In the months of Jan, Feb and March 2019, Singapore REITs have seen net institutional inflows of S$82.7 million, S$42.7 million and S$114.2 million respectively, according to SGX data.
Analysts have noted revived investor interest in S-REITs since late last year, driven by a flight to safety amidst the uncertain outlook for US-Sino trade negotiations, the hunt for higher yields, and as global equity markets remained volatile. Recent dovish signals from the US Federal Reserve suggesting a pause in the rate hike cycle has also buoyed sentiment on the sector.
In the YTD, the five best-performing S-REITs were: Sasseur REIT (25.0%), Capitaland Retail China Trust (19.4%), Keppel-KBS US REIT (18.2%), Mapletree Logistics Trust (17.6%), and Mapletree North Asia Commercial Trust (17.6%). They have averaged a total return of 19.6% in the YTD, bringing their 1Y total return to 11.0%.
There are 34 Real Estate Investment Trusts (REITs), 5 stapled trusts and 3 property trusts listed on SGX. The sector has a combined market capitalisation of nearly S$100 billion, with Retail, Industrial and Office REITs making up the largest segments.
Investor Participation in S-REITs
Since late last year, analysts have noted revived investor interest in S-REITs, driven by a flight to safety amidst the uncertain outlook for US-Sino trade negotiations, the hunt for higher yields, and as global equity markets remain volatile.
In the months of January, February and March, Singapore REITs have seen net institutional inflows of S$82.7 million, S$42.7 million, and S$114.2 million respectively, which brings the sector’s inflows to S$239.6 million for the first quarter of 2019, SGX data showed. S-REITs was also the top net buy sector in January.
Sector Fundamentals and Outlook
The relatively strong fundamentals of S-REITs – about 80% of the trusts across various segments have hedged at least 70% of their debt with fixed rates, while all are required by regulation to have a maximum gearing ratio of 45% – should also help mitigate the impact of the higher interest-rate environment.
Further boosting the sector were dovish signals from the US Federal Reserve during its March 20 policy-setting meeting, which represented a pivot from its policy stance late last year. Fed officials now expect not to raise rates at all this year, after lifting interest rates four times over the course of 2018. Most officials also anticipate one interest rate increase in 2020 and none in 2021, compared to December, when Fed officials said they expected two rate hikes this year and another in 2020.
Best Performers in the YTD
In the 2019 year-to-date, the 20 best-performing S-REITs – which have a combined market capitalisation of more than S$60 billion – have averaged a total return of 15.7%. This brings their one-year, three-year and five-year total returns to 10.6%, 37.9%, and 51.7% respectively. These 20 trusts have also averaged a price-to-book ratio of 1.0 and a dividend yield of 6.1%. Industrial and office REITs account for the majority of the best performers, with the remainder being hospitality and retail REITs.
Among the 20, the 5 best performers in the YTD were: Sasseur REIT (25.0%), Capitaland Retail China Trust (19.4%), Keppel-KBS US REIT (18.2%), Mapletree Logistics Trust (17.6%), and Mapletree North Asia Commercial Trust (17.6%). These 5 trusts have averaged a total return of 19.6% in the YTD, bringing their one-year total return to 11.0%.
In a S-REITs sector report published on 18 March, RHB Research noted that its preferred sub-sectors were the industrial and hospitality REITs, while investors should buy retail and office REITS on dips. The brokerage added that the supply of industrial space is slowing, even as demand remains relatively stable, while demand-supply conditions in the hospitality sector are ripe for a multi-year recovery.
The table below details the 20 best-performing S-REITs on SGX, sorted by YTD total returns.
|CAPITALAND RETAIL CHINA TRUST||AU8U||1,558||19.4||6.5||32.8||56.3||1.0||6.5|
|KEPPEL-KBS US REIT||CMOU||779||18.2||-5.7||NA||NA||0.9||7.2|
|MAPLETREE LOGISTICS TRUST||M44U||5,252||17.6||26.2||78.1||93.8||1.2||5.4|
|MAPLETREE NORTH ASIA COMMERCIAL TRUST||RW0U||4,221||17.6||24.4||69.6||128.8||1.0||7.2|
|FAR EAST HOSPITALITY TRUST||Q5T||1,326||17.5||7.2||33.5||17.6||0.8||5.7|
|MAPLETREE COMMERCIAL TRUST||N2IU||5,519||16.1||27.2||60.2||109.2||1.3||4.8|
|OUE COMMERCIAL REIT||TS0U||1,472||16.0||-11.2||12.5||15.1||0.7||6.7|
|CDL HOSPITALITY TRUSTS||J85||2,003||15.1||2.2||57.6||41.1||1.1||5.7|
|MANULIFE US REIT||BTOU||1,503||14.4||2.5||NA||NA||1.0||6.6|
|ASCENDAS HOSPITALITY TRUST||Q1P||999||14.3||16.3||46.5||74.0||0.9||6.8|
|KEPPEL DC REIT||AJBU||2,028||13.9||9.7||68.6||NA||1.4||4.9|
|CAPITALAND COMMERCIAL TRUST||C61U||7,273||13.5||11.2||57.1||74.3||1.1||4.5|
|ASCOTT RESIDENCE TRUST||A68U||2,564||13.0||11.2||38.1||42.3||0.8||6.1|
|FRASERS LOGISTICS & INDUSTRIAL TRUST||BUOU||2,369||12.6||14.8||NA||NA||1.3||5.7|
|MAPLETREE INDUSTRIAL TRUST||ME8U||4,265||12.6||10.8||59.7||115.5||1.4||5.7|
|EC WORLD REIT||BWCU||602||12.4||11.9||NA||NA||0.9||8.1|