)+0.2 (Japan Properties)Portfolio RevPAU: S$60 (-14% YoY)+5.4Not Disclosed3.4Gearing (%)36.741.835.937.13742.5Cost of Debt (%)1.51.871.62.820.566.471 Yr Fwd Yield (%)3.916.84.167.772.975.5 (annualized 1H21)Debt Hedged (%)67825084.78280.6Target PriceNAN/ANAN/AN/AN/ARatingNAN/ANAN/AN/AN/A

ASEAN Builder's Scoop (27Jul21) - KDCREIT Maiden China Acq

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/lhn-ltd" target="_blank" data-smartkarma-citation="entities:27234" rel="noopener">LHN Ltd (LHN SP)</a> to acquire an industrial property at Tuas South for S$21m; Expanding its Space Optimisation Business</h3><ul><li>LHN has accepted the OTP for the purchase of Tuas South Property for S$21m. The acquisition is expected to complete by 1Oct21 and will be financed by a mix of internal sources of funding and bank borrowings</li><li>The Tuas South Property is located at 55 Tuas South Avenue 1, with a land area of 51,655sqft and a remaining lease of ~39 years. The property has GFA of 129,138sqft and consists of (i) an 11-storey industrial building with a basement carpark; (ii) a part single-storey industrial factory; and (iii) a part single-storey industrial factory with two storey workers’ dormitory. This property is a foreclosed property and DBS Bank is selling it as the mortgagee of the property exercising its power of sale</li><li>LHN intends to operate the property under the industrial segment of its Space Optimisation Business to provide business spaces under the Business 2 zone for industrial developments as well as a range of value-added logistics support services to its tenants</li></ul>Comments: The Tuas South Property will add 2.9% of Industrial Space to LHN’s Space Optimisation Business, bringing total Industrial space to 1.83m sqft. LHN has been rationalizing its Industrial Space in FY20/21 by not renewing expired leases that are deemed underperforming. Including the 2 new JVs at 202 Kallang Bahru and 5 Toa Payoh, Industrial Space registered a net decline of -1.10m sqft (or -38.3%) over the last two years. We are positive on the acquisition given the strategic location and favorable price. The Consideration of S$21m translates to S$163psf, which is lower than the last two industrial property transactions along Tuas South Avenue 1 in 2020 at S$194psf and S$222psf, respectively (source: edgeprop). We expect future CapEx should be small as the property’s existing GFA of 129,138sqf is already at its maximum allowable plot ratio of 2.5 under the URA’s Master Plan 2019.

SingaporeLHN Ltd (LHN SP) to acquire an industrial property at Tuas South for S$21m; Expanding its Space Optimisation BusinessLHN has accepted the OTP for the purchase of Tuas South Property for S$21m. The acquisition is expected to complete by 1Oct21 and will be financed by a mix of internal sources of funding and bank borrowingsThe Tuas South Property is located at 55 Tuas South Avenue 1, with a land area of 51,655sqft and a remaining lease of ~39 years. The property has GFA of 129,138sqft and consists of (i) an 11-storey industrial building with a basement carpark; (ii) a part single-storey industrial factory; and (iii) a part single-storey industrial factory with two storey workers’ dormitory. This property is a foreclosed property and DBS Bank is selling it as the mortgagee of the property exercising its power of saleLHN intends to operate the property under the industrial segment of its Space Optimisation Business to provide business spaces under the Business 2 zone for industrial developments as well as a range of value-added logistics support services to its tenantsComments: The Tuas South Property will add 2.9% of Industrial Space to LHN’s Space Optimisation Business, bringing total Industrial space to 1.83m sqft. LHN has been rationalizing its Industrial Space in FY20/21 by not renewing expired leases that are deemed underperforming. Including the 2 new JVs at 202 Kallang Bahru and 5 Toa Payoh, Industrial Space registered a net decline of -1.10m sqft (or -38.3%) over the last two years. We are positive on the acquisition given the strategic location and favorable price. The Consideration of S$21m translates to S$163psf, which is lower than the last two industrial property transactions along Tuas South Avenue 1 in 2020 at S$194psf and S$222psf, respectively (source: edgeprop). We expect future CapEx should be small as the property’s existing GFA of 129,138sqf is already at its maximum allowable plot ratio of 2.5 under the URA’s Master Plan 2019.

