Following a dismal 1Q19 where there were more misses than beats against consensus estimates, CIMB thinks that the tide has now shifted towards earnings predictability, value and yield in 2Q19 results. The case for investors to look into these factors is further reinforced by a dovish interest rate outlook.
In the coming months, these three themes will be key investment strategies for most investors as we enter the upcoming results season. Based on these three investment themes, CIMB has highlighted its top eight picks. In the first part of this two-part series, we will focus on the S-REIT and property plays: CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT and UOL Group.
Investors Takeaway: 4 Value REIT And Property Plays To Switch Into By CIMB
- CapitaLand Commercial Trust
Among the S-REITs, CapitaLand Commercial Trust continues to be one of the large cap gems that investors cherish. CapitaLand Commercial Trust continues to enjoy high occupancy rate and positive uplifts in rent. Its lease renewal profile in FY19-20F also puts it as one of the office REITs with good exposures to the rental upcycle. Given the limited mid-term supply of office space in the CBD, CIMB expects CapitaLand Commercial Trust to ride on the trending office rents (5 percent year-on-year).
BUY, TP $2.25; Current share price $2.18
- Mapletree Commercial Trust
According to CIMB, Mapletree Commercial Trust has two crown jewels (Vivocity and Mapletree Business City I) that are expected to grow steadily in terms of rental income. After all, Vivocity is one of the few destination malls in Singapore. It also stands to benefit from the Greater Southern Waterfront developments announced by the Urban Redevelopment Authority. Mapletree Business City I, on the other hand, will benefit from decentralisation efforts due to its proximity to the CBD area, grade-A office specifications and lower rental rates vis-à-vis CBD offices.
The upcoming acquisition of Mapletree Business City II could raise Mapletree Commercial Trust’s FY20-21F DPU by approximately another 5 percent, which could provide positive catalyst for Mapletree Commercial Trust share price.
BUY, TP $2.24; Current share price $2.05
- Suntec REIT
Another office play that CIMB recommends is Suntec REIT. According to CIMB, Suntec REIT gives investors exposure to the rising office cycle and higher shopper traffic. Higher tenant sales at its Suntec Mall will allow Suntec REIT to benefit from stronger-than-expected retail rental hikes. The announcement of pre-leasing of 9 Penang Rd to UBS has also helped to strengthen Suntec REIT’s earnings visibility.
BUY, TP $2.15; Current share price $1.96
- UOL Group
Another familiar name for investors that CIMB recommends is UOL Group. Thanks to its large investment property portfolio and the benign interest rate outlook, CIMB expects UOL’s office and retail assets to continue to benefit from cap rate compression. Its planned roll out of two residential projects (1,130 units) in Singapore by July 2019 should generate attention and potentially serve as a share price catalyst. Right now, UOL is trading at an attractive valuation of 42 percent to its RNAV.
BUY, TP $8.45; Current share price $7.58