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

SCCM Asia Research

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.

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

Vietnam Real estate / Thematic (Sector/Industry)

<h2>Singapore</h2>
<h3>SREITs – Reflation is working in SREIT’s favour (BUY FCT DASIN AAREIT AREIT ECWREIT)</h3>
<p>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.</p>
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<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.






ASEAN Builder's Scoop (1Jul21) - SREITs Reflation Is Working in Its Favour