ASEAN Builder's Scoop (15Jul21) - LHN Expands Its Space Optimization Biz

<h2>Singapore</h2>
<h3>SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)</h3>
With Singapore moving into Phase 3, economic recovery should regain momentum, albeit uneven across sectors. The accelerated timetable for US interest rate hikes has triggered yield spread compression, but also signaled a stronger and sustainable economic growth, which bodes well for trade-dependent Singapore. We reinitiate the SREIT sector with BUY. Top picks are FCT, DASIN, AAREIT and AREIT. SGREIT offers a good entry point for midterm recovery play; while ECWREIT could see a DPU boost from deferred DI.
<ul>
<li>Economy recovery provides strong tailwind for yield, albeit uneven across sectors. Following a setback from a month-long partial lockdown in Phase 2, Singapore has resume gradual reopening on 14Jun, thus setting economy back on track to recovery. However, we should see some deviation from initial expected timeline and recovery pace across sectors. In particular, tourism-related sectors are set to see further delays in recovery given the slower lifting of global travel curbs and the recent cut in capacity limits at local attractions. On the other hand, domestic-driven expenditures and outward-oriented sectors, such as retail and manufacturing, are expected to benefit from the pick-up in demand</li>
<li>We prefer Retail and Commercial subsectors, which should recover on stronger pace and offer attractive yields within the SREIT sector, while trading at c.1.0x forward P/B. Industrial subsector offers mixed picture, where we are positive on warehouse space, but neutral on other property types. Continued M&amp;A activities within the Industrial subsector should boost future DPU growth in addition to organic growth</li>
<li>We underweight both Hospitality and Healthcare subsectors. Outlook for Hospitality subsector remains cloudy in near term. Nonetheless, we remain upbeat on the longer-term prospect of the subsector in anticipation of international border reopening. On the other hand, the robust valuations of Healthcare subsector and low cash-flow growth realizations could indicate over optimism in investors’ expectations</li>
<li>Our top picks: FCT (Buy; S$2.89) for its faster recovery in near term. DASIN (Buy; S$0.81) for China-focused retail play with its Greater Bay Area (GBA) exposure. We favour AAREIT (Buy; S$1.60) and AREIT (Buy; S$3.55) for their strong balance sheet, which allows them financial flexibility in pursuing new acquisitions, or embarking on development/ redevelopment/ AEI projects. Tactical investment into ECWREIT (Buy; S$0.82) on potential DPU boost from deferred DI.
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Singapore
SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)
With Singapore moving into Phase 3, economic recovery should regain momentum, albeit uneven across sectors. The accelerated timetable for US interest rate hikes has triggered yield spread compression, but also signaled a stronger and sustainable economic growth, which bodes well for trade-dependent Singapore. We reinitiate the SREIT sector with BUY. Top picks are FCT, DASIN, AAREIT and AREIT. SGREIT offers a good entry point for midterm recovery play; while ECWREIT could see a DPU boost from deferred DI.

Economy recovery provides strong tailwind for yield, albeit uneven across sectors. Following a setback from a month-long partial lockdown in Phase 2, Singapore has resume gradual reopening on 14Jun, thus setting economy back on track to recovery. However, we should see some deviation from initial expected timeline and recovery pace across sectors. In particular, tourism-related sectors are set to see further delays in recovery given the slower lifting of global travel curbs and the recent cut in capacity limits at local attractions. On the other hand, domestic-driven expenditures and outward-oriented sectors, such as retail and manufacturing, are expected to benefit from the pick-up in demand
We prefer Retail and Commercial subsectors, which should recover on stronger pace and offer attractive yields within the SREIT sector, while trading at c.1.0x forward P/B. Industrial subsector offers mixed picture, where we are positive on warehouse space, but neutral on other property types. Continued M&amp;A activities within the Industrial subsector should boost future DPU growth in addition to organic growth
We underweight both Hospitality and Healthcare subsectors. Outlook for Hospitality subsector remains cloudy in near term. Nonetheless, we remain upbeat on the longer-term prospect of the subsector in anticipation of international border reopening. On the other hand, the robust valuations of Healthcare subsector and low cash-flow growth realizations could indicate over optimism in investors’ expectations
Our top picks: FCT (Buy; S$2.89) for its faster recovery in near term. DASIN (Buy; S$0.81) for China-focused retail play with its Greater Bay Area (GBA) exposure. We favour AAREIT (Buy; S$1.60) and AREIT (Buy; S$3.55) for their strong balance sheet, which allows them financial flexibility in pursuing new acquisitions, or embarking on development/ redevelopment/ AEI projects. Tactical investment into ECWREIT (Buy; S$0.82) on potential DPU boost from deferred DI.






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Singapore

Parkway Life Real Estate Investment Trust (Parkway Life REIT) invests primarily in income producing real estate and real estate related assets in the Asia Pacific region. The trust's real estate is used primarily for healthcare and healthcare-related purposes.

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