• The four SGX-listed retail S-REITs have outperformed the STI benchmark index by 5.6%. Despite growing risk-averse sentiment, investor expectations of potential downside for retail S-REITS were fairly subdued, underpinned by the sector’s strong earnings profile and its perceived defensive nature.
  • Collectively, the four SGX-listed China retail REITS also fared comparatively better than the CSI300 benchmark index, averaging a 2018 year-to-date return of -2.2% against the benchmark’s return of -16.4% in SGD terms.
  • Lippo Mall Indonesian REIT tops the list of best-yielding SGX-listed retail REITs with a yield of 8.6%. However, the REIT delivered a 2018 year-to-date total return of -27.0%, underperforming the Jakarta Composite Index by 14.6%.

Retail S-REITs Outperform STI Benchmark

Together, the four SGX-listed retail S-REITs – Capitaland Mall Trust, Mapletree Commercial Trust, SPH REIT and Frasers Centrepoint Trust averaged a 2018 year-to-date total return of 4.0%, outperforming the Straits Times Index index by 5.6%. Despite global trade uncertainties and growing risk-averse sentiment, investor expectations of potential downside for retail S-REITS were fairly subdued, underpinned by the sector’s strong earnings profile and its perceived defensive nature.

In a report published by DBS Vickers Securities on 24 August 2018, analysts noted that while retail rents in the Central and Fringe areas in Singapore have been relatively weak since 2015, driven by competition from e-commerce and changing consumer spending trends, this may have bottomed in recent quarters and fringe area rentals have actually turned positive in 1H 2018.

retailreit-chart1

3-Month SOR Nearing 10-Year Highs

The 3-month Singapore swap offer rate (SOR) in September is at 1.68%, nearing its 10-year high and is expected to continue rising as the Federal Reserve signals two to four more rate hikes in 2018 and 2019 respectively. While sector headwinds in the near to mid-term include escalating US-China trade tensions and rising interest rates, rental growth and healthy rental revisions can be mitigating factors.

Retail S-REIT Updates

CapitaLand Mall Trust (CMT) will be acquiring the remaining 70% interest in Infinity Mall Trust for S$806mn (including acquisition-related expenses), through a combination of debt and equity. Post-completion of the acquisition, CMT will own 100% of Westgate Mall. Ratings agency Moody’s downgraded the outlook on all CMT’s ratings from stable to negative following the announcement, although it affirmed its A2 issuer ratings.

China Retail REITs Fared Comparatively Better

In 2018 year-to-date, the benchmark CSI300 index generated a total return of -16.4% in SGD terms, indicative of the risk-off sentiment amid US-China trade tensions. Collectively, the four SGX-listed China retail REITS – Capitaland Retail China Trust, Sasseur REIT, Dasin REIT and BHG REIT – fared comparatively better, averaging a 2018 year-to-date total return of -2.2%. Management from the respective REITs have noted that their outlooks remain positive, citing strong China retail sales growth, as well as rising urban disposable income and expenditure per capita.

China retailreit-chart

 

Indonesian Retail REIT was Worst Performer YTD

Amongst the list of SGX-listed retail REITs, Lippo Mall Indonesia REIT was the worst performer, generating a 2018 year-to-date total return of -27.0%. A weaker rupiah, lower net property income (NPI) margins, new tax regulations and expiry of master leases for seven retail spaces were some drivers for its underperformance. Despite its poor returns, Lippo Mall Indonesia REIT tops the list of SGX-listed retail REITs in terms of dividend yield, with a yield of about 8.6%. Comparatively, the Jakarta Composite Index (JCI) returned -12.4% in 2018 year-to-date.

Indonesian retailreit-chart

SGX’s Cluster of Retail REITS

SGX list 11 retail REITS with a total market capitalisation of about S$25 billion. Collectively, they have averaged a dividend yield of 5.8% and a one-year total return of 3.1%. The table below lists the 11 retail REITS, sorted by dividend yield. Click on the stock name to view its profile on StockFacts.

SGX's Cluster retailreit-table