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Singapore REITs - Keeping our ears on the ground

Shared By Stock Fanatic on Friday, July 6, 2018 | 6.7.18

• Thai investors return to a “uniquely Singapore” 3-day tour

• Positive feedback on the ground; turning into a landlords' market soon

• Time to re-enter into selective REITs with growth

Thai investors return in force! On the back of a successful “familiarisation trip” a year ago, we hosted an even bigger group of institutional funds from Thailand to a 3-day tour of Singapore recently. Building on the past insights gained in previous meetings with various S-REIT managers, the investors this time, sought to explore new names and also re-visited a selected group of S-REIT managers for an update on the market outlook. Our site visits included a visit to key properties across the island (currently owned by S-REITs and pipeline assets). We also met with SingPost to gain a deeper understanding of their distribution business (logistics and mail), providing us insights into what happens in a warehouse.

Positive feedback loop from “the ground”; market turning into a landlords’ market soon. The on-the-ground feel we got in our property visits was generally positive. Through talking to the property and REIT managers, operationally, most are seeing an uptick in tenant demand for most sectors (office, industrial and hotels) and have increased ability to price up. Even for the retail sector, which is widely perceived to be the most “challenged” given the threat of e-commerce, selective malls continue to see good demand for space and tenant sales had been inching higher. This implies that the worst for retail could be over. With property market dynamics pointing towards lower supply risk across most real estate subsectors over 2018- 2019, we believe that, with the economic environment remaining stable, we will see a landlords’ market over the next few years.

SingPost - Technical Analysis
Daily Chart
Timing the re-entry into REITs selectively. Timing of the visits was apt, especially when the S-REITs' (FSTREI) share prices have fallen of late (9% YTD vs 5% YTD drop in the Straits Times Index), weakened by fund outflows on the back of tightening yield spreads. With rising 10-year bond rates (UST up 45 bps YTD and SG 10-year up 50 bps YTD) which are expected to hit 2.7% by end 2018 and 2.9% by end 2019, according to DBS economists, we believe that share prices will likely remain volatile. Therefore, our strategy will be to pick winners among subsectors, with a preference for S-REITs with an ability to continue tapping a potent mix of organic and inorganic opportunities.

Source : DBS Group Research
(Read Report)

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Posted on Friday, July 6, 2018 | 6.7.18
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