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SINGAPORE (July 14): Daiwa Capital Markets is keeping its “positive” rating on Singapore Real Estate Investment Trusts (S-REITs), but has “low expectations” ahead of announcement of 2Q16 results by the 14 S-REITs under its coverage starting Friday.
“We view the upcoming results season with some trepidation because the S-REITs’ operating performance for 2Q16 looks more vulnerable than for any quarter in recent memory because all property sub-segments in Singapore are facing weakening rental demand and declining spot rents,” says Daiwa analyst David Lum in a Tuesday report.
“Without exception, we expect extremely low or negative year-on-year growth in DPUs, with all S-REITs, even those regarded as defensive, facing a significant risk of DPU or earnings disappointment,” Lum adds, even though