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Singapore REITs: Rising yields negate improving industry fundamentals
Looking at the recently concluded 1QCY18 results season, 19 out of the 23 S-REITs under our coverage reported results which met our expectations, while four missed. The average DPU growth came in at -2.6% on a YoY basis. Looking ahead, we are projecting stable DPU growth (market-cap weighted) of 1.9% for the current financial year and 1.6% for the next financial year. One of the key trends which emerged since late last year was the penetration of S-REITs into new geographical markets. Another key sector event was the agreement reached between the REIT managers of ESR-REIT and Viva Industrial Trust on their proposed merger. This could set the stage for further consolidation in the industry in the future. Despite the S-REITs sector’s share price correction YTD, valuations are still stretched, in our view. Maintain NEUTRAL, with a selective stock picking approach remaining key at this juncture. Our preferred picks are Frasers Logistics & Industrial Trust [BUY; FV: S$1.21]; Frasers Centrepoint Trust [BUY; FV: S$2.49]; and Mapletree Greater China Commercial Trust [BUY; FV: S$1.42]. |
BreadTalk A Year Of New Ventures
Maintain NEUTRAL with TP of SGD0.93, 1% upside, as we adjust for the share split on 17 May. Last night, BreadTalk announced a JV with Pindao, a tea beverage company from China. The JV will operate and manage Pindao’s tea beverage brands, Nayuki and Tai Gai, in Singapore and Thailand. We are positive on the longer-term prospects for some of BreadTalk’s new ventures, but note that the surge in new JVs and expected new store openings in 2H18 would result in start-up costs dragging bottomline growth this year.
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Check out our compilation of Target Prices
