The quarterly review of the Straits Times Index (STI) in March leads to the inclusion of Frasers Centrepoint Trust (FCT) in the index, effective as of March 18, 2024. This is the first time a pure play Singapore revenue stock was added to the STI since CapitaLand Commercial Trust (which has since merged with CapitaLand Mall Trust) was added 8 years ago.
Frasers Centrepoint Trust's inclusion is expected to take the STI's REIT Sector weight back to ~13% from ~12% at present, and the number of STI REITs back to 7, following Keppel DC REIT leaving the STI in June 2023. The REIT Sector remains the 3rd biggest Sector weight in the STI after Banks and Industrials. Based on trading turnover rankings in early 2024, the 7 REITs also stand to contribute ~18% of the STI's average daily turnover.
The number of retail malls in the portfolio of Frasers Centrepoint Trust has tripled since it listed in July 2006 with an initial unit price of S$1.03. It's unit price ended 12 March at S$2.19, and according to Bloomberg it has paid more than S$1.80 per unit in distributions since IPO, bringing its annualised total return since listing to 10.3%.
The STI has kept pace with regional benchmarks since the end of 2019, and as a country benchmark maintains one the highest indicative dividend yields across the globe.
The indicative weights of all 30 current STI constituents as of the end of 2023 are available here. At the end of last year, the STI included six S-REITs, with a combined weightage of 12.8%.
The subsequent 10 weeks have seen consensus expectations for an FOMC Fed Funds Rate cut deferred from the end of 1Q24, to the end of 2Q24. Impacting the outlook for financing costs, this has seen the six STI REITs average 9.4% declines in unit prices post the indicative 29 Dec 2023 STI weightages. At the same time, the remaining 23 constituents averaged less declines, with the heavyweight Bank Sector averaging a 0.1% price gain. This means the current indicative weight of the six S-REITs in the STI is currently closer to 11.9%.
However, the inclusion of Frasers Centrepoint Trust (FCT) with an approximate weight of 0.8%, will take the S-REIT Sector weightage in the STI back to the vicinity of 12.7%.
The indicative S-REIT weights within the STI, effective 18 March (based on 12 March prices) are tabled below.
| STI S-REIT Constituents | SGX Code |
STI Weight (End-2023) |
YTD Price Change % |
Indicative STI Weight (18-Mar-2024) |
Unit Price (12-Mar-2024) |
Refinitiv Consensus Estimate Target Price (12-Mar-2024) |
P/B (x) | 5-Year Average P/B (x) |
5-Year Annualised Total Return % |
Distribution Yield % |
|---|---|---|---|---|---|---|---|---|---|---|
| CapitaLand Integrated Commercial Trust | C38U | 3.5% | -4.9 | 3.4% | $1.96 | $2.166 | 0.92 | 1.03 | 0.7 | 5.5 |
| CapitaLand Ascendas REIT | A17U | 3.6% | -10.6 | 3.3% | $2.71 | $3.139 | 1.17 | 1.27 | 5.1 | 5.5 |
| Mapletree Logistics Trust | M44U | 1.9% | -15.5 | 1.6% | $1.47 | $1.792 | 0.97 | 1.26 | 5.6 | 6.1 |
| Mapletree Industrial Trust | ME8U | 1.6% | -8.4 | 1.5% | $2.30 | $2.556 | 1.18 | 1.45 | 7.8 | 5.9 |
| Mapletree Pan Asia Commercial Trust | N2IU | 1.2% | -15.9 | 1.0% | $1.32 | $1.617 | 0.74 | 1.11 | -1.3 | 6.6 |
| Frasers Logistics & Commercial Trust | BUOU | 1.1% | -9.6 | 1.0% | $1.04 | $1.298 | 0.89 | 1.17 | 3.5 | 6.8 |
| Frasers Centrepoint Trust | J69U | N/A | -3.1 | 0.8% | $2.19 | $2.435 | 0.94 | 1.05 | 4.6 | 5.6 |
| Total | 12.8% | 12.7% | ||||||||
| Average | -9.7 | 3.7 | 6.0 |
All Data as of 12 March 2024 except for Distribution Yields as of 29 Feb 2024.
Note: Refinitiv Consensus Estimate Target Price which represent the average of individual estimates provided by analysts covering the stock and estimates typically represent an analyst's opinion of the stock performance over the next 18 months.
Note: Indicative STI weights can be subject to change between now and 18 March.
Source: SGX, Refinitiv, Bloomberg.
As detailed in the table above, the majority of the STI REITs have generated positive total returns over the past five years. All seven of the REITs tabled above are also trading at discounts to their Refinitiv Consensus Estimate Target Price (RCETP), with Frasers Logistics & Commercial Trust, Mapletree Pan Asia Commercial Trust and Mapletree Logistics Trust unit prices closing 12 March at the biggest discount to their respective RCETP. These RCETPs are updated regularly on the SGX Stock Screener.
All the above tabled REITs are also trading at Price-to-book (P/B) ratios below their respective 5-year average P/B ratios. Note, however multiple REITs have pursued strategic mergers and acquisitions over the five year period, impacting their comparative book values. For instance, Mapletree Pan Asia Commercial Trust was formed in August 2022 after Mapletree Commercial Trust merged with Mapletree North Asia Commercial Trust.
Incoming STI constituent Frasers Centrepoint Trust (FCT) has also been active on the acquisition and divestment front since its FY18. It recently increased its initial 25.5% acquisition of NEX in February 2023, to a 50% interest. A private placement of S$200 million helped to partially fund the increased interest. NEX is seen as strategic fit to FCT's prime suburban retail portfolio, and is also the largest suburban mall in the northeast of Singapore by Net Lettable Area. The number of retail malls in the FCT portfolio have tripled since it listed in July 2006, with the initial unit price of S$1.03. It units ended 12 March at S$2.19, and according to Bloomberg has paid more than S$1.80 per unit in distributions since IPO.
