1. First REIT
The REIT’s 3Q17 results fell within fair estimates, thanks to its portfolio of hospitals and rental income from South-east Asia.
A distribution per unit (DPU) accretive acquisition finished on 10 Oct 2017 on top of a possible joint acquisition of another DPU-accretive development in Indonesia bodes well for the REIT.
Moreover, on the back of Bloomberg’s consensus estimate for the Consumer Price Index (CPI) to expand by 0.8% year-on-year, First REIT’s acquisitions should propel it even further ahead.
As First REIT’s current price-book ratio is significantly lower than its peer Parkway Life REIT, OCBC Research upgraded its previous HOLD call on First REIT (SGX: AW9U) to BUY with a target price of $1.44 (up from $1.38 previously).
2. Mapletree Logistics Trust
The REIT’s 2QFY18 earnings results showed growth in gross revenue, net profit income (NPI), and DPU of 2.3%, 2.5% and 1.5% year-on-year respectively, well within OCBC Research’s estimates.
While an increasing supply in Singapore might slow down the REIT’s recovery in rental reversions, overall portfolio occupancy improved from 95.5% to 95.8% and diversification to other geographies is in the pipeline.
The recent divestments of three properties of about $5.4 million will be paid out to unitholders and the management intends to optimise its portfolio with the proceeds.
Noting that the REIT completed its HK$4.8 billion acquisition of Mapletree Logistics Hub Tsing Yi in Hong Kong, OCBC Research maintains its BUY call on Mapletree Logistics Trust (SGX: M44U) with a target price of $1.35.
3. Mapletree Greater China Commercial Trust
2QFY18 results fell within expectations but more importantly, DPU increased by 5.8% year-on-year for the REIT and its unitholders.
The REIT’s portfolio of properties all delivered positive rental reversions and higher retail sales for tenants, which is in line with the overall Hong Kong retail sales.
With the “continued re-rating momentum” in the local REITs scene, the REIT’s gearing ratio at its lowest since 10 quarters ago, and better consumer spending, OCBC Research lowers its cost of equity assumption from 8.1% to 7.8%.
Mapletree Greater China Commercial Trust (SGX: RW0U) received a maintained BUY call and a higher target price of $1.28 (previously $1.22).
4. CapitaLand Retail China Trust
While CapitaMall Wangjing should contribute more to the REIT’s earnings from 2Q18 onwards, CapitaMall Minzhongleyuan is undergoing trade mix adjustments, resulting in unstable contributions.
OCBC Research previously expected “a more robust gain” but it’s taking longer than it should.
As such, 3Q17 results for the REIT were desirable but could have been better, in OCBC Research’s view.
The REIT is delivering a “healthy rental reversion” of 7.5% and “resilient portfolio occupancy” of 95.6% but recent unexpected developments caused OCBC Research to adopt a wait-and-see approach for now.
OCBC Research maintained its HOLD call on CapitaLand Retail China Trust (SGX: AU8U) with a target price of $1.61 (previously $1.59).