In part two of this 6-part series, we zoom in on the outperformers of this quarter. The focus will be on the REITs that managed to put in a strong quarterly performance. Here are three REITs that had such a strong 4Q18 that investors will now wish that you own a piece of them.
Investors Takeaway: 3 REITs Finishing Strong
- CapitaLand Mall Trust
It was a solid quarter for CapitaLand Mall Trust as it returned to growth in 4Q18. Both CapitaLand Mall Trust’s 4Q18 and FY18 DPU came in above DBS’s expectations. DBS notes that while several factors were at play, the growth in distributions was mainly attributed to the Westgate acquisition and further improvements on the operational front. Besides that, there was also a broad-based improvement in net property income across CapitaLand Mall Trust’s portfolio malls, especially in its suburban assets.
Heading into FY19, the manager of CapitaLand Mall Trust notes that the worst is over for Westgate as it emerges from the completion of its asset enhancement initiatives (AEI) and new concept launches. CapitaLand Mall Trust will also be launching Funan at the end of 2Q19, which should see improved leasing momentum. So far, Funan has already achieved commitments of ~80 percent (from 70 percent in November), on an active leasing basis.
Moving forward, plans to take on selective AEI and redevelopment opportunities at lower-performing malls may provide further upside over the medium term.
BUY, TP $2.44, REIT Report Card Rating: A+
- Sasseur REIT
Sasseur REIT finished the quarter on a high note with 4Q18 DPU of $0.01999, which translates to FY18 DPU of $0.05128. The final DPU exceeded both its IPO projection and DBS’ estimates, which was largely attributed to robust tenant sales. In 4Q18, outlet sales grew by 16 percent year-on-year. According to DBS, this should give investors more confidence on Sasseur REIT’s prospects to grow at 24 percent CAGR from 2016 to 2021.
With 4Q18 results exceeding expectations and Sasseur REIT continuing to enjoy strong tenant sales, concerns over Sasseur REIT’s ability to deliver on its robust IPO projections should be allayed. As such, DBS believes that this would convince more investors on Sasseur REIT’s merits as an attractive investment opportunity. DBS also notes that Sasseur REIT now offers an attractive forward FY19 yield of 9.4 percent, which is among the highest in the S-REIT sector.
BUY, TP $0.97, REIT Report Card Rating: A+
- Mapletree Logistics Trust
Mapletree Logistics Trust crossed the 3Q19 finishing line with a superb performance by delivering the third best performance year-to-date among S-REITs. Mapletree Logistics Trust delivered total returns of 14.4 percent (including distributions and capital gain). This was almost 50 percent above the 10.2 percent return from FTSE ST REIT Index.
Overall, OCBC highlights that Mapletree Logistics Trust continues to possess a resilient portfolio, strong management team and strong potential for further capital recycling. OCBC is confident that this will help to sustain another year of good performance for Mapletree Logistics Trust as OCBC raises its fair value estimate.
While there are concerns over Mapletree Logistics Trust’s Australia portfolio due to economic growth concerns, OCBC notes that fundamentals of the logistics sector remain largely healthy. Recent earning calls from major logistics players are showing positive signs that will continue to drive the logistics sector. More growth is expected in the next 3-5 years.
BUY, TP $1.50, REIT Report Card Rating: A