Singapore REITs - CGS-CIMB Research 2023-01-10: Tailwinds For Retail S-REITs

Singapore REITs - Tailwinds For Retail S-REITs

  • November 2022’s retail sales value excluding motor vehicles (RSV Ex. MV) came in at S$3,582m (+8.8% y-o-y), lifted by stronger F&B (+57.6%), fashion (+34.1%), recreation goods (+16.2%) and watches and jewellery (+15.4%) trades. Nov 22’s slower 8.8% growth breaks the 8-month double-digit y-o-y growth streak. We think this is likely due to outbound travel, which recovered to 63% of 2019’s levels in October 2021.
  • The slower growth was partially offset by the accelerated pre-GST hike shopping, based on previous consumer patterns during past GST hikes. Although we think inflation could bite, on the flip side, the recovery of international visitor arrivals, and strong performance of specific trades such as furniture and household equipment and F&B could prop up FY23F’s RSV and consequently, tenant sentiment.
  • Similar to the current 2023-24 GST hike, the GST hike of 2003-04 was announced 8 months prior and was implemented in two stages – a 1% GST increase on 1 Jan 2003 and a second 1% increase on 1 Jan 2004. We noted a y-o-y uptick in RSV in the months leading up to the effective date of GST increase in 2003, likely due to accelerated purchases, followed by negative RSV growth in the subsequent 11 months due to the prior year’s high base effect, before the resumption of single-digit y-o-y growth.
  • Nonetheless, we think that 2023F’s tenant sales will be supported by
    1. an estimated 12- 16mil international visitor arrivals in 2023F (vs. 2022’s 6mil international visitor arrivals),
    2. the delivery of backlogged build-to-order (BTO) flats and private residential units in 2023 as construction levels pick up post-COVID-19 and
    3. pick-up in F&B sales as more workers return to the office and corporate and social gatherings/events normalise.
  • The National Immigration Administration of China announced on 28 Dec 2022 that starting 8 Jan 2023, it will resume accepting and approving Chinese citizens' applications for ordinary passports for the purposes of tourism and visiting friends abroad. It will also resume issuing approval for tourists and businesspeople to visit Hong Kong, a Chinese territory with its own border controls.
  • Amongst the commercial S-REITs under our coverage, we think that Mapletree Pan Asia Commercial Trust (SGX:N2IU)
    would be the greatest beneficiary of China’s reopening given that ~45% of FY23/24 NPI is derived from Festival Walk in Hong Kong and VivoCity in Singapore.
  • Other beneficiaries include Paragon REIT (SGX:SK6U), Lendlease REIT (SGX:JYEU) and CapitaLand Integrated Commercial Trust (SGX:C38U), which derive ~39%, 28% and 25% of their respective FY23/24F NPIs from downtown malls frequented by tourists.
  • Reiterate sector OVERWEIGHT.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | 2023-01-10

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