The global stock market is growing concerned about the pace of rising interest rates on the stock market. In particular, the REIT share prices have been battered. Should you still be investing in REITs at this point in time? According to DBS, the answer is a resounding yes. DBS thinks that there are four REITs you should own even as the Fed raises interest rate.
Investors Takeaway: 4 REITs You Should Own Even As Fed Raises Interest Rate
- Frasers Logistics & Industrial Trust
Frasers Logistics & Industrial Trust has been making significant acquisitions in Germany and the Netherlands recently. The industrial properties are mainly modern logistics facilities located within major logistics clusters in Germany and the Netherlands, which cater to core distribution needs of both countries.
These properties are underpinned by a high-quality tenant base with tenants like BMW Group, Bakker Logistiek, DSV Solutions and Mainfreight. DBS believes that the acquisitions will empower Frasers Logistics & Industrial Trust with greater access to the Sponsor’s industrial platform in Europe and an expanded pipeline of assets in Australia and Europe.
In addition to growing distribution yield, DBS opines that the logistic trust could deliver an overall 20 percent return to investors.
Frasers Logistics Trust: BUY, TP $1.20
- Keppel DC REIT
Keppel DC REIT remains one of the rare few REITs in Singapore that can still make accretive acquisitions, given its low cost of capital. Its 1Q18 results were in line with consensus expectations. Portfolio occupancy is sustained at a healthy 92.6 percent and limited expiries over the coming two financial years, provide high income visibility for unitholders. Moving forward, Keppel DC REIT is projected to achieve a solid compound annual growth rate of three percent in distributions, supported by ambitious growth plans.
Keppel DC REIT: BUY, TP $1.52
- Mapletree North Asia Commercial Trust
Due to uncertainty over a potential equity raising to fund an acquisition following the expansion of its investment mandate to include Japan, Mapletree North Asia Commercial Trust share price has been plummeting since the start of the year. However, with the overhang from an equity raising over, DBS thinks that Mapletree North Asia Commercial Trust share price will start to rally once macro conditions in Hong Kong improves and Japan’s expansion leads to higher DPU.
Historically, Mapletree North Asia Commercial Trust share price lags during periods when Hong Kong retail sales are sluggish. With Hong Kong’s retail scene on an upturn, the positive news flow from improving retail sales should act as a tailwind to Mapletree North Asia Commercial Trust’s share price.
Mapletree North Asia Commercial Trust: BUY, TP $1.45
- Mapletree Logistics Trust
Mapletree Logistics Trust has been on an acquisition spree. Post recent plans to acquire a portfolio of modern logistics properties, excitement on Mapletree Logistics Trust’s growth prospects remains strong.
DBS highlights that the market has not accounted for the improved fundamentals post-acquisition and potential to surprise on the upside organically and through acquisitions.
Heading into 2019, DBS sees more opportunities for Mapletree Logistics Trust to gear up. Mapletree Logistics Trust could potentially make acquisitions from third parties in markets like Vietnam and Australia in the medium term.
Coupled with a stronger balance sheet post recapitalisation, improving organic growth outlook and a myriad of acquisitions, the REIT’s improved earnings prospects will translate into higher valuations going forward.
Mapletree Logistics Trust: BUY, TP $1.48