- Conducive macro data points and sustained underperformance versus the STI and regional peers provide scope for outperformance for the S-REIT index, in our view. However, fundamentals still point to a decline in distribution without sustained rate cuts, and downside pressure on NAVs from revaluation losses.
- - Read this at SGinvestors.io -
Room for rotation into the sector
- US CPI for June fell 0.1% m-o-m, the first m-o-m decline since May 2020. The “core” CPI was up 0.1% m-o-m, the smallest increase since August 2021. A few more of such data points will build the case for a lower discount rate for the S-REIT sector.
- Other favourable data points are a broadening of growth for Singapore, resurfacing of loan demand and increased bond issuances by the sector.
- Coupled with the fact that the S-REIT index is down ~9% year-to-date/12-month and underperforming the STI and other FTSE EPRA developed market indices (ex-HK), we think there is room for rotation into the sector.
- - Read this at SGinvestors.io -
- The S-REIT index is up ~6% from recent lows for a 7bps decline in yield. Comparatively, bottom-to-peak return in 4Q23 was 18% for a 70bps decline in yield.
- We estimate every 50bps fall in the risk-free rate raises fair value by 10% on average. Some consolidation may be due while waiting for further moderation of inflation and movement in credit spreads.
June preview – distribution still under pressure
- Read more at SGinvestors.io.
Above is the excerpt from report by Maybank Research.
Clients of Maybank Securities may be the first to access the full report in PDF @ https://www.maybanktrade.com.sg/.
Krishna Guha Maybank Research | Li Jialin Maybank Research | https://www.maybank-ke.com.sg/ 2024-07-15
Read More Analysis On Singapore REITs (S-REITs):
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