Investors Takeaway: 3 REITs That Delivered Mixed Performance
- Mapletree Industrial Trust
Driven by higher hi-tech contribution, Mapletree Industrial Trust recorded results that were largely in line with MBKE’s quarterly forecast. Occupancies of its Singapore portfolio showed slight improvement compared to last quarter. However, most segments that were up for renewal saw negative rental reversions, except for the hi-tech segment.
Mapletree Industrial Trust’s performance for FY18 will largely be driven by the completion of its Kallang Asset Enhancement Initiative and full-year accretion of its US data centre investment. With its low funding cost and low aggregate leverage, Maybank Kim Eng believes that there are opportunities for growth through inorganic growth.
BUY, TP $2.25
REIT Quarterly Scorecard Rating: C+
- Suntec REIT
Suntec REIT delivered a commendable performance in 1Q18 that was largely in line with consensus expectations. However, distribution per unit (DPU) fell in the quarter as there was an increase in units on issue (combination of management fees and conversion of convertible bonds), fall in contribution from associates due to the absence of one-off income and higher borrowing costs.
Yet, Suntec REIT managed to improve on its results thanks to Suntec Mall, as both foot traffic and tenant sales growth accelerated at Suntec Mall. In the near term, there are two earnings catalysts to drive Suntec REIT’s earnings higher, according to DBS. The completion of an additional 25 percent acquisition interest stake in Southgate Complex (May 2018), as well as higher signing rents at Suntec Mall arising from improving tenant sales, are expected to give earnings a boost. With spot office rent in Singapore rising rapidly, there are also better prospects for positive rental reversions.
DBS has given Suntec REIT a positive outlook for the turnaround of Suntec Mall as well as its exposure to the multi-year recovery in the Singapore office market. As underlying earnings recovers and quality of its DPU improves, DBS believes that the market will reward Suntec REIT with a higher share price over time.
BUY, TP $2.30
REIT Quarterly Scorecard Rating: B
- SPH REIT
The biggest surprise for SPH REIT this quarter was the announcement of the acquisition of The Rail Mall. A retail strip with about 360-meter of main road frontage along Upper Bukit Timah Road, The Rail Mall comprises 43 single-storey shop units and 95 private carpark lots. It is one of the key access points to the Rail Corridor.
Under the ownership of SPH REIT, DBS believes that there are opportunities to value-add to the tenant mix to capture a wider crowd. SPH REIT management notes that the opportunity to raise income lies in strengthening the property’s food and beverages (F&B) offering through a careful and well-curated mix of F&B concepts and services.
BUY, TP $1.07
REIT Quarterly Scorecard Rating: B-