Singapore REITs - Maybank Research 2023-05-09: Rates Pause, REITs Rally? Selective Opportunities Ahead

Singapore REITs - Rates Pause, REITs Rally? Selective Opportunities Ahead

Singapore REITs - Maybank IB Research  | SGinvestors.ioCapitaLand Integrated Commercial Trust (SGX:C38U) MAPLETREE PANASIA COM TRUST (SGX:N2IU) MAPLETREE LOGISTICS TRUST (SGX:M44U) CDL HOSPITALITY TRUSTS (SGX:J85)
  • The March quarter saw S-REITs' better portfolio performance more than offset by higher funding and operating costs as well as adverse FX moves. Capital values were flat to down and managers talked up recycling and opportunistic divestments.
  • We believe rate pause may bring forth optimism for Singapore REITs but sustainable re-rating will only come from better growth or rate cuts. That said, there is room for rotation and selective opportunities in a range-bound sector outlook.
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  • Mapletree Pan Asia Commercial Trust (SGX:N2IU),
  • Mapletree Logistics Trust (SGX:M44U),
  • CDL Hospitality Trusts (SGX:J85),
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Higher funding costs erode performance, capital recycling gains prominence

  • The quarter saw coverage REITs reporting relatively resilient operating metrics. Average occupancy rose 100bps y-o-y while positive reversions ranged from mid-single digit to high teens. However, this was more than offset by higher funding and operating cost and FX losses. Funding cost rose by close to 100bps y-o-y. This, along with higher FX hedge ratios, led to a decline in interest coverage ratios (ICR). Hospitality bucked the trend with better operating performance.
  • Barring hospitality, DPUs and NAVs fell y-o-y except Mapletree Logistics Trust, AIMS APAC REIT while Frasers Centrepoint Trust fell 0.1% y-o-y. With a difficult acquisition environment, REIT managers are more focused on sweating the assets or recycling capital. Outright divestments to de-gear may also be a possibility.
  • Our sample analysis of three commercial S-REITs – CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, Suntec REIT – suggests that 4-29% of AUM is yielding below current cost of debt. While such opportunities exist, REIT managers are likely to take a more holistic view of the future earnings and valuation potential of an asset and the portfolio before deciding to divest or recycle the capital.

Nascent optimism as rates pause, solid ground from better growth or pivot to rate cuts

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Above is the excerpt from report by Maybank Research.
Clients of Maybank Securities may be the first to access the full report in PDF @

Krishna Guha Maybank Research | 2023-05-09

Read More Analysis On Singapore REITs (S-REITs):
Analyst Reports on Singapore REIT Sector

Check Out Also The Summary Of:
S-REIT Share Price Performance
S-REIT Target Prices & Ratings


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