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.

Asia’s leading multi-asset exchange

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

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

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For the June quarter, SGX’s four largest office REITs – CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT and Keppel REIT – averaged a DPU of 2.07 Singapore cents. Suntec REIT reported the highest DPU of 2.36 cents, followed by Mapletree Commercial Trust with a DPU of 2.31 cents. 
	 </li>
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For the quarter, Keppel REIT and Suntec REIT had the highest aggregate leverage ratios of 38.4% and 38.3% respectively, while Mapletree Commercial Trust had the lowest gearing of 33.1%. CapitaLand Commercial Trust had the highest interest cover ratio of 5.3x, followed by Mapletree Commercial Trust at 4.6x. 
	 </li>
	<li>In the YTD, SGX’s four largest office REITs have averaged a total return of 19.6%, bringing their 1Y and 3Y total returns to 20.1% and 51.5% respectively. The two best performers were Mapletree Commercial Trust and CapitaLand Commercial Trust, with YTD total returns of 28.6% and 26.9% respectively.</li>
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Top Net Buy Sector in 6M19

SGX lists 35 REITs, seven stapled trusts and three property trusts with a combined market cap of over S$100 billion. Singapore REITs was the top net buy sector in the first six months of 2019, drawing net institutional inflows of S$396.3 million over the period. S-REITs was also the top net buy sector in June, with CapitaLand Commercial Trust topping the institutional net buy list.

Of the 35 REITs on SGX, 10 are engaged in the acquisition, development, ownership, leasing, management and operation of office properties located in Singapore, Malaysia, South Korea, Australia, Europe, and the United States. Among these 10, the four largest trusts by market capitalisation are: CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT and Keppel REIT. Note that Mapletree Commercial Trust and Suntec REIT also own retail assets. Over the last two weeks, these four largest commercial REITs have reported results for the three months ended 30 June 2019.

June Quarter Earnings Highlights 

For the three months ended 30 June 2019, the four trusts averaged a distribution per unit (DPU) of 2.07 Singapore cents, down an average 0.3% from the year-ago period. Suntec REIT reported the highest DPU of 2.36 Singapore cents among the four trusts, down 4.6% YoY, largely due its enlarged unit base. This was followed by Mapletree Commercial Trust with a DPU of 2.31 Singapore cents, up 3.6% YoY. Among the four REITs, Mapletree Commercial Trust registered the highest YoY growth in DPU.

These trusts averaged a 7.9% YoY fall in net property income to S$63.5 million, while gross revenue declined an average 4.7% YoY to S$85.4 million.

On average, the four REITs had an aggregate leverage ratio of 36.2% as of the quarter ended 30 June 2019. This compares with an average of 37.3% in the year-ago period. Keppel REIT and Suntec REIT had the highest aggregate leverage ratios of 38.4% and 38.3% respectively, while Mapletree Commercial Trust had the lowest gearing of 33.1%. Interest cover for the four trusts averaged 4.2 times in the June quarter, versus 4.5 times in the year-ago period. CapitaLand Commercial Trust had the highest ICR of 5.3x in the quarter, followed by Mapletree Commercial Trust at 4.6x.

The tables below detail the April-June 2019 results of SGX’s four largest office REITs.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Distribution Per Unit (SG cts)
			</td>
			<td>
			YoY Change (%)
			</td>
			<td>
			Net Property Income (S$M)
			</td>
			<td>
			YoY % change
			</td>
			<td>
			Gross Revenue (S$M)
			</td>
			<td>
			YoY Change (%)
			</td>
		</tr>
<tr>
<td>
			CapitaLand Commercial Trust
			</td>
			<td>
			2.20
			</td>
			<td>
			1.9
			</td>
			<td>
			78,383
			</td>
			<td>
			0.8
			</td>
			<td>
			100,985
			</td>
			<td>
			3.0
			</td>
		</tr>
<tr>
<td>
			Mapletree Commercial Trust
			</td>
			<td>
			2.31
			</td>
			<td>
			3.6
			</td>
			<td>
			88,347
			</td>
			<td>
			2.8
			</td>
			<td>
			112,128
			</td>
			<td>
			3.3
			</td>
		</tr>
<tr>
<td>
			Suntec REIT
			</td>
			<td>
			2.36
			</td>
			<td>
			-4.6*
			</td>
			<td>
			56,363
			</td>
			<td>
			-7.2
			</td>
			<td>
			88,396
			</td>
			<td>
			-2.3
			</td>
		</tr>
<tr>
<td>
			Keppel REIT
			</td>
			<td>
			1.39
			</td>
			<td>
			-2.1
			</td>
			<td>
			31,063
			</td>
			<td>
			-28.1
			</td>
			<td>
			39,913
			</td>
			<td>
			-22.7
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			2.07
			</td>
			<td>
			-0.30
			</td>
			<td>
			63,539
			</td>
			<td>
			-7.9
			</td>
			<td>
			85,356
			</td>
			<td>
			-4.7
			</td>
		</tr>
</tbody></table>
 

