- We recommend investors adopt a slightly more aggressive stance, with a balanced mix of high-quality industrial REITs for stable yields, and office REITs (which we believe are undervalued) and selective overseas REITs to ride on the rebound from the turn in the interest rate cycle.
Recent events tilted the balance firmly in favour of S-REITs
- - Read this at SGinvestors.io -
- While there will be a lag effect (12-18 months) for positive impacts to flow through to bottomlines, we expect decisive shifts in investor sentiment and early positionings to ride the upcycle.
- Key risks: Faltering economic growth and adverse effects from rising Middle East tensions.
Past cycles have shown sharp rallies during turning points in interest rates.
- - Read this at SGinvestors.io -
- With S-REITs share prices currently trading at ~30% below 2021’s peak we see room for the recent rally to continue well into 4Q and 2025.
- Valuation-wise, the sector is trading at 0.9x P/B (-1 standard deviation below mean) with a yield spread of ~335bps, which is considerably higher than global peers.
2Q24 summary & outlook.
- Read more at SGinvestors.io.
Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2024-08-28
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