Singapore REITs Monthly - Phillip Securities 2023-10-16: Repositioning For The Fed Pause

• S-REITs Index fell 3.2% m-o-m, with the bulk of the losses coming in the last 2 weeks after the FOMC held interest rates unchanged and indicated that rates will likely remain higher for longer.
• S-REITs share prices are now trading at a forward dividend yield of ~6.4%, 0.5 standard deviation above the mean of 6.1% and a P/NAV of 0.86x, 2.0 standard deviation below the mean of 1.03x. We think this could signal an attractive opportunity to reposition into S-REITs for the eventual interest rate pause and decline.
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• Top picks are CapitaLand Ascott Trust (SGX:HMN) and Frasers Centrepoint Trust (SGX:J69U).

S-REIT sector round-up

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• EC World REIT (SGX:BWCU) has been suspended from trading since 31 Aug for not meeting its financing obligations. It has also updated that it will be unable to make distributions to unitholders and that the payment will be deferred to a later date when it has sufficient free cash. ECW Group are owed more than RMB148.8mil in overdue rent by its sponsor Forchn Holdings Group.
• CapitaLand Ascott Trust's share price has experienced a decline of ~10% from its preferential offering price of S$1.025, which was undersubscribed at 64.7%, including excess rights. The joint lead managers, bookrunners and underwriters subscribed for the remaining portion that was not subscribed. Together with the S$200mil raised through the private placement at S$1.043, gross proceeds of S$303.1mil was raised from this equity fundraising – 56.1% of which will be used to fund the ~1.8% DPU accretive acquisition of S$530.8mil in assets. Considering CapitaLand Ascott Trust's share price’s post-issue performance in this weak market, we believe REITs will hold off any equity fund-raising plans in the foreseeable future, unless as a last resort to reduce leverage, or a highly promising acquisition opportunity arises.

Retail sector

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Darren Chan Phillip Securities Research | https://www.stocksbnb.com/ 2023-10-16 SGinvestors.io

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