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 June 2019
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 June 2018
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 June 2019
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 June 2018
			</td>
		</tr>
<tr>
<td>
			CapitaLand Commercial Trust
			</td>
			<td>
			34.8
			</td>
			<td>
			37.9
			</td>
			<td>
			5.7
			</td>
			<td>
			5.3
			</td>
		</tr>
<tr>
<td>
			Mapletree Commercial Trust
			</td>
			<td>
			33.1
			</td>
			<td>
			34.7
			</td>
			<td>
			4.5
			</td>
			<td>
			4.6
			</td>
		</tr>
<tr>
<td>
			Suntec REIT
			</td>
			<td>
			38.3
			</td>
			<td>
			37.9
			</td>
			<td>
			2.9
			</td>
			<td>
			3.6
			</td>
		</tr>
<tr>
<td>
			Keppel REIT
			</td>
			<td>
			38.4
			</td>
			<td>
			38.6
			</td>
			<td>
			3.7
			</td>
			<td>
			4.3
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			36.2
			</td>
			<td>
			37.3
			</td>
			<td>
			4.2
			</td>
			<td>
			4.5
			</td>
		</tr>
</tbody></table>
Source: Company data      *Decline due mainly to enlarged unit base

Office Rentals Seen Rising as Supply Shrinks

According to CBRE Research, Singapore’s average monthly Grade A office market rent increased by 11.9% YoY in 2Q 2019 to S$11.30 per square foot (psf). Occupancy in Singapore’s core CBD office buildings as at end-June was 95.8%, up from 95.4% in the previous quarter.

According to a <a href="https://research.sginvestors.io/2019/05/office-reits-uob-kay-hian-research-2019-05-30.html">report</a> dated 30 May 2019 by UOB-Kay Hian Research, Singapore’s office market, which bottomed out in the first half of 2017, is now in its second year of recovery, and continued upside for office rentals will likely be supported by tapering supply.

Likewise, in a 21 June 2019 <a href="https://www.colliers.com/en-gb/singapore/about/media/2019-06-21-top-micro-markets-sg">report</a>, Colliers International projected that rents for Grade A office buildings in Singapore’s CBD will rise by 8% this year and 5% in 2020.  It expects new supply in 2019-2021 to average 614,000 square feet per annum or 2% of stock, versus 5% over the past five years. This is anticipated to keep vacancies tight in 2019 through 2021, the report added.

YTD Performances

In the YTD, SGX’s four largest office REITs have averaged a total return of 19.6%, bringing their one-year and three-year total returns to 20.1% and 51.5% respectively. The four also averaged a price-to-book ratio of 0.9x and a dividend indicated yield of 4.6%. The two best performers were Mapletree Commercial Trust and CapitaLand Commercial Trust, with YTD total returns of 28.6% and 26.9% respectively.

The table below details SGX’s four largest office REITs, sorted by market capitalisation.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			SGX Code
			</td>
			<td>
			Market Cap (S$M)
			</td>
			<td>
			Total Return YTD (%)
			</td>
			<td>
			Total Return 1Y (%)
			</td>
			<td>
			Total Return 3Y (%)
			</td>
			<td>
			P/B (x)
			</td>
			<td>
			Div Ind Yld (%)
			</td>
		</tr>
<tr>
<td>
			CapitaLand Commercial Trust
			</td>
			<td>
			C61U
			</td>
			<td>
			7,950
			</td>
			<td>
			26.9
			</td>
			<td>
			26.9
			</td>
			<td>
			73.8
			</td>
			<td>
			0.9
			</td>
			<td>
			4.5
			</td>
		</tr>
<tr>
<td>
			Mapletree Commercial Trust
			</td>
			<td>
			T82U
			</td>
			<td>
			5,992
			</td>
			<td>
			28.6
			</td>
			<td>
			33.1
			</td>
			<td>
			64.5
			</td>
			<td>
			1.1
			</td>
			<td>
			4.4
			</td>
		</tr>
<tr>
<td>
			Suntec REIT
			</td>
			<td>
			K71U
			</td>
			<td>
			5,366
			</td>
			<td>
			11.3
			</td>
			<td>
			9.4
			</td>
			<td>
			29.4
			</td>
			<td>
			0.9
			</td>
			<td>
			5.1
			</td>
		</tr>
<tr>
<td>
			Keppel REIT
			</td>
			<td>
			ND8U
			</td>
			<td>
			4,182
			</td>
			<td>
			11.7
			</td>
			<td>
			11.1
			</td>
			<td>
			38.0
			</td>
			<td>
			0.8
			</td>
			<td>
			4.5
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			19.6
			</td>
			<td>
			20.1
			</td>
			<td>
			51.5
			</td>
			<td>
			0.9
			</td>
			<td>
			4.6
			</td>
		</tr>
</tbody></table>
Source: Bloomberg &amp; StockFacts (data as of 26 July 2019)
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For the June quarter, SGX’s four largest office REITs – CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT and Keppel REIT – averaged a DPU of 2.07 Singapore cents. Suntec REIT reported the highest DPU of 2.36 cents, followed by Mapletree Commercial Trust with a DPU of 2.31 cents. 
	 
