Singapore REITs - OCBC Investment 2023-05-22: Fed Pause On Track

• The recently concluded 1Q23 earnings season highlighted obvious headwinds from higher borrowing costs and foreign currency translation losses, thereby resulting in negative y-o-y distribution per unit (DPU) growth for several of the S-REITs under coverage. However, the weakness in the sector was not entirely unexpected.
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• Based on Refinitiv consensus projections, FY-1 and FY-2 DPU forecasts were cut by 3.1% and 2.7% on average, respectively, compared to end-2022 levels. Our forecasts are 1.6% (average) and 1.2% (median) below the street for FY-1, and 1.1% (average) and 2.0% (median) lower than the street for FY-2. While we see further cuts to consensus’ estimates, we believe the earnings downgrade cycle is nearing the end, as rates have also showed signs of stabilising.
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• During the most recent reporting period, we saw an slight deterioration in credit metrics for the S-REITs under our coverage.
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Above is an excerpt from a report by OCBC Investment Research.
Clients of OCBC Securities may be the first to access the full PDF report @ https://www.iocbc.com/.

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