- With a close correlation between interest rates and REITs, we remain confident that S-REITs share price already saw their lows back in July 24 and should see strength ahead.
- Interest rates impact peaked; sensitivity analysis indicate a 100bps cut in interest rates will drive DPU surprise by up to 2.4% on average.
- - Read this at SGinvestors.io -
Interest rates: Tailwinds at last?
Interest rate cuts to have a more immediate impact for REITs with a lower proportion of loans hedged to fixed rates.
- The protracted rate cuts will have an immediate impact on floating rates for REITs, with a more pronounced effect on those that had more than 20% of their loans left unhedged. Assuming the three-month swap rate falls by 1ppt, S-REITs could see average financing cost decrease by ~30 bps to ~3.6% vs the current average of ~3.9%. The top beneficiaries of this reduction are likely to be CDL Hospitality Trusts (SGX:J85), and Far East Hospitality Trust (SGX:Q5T).
- - Read this at SGinvestors.io -
Savings on floating rates outweigh increase due to refinancing.
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Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Derek TAN DBS Group Research | Dale LAI DBS Research | Geraldine WONG DBS Research | https://www.dbs.com/insightsdirect/ 2024-08-22
Read More Analysis On Singapore REITs (S-REITs):
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