Real estate plays are not stranger to Singapore investors. In this article, we zoom in on the real estate sector, uncovering three overlooked gems with strong potential for growth.
Investors Takeaway: 3 Real Estate Plays With Growth Profile That Investors Will Love By RHB
- Starhill Global REIT
Starhill Global REIT is a hybrid office and retail REIT with presence in both Singapore and overseas market. Its retail portfolio has been facing some pressure from the deteriorating retail climate. However, according to RHB, its Singapore retail portfolio appears to be bottoming out.
Rents at Orchard Road are looking to be inching up, along with the government’s effort to revamp the shopping precinct, should help shopper traffic to return and hence benefit Starhill Global REIT’s retail portfolio in the long haul.
Starhill Global REIT also recently signed two master lease agreements with the existing master tenants of its Malaysian assets as a long-tenure mitigatory for upfront asset enhancement initiative (AEI) costs.
RHB thinks that Starhill Global REIT’s current valuation makes it a compelling buy. Right now, Starhill Global REIT is offering forward-FY19 yield of seven percent, which is 180 basis points higher than the listed retail/office S-REIT average. With the bottoming out of Orchard Road rent, limited new office supply, and completion of its overseas asset revamp, RHB believes that Starhill Global REIT has been repositioned back to DPU growth trajectory.
BUY, TP $0.78; Current share price $0.775
- EC World REIT
With seven assets in China that caters to the e-commerce, logistics and supply-chain segments, EC World REIT offers investors a proxy to China’s booming ecommerce market. Given the limited good quality logistics assets in China, RHB thinks that the REIT’s assets are well-positioned in future growth segments, which could potentially benefit from the Chinese Government’s push to boost domestic growth.
EC World REIT has a gearing ratio of 31.5 percent, which puts it on the lower end compared to its peers. With ample debt headroom for growth-accretive acquisitions, EC World REIT could look to its strong sponsor Fu Zhou for e-commerce properties to acquire in the near future, according to RHB. Besides Fu Zhou, EC World REIT also has access to 13 YCH logistics assets across Southeast Asia. Acquiring YCH assets could transform EC World REIT into a pan Asian e-commerce logistics play.
RHB is forecasting that EC World REIT would offer investors a high forward-FY18 and forward-FY19 yield of 8.8 percent and 9.2 percent respectively – a good 250 basis points above the average yields of S-REITs and overseas REITs. As such, RHB thinks that EC World REIT’s portfolio of logistics e-commerce assets, coupled with annual rent escalations and growth potential, would make it a value buy among overseas S-REITs.
BUY, TP $0.84; Current share price $0.795
- APAC Realty
As one of the largest real estate agencies in Singapore, APAC Realty is picked out by RHB as a proxy to the residential demand in Singapore. According to RHB, the residential demand in Singapore is expected to remain resilient on strong new-launches pipeline in 2019. So far, APAC Realty has already secured agent roles for 46 of the 50 projects slated for launch in 2019.
Besides its Singapore market, RHB also notes that APAC Realty has been strengthening its overseas presence, making a direct foray into the Indonesian, Thai, and Chinese markets last year by acquiring franchises in these markets. While contributions are likely to be small to begin with, RHB foresees exponential growth ahead as activities in these new regions ramp up.
BUY, TP $0.72; Current share price $0.530