S-REITs have been putting in a strong performance since the start of 2019. This continues to grow as a benign interest rate environment and a deteriorating macro backdrop shifts investors into S-REITs. According to MBKE, investors eyeing returns from both yields and growth should continue to find value in S-REITs. Among the S-REITs, here are five S-REITs that MBKE recommends for investors who are looking for yield and growth.
Investors Takeaway: 5 S-REITs That Investors Should Own For Yield And Growth By MBKE
- Ascendas REIT
A-REIT is the largest and most liquid REIT among the S-REITs. MBKE likes A-REIT for its scale and views A-REIT as the best proxy for a recovering industrial sector, thanks to its concentrated business-park and high-spec portfolio.
Moving forward, A-REIT is planning to increase its overseas exposure. MBKE thinks that the rising overseas exposure will offset lower Singapore contributions in the near term. Following its UK entry and a stronger sponsor pipeline after the CAPL-Ascendas Singbridge merger, MBKE thinks that there could be more opportunities for diversification. This will provide upside to FY19-21E three percent DPU CAGR estimates.
BUY, TP $3.20; Current share price $3.06
- Mapletree Industrial Trust
Mapletree Industrial Trust has been transforming itself into a high-tech REIT play. Its recent acquisition of Sunview 1 BTS data centre is part of a growing data centre portfolio where contributions have been rising. Besides its growing data centre portfolio, Mapletree Industrial Trust has also been engaging in asset enhancement initiatives at 30A Kallang Place and acquiring new assets into its portfolio from its sponsor (18 Tai Seng). Further acquisitions could further support MBKE’s 3-year five percent DPU CAGR forecast.
- CDL Hospitality Trusts
CDL Hospitality Trusts was chosen by MBKE as the top hospitality pick for its scale and liquidity. According to MBKE, its scale and liquidity renders it a good proxy for a sustained recovery in Singapore’s hospitality sector. MBKE notes that overseas expansion has been gaining traction for CDL Hospitality Trusts as it continues its push into Europe. The expansion is supported by positive carry from low funding costs and the interesting deals in Europe. With a low gearing and ample debt headroom, MBKE thinks that there are more opportunities for CDL Hospitality Trust to gain upside from potentially DPU-accretive deals.
BUY, TP $1.80; Current share price $1.64
- Far East Hospitality Trust
Among its top five REIT picks, hospitality REITs took two spots from the top five. Other than CDL Hospitality Trust, MBKE also recommends Far East Hospitality Trust. According to MBKE, Far East Hospitality Trust is the only REIT with pure exposure to the expected rebound in Singapore hospitality.
Rising contributions from its recently-acquired Oasia Downtown, an expected three percent year-on-year annual recovery in hotel RevPARs and management fees from three Sentosa properties opening this year are expected to anchor Far East Hospitality Trust’s strongest six percent DPU CAGR in FY18-20E. Besides that, MBKE also sees stronger DPU upside potential from its higher Singapore RevPAR sensitivity and visible sponsor pipeline.
BUY, TP $0.80; Current share price $0.680
- Frasers Centrepoint Trust
Among the retail REITs, Frasers Centrepoint Trust is the only REIT that has been given a BUY rating by MBKE. MBKE attributes this to Frasers Centrepoint Trust’s strengthening suburban-mall footprint, visible growth drivers and potential acquisition catalysts. With a gearing ratio of only 28.8 percent and debt headroom of $400M, MBKE thinks that Frasers Centrepoint Trust has ample of debt headroom to support acquisitions. MBKE also notes that Frasers Centrepoint Trust’s sponsor has multiple assets in the pipeline that is ready for acquisition (Northpoint City’s South Wing, Waterway Point), which will help Frasers Centrepoint Trust strengthen its suburban footprint.