	
For the quarter, Keppel REIT and Suntec REIT had the highest aggregate leverage ratios of 38.4% and 38.3% respectively, while Mapletree Commercial Trust had the lowest gearing of 33.1%. CapitaLand Commercial Trust had the highest interest cover ratio of 5.3x, followed by Mapletree Commercial Trust at 4.6x. 
	 
	In the YTD, SGX’s four largest office REITs have averaged a total return of 19.6%, bringing their 1Y and 3Y total returns to 20.1% and 51.5% respectively. The two best performers were Mapletree Commercial Trust and CapitaLand Commercial Trust, with YTD total returns of 28.6% and 26.9% respectively.

Top Net Buy Sector in 6M19

SGX lists 35 REITs, seven stapled trusts and three property trusts with a combined market cap of over S$100 billion. Singapore REITs was the top net buy sector in the first six months of 2019, drawing net institutional inflows of S$396.3 million over the period. S-REITs was also the top net buy sector in June, with CapitaLand Commercial Trust topping the institutional net buy list.

Of the 35 REITs on SGX, 10 are engaged in the acquisition, development, ownership, leasing, management and operation of office properties located in Singapore, Malaysia, South Korea, Australia, Europe, and the United States. Among these 10, the four largest trusts by market capitalisation are: CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT and Keppel REIT. Note that Mapletree Commercial Trust and Suntec REIT also own retail assets. Over the last two weeks, these four largest commercial REITs have reported results for the three months ended 30 June 2019.

June Quarter Earnings Highlights 

For the three months ended 30 June 2019, the four trusts averaged a distribution per unit (DPU) of 2.07 Singapore cents, down an average 0.3% from the year-ago period. Suntec REIT reported the highest DPU of 2.36 Singapore cents among the four trusts, down 4.6% YoY, largely due its enlarged unit base. This was followed by Mapletree Commercial Trust with a DPU of 2.31 Singapore cents, up 3.6% YoY. Among the four REITs, Mapletree Commercial Trust registered the highest YoY growth in DPU.

These trusts averaged a 7.9% YoY fall in net property income to S$63.5 million, while gross revenue declined an average 4.7% YoY to S$85.4 million.

On average, the four REITs had an aggregate leverage ratio of 36.2% as of the quarter ended 30 June 2019. This compares with an average of 37.3% in the year-ago period. Keppel REIT and Suntec REIT had the highest aggregate leverage ratios of 38.4% and 38.3% respectively, while Mapletree Commercial Trust had the lowest gearing of 33.1%. Interest cover for the four trusts averaged 4.2 times in the June quarter, versus 4.5 times in the year-ago period. CapitaLand Commercial Trust had the highest ICR of 5.3x in the quarter, followed by Mapletree Commercial Trust at 4.6x.

The tables below detail the April-June 2019 results of SGX’s four largest office REITs.




			Name
			
			
			Distribution Per Unit (SG cts)
			
			
			YoY Change (%)
			
			
			Net Property Income (S$M)
			
			
			YoY % change
			
			
			Gross Revenue (S$M)
			
			
			YoY Change (%)
			
		


			CapitaLand Commercial Trust
			
			
			2.20
			
			
			1.9
			
			
			78,383
			
			
			0.8
			
			
			100,985
			
			
			3.0
			
		


			Mapletree Commercial Trust
			
			
			2.31
			
			
			3.6
			
			
			88,347
			
			
			2.8
			
			
			112,128
			
			
			3.3
			
		


			Suntec REIT
			
			
			2.36
			
			
			-4.6*
			
			
			56,363
			
			
			-7.2
			
			
			88,396
			
			
			-2.3
			
		


			Keppel REIT
			
			
			1.39
			
			
			-2.1
			
			
			31,063
			
			
			-28.1
			
			
			39,913
			
			
			-22.7
			
		


			Average
			
			
			2.07
			
			
			-0.30
			
			
			63,539
			
			
			-7.9
			
			
			85,356
			
			
			-4.7
			
		

 




			Name
			
			
			Aggregate Leverage Ratio (%) as at 30 June 2019
			
			
			Aggregate Leverage Ratio (%) as at 30 June 2018
			
			
			Interest Coverage Ratio (x) as at 30 June 2019
			
			
			Interest Coverage Ratio (x) as at 30 June 2018
			
		


			CapitaLand Commercial Trust
			
			
			34.8
			
			
			37.9
			
			
			5.7
			
			
			5.3
			
		


			Mapletree Commercial Trust
			
			
			33.1
			
			
			34.7
			
			
			4.5
			
			
			4.6
			
		


			Suntec REIT
			
			
			38.3
			
			
			37.9
			
			
			2.9
			
			
			3.6
			
		


			Keppel REIT
			
			
			38.4
			
			
			38.6
			
			
			3.7
			
			
			4.3
			
		


			Average
			
			
			36.2
			
			
			37.3
			
			
			4.2
			
			
			4.5
			
		

Source: Company data      *Decline due mainly to enlarged unit base

Office Rentals Seen Rising as Supply Shrinks

According to CBRE Research, Singapore’s average monthly Grade A office market rent increased by 11.9% YoY in 2Q 2019 to S$11.30 per square foot (psf). Occupancy in Singapore’s core CBD office buildings as at end-June was 95.8%, up from 95.4% in the previous quarter.

According to a report dated 30 May 2019 by UOB-Kay Hian Research, Singapore’s office market, which bottomed out in the first half of 2017, is now in its second year of recovery, and continued upside for office rentals will likely be supported by tapering supply.

Likewise, in a 21 June 2019 report, Colliers International projected that rents for Grade A office buildings in Singapore’s CBD will rise by 8% this year and 5% in 2020.  It expects new supply in 2019-2021 to average 614,000 square feet per annum or 2% of stock, versus 5% over the past five years. This is anticipated to keep vacancies tight in 2019 through 2021, the report added.

YTD Performances

In the YTD, SGX’s four largest office REITs have averaged a total return of 19.6%, bringing their one-year and three-year total returns to 20.1% and 51.5% respectively. The four also averaged a price-to-book ratio of 0.9x and a dividend indicated yield of 4.6%. The two best performers were Mapletree Commercial Trust and CapitaLand Commercial Trust, with YTD total returns of 28.6% and 26.9% respectively.

The table below details SGX’s four largest office REITs, sorted by market capitalisation.




			Name
			
			
			SGX Code
			
			
			Market Cap (S$M)
			
			
			Total Return YTD (%)
			
			
			Total Return 1Y (%)
			
			
			Total Return 3Y (%)
			
			
			P/B (x)
			
			
			Div Ind Yld (%)
			
		


			CapitaLand Commercial Trust
			
			
			C61U
			
			
			7,950
			
			
			26.9
			
			
			26.9
			
			
			73.8
			
			
			0.9
			
			
			4.5
			
		


			Mapletree Commercial Trust
			
			
			T82U
			
			
			5,992
			
			
			28.6
			
			
			33.1
			
			
			64.5
			
			
			1.1
			
			
			4.4
			
		


			Suntec REIT
			
			
			K71U
			
			
			5,366
			
			
			11.3
			
			
			9.4
			
			
			29.4
			
			
			0.9
			
			
			5.1
			
		


			Keppel REIT
			
			
			ND8U
			
			
			4,182
			
			
			11.7
			
			
			11.1
			
			
			38.0
			
			
			0.8
			
			
			4.5
			
		


			Average
			
			
			 
			
			
			 
			
			
			19.6
			
			
			20.1
			
			
			51.5
			
			
			0.9
			
			
			4.6
			
		

Source: Bloomberg &amp; StockFacts (data as of 26 July 2019)



Mapletree Pan Asia Commercial Trust (MCT SP)

June Quarter Earnings of SGX’s Largest Office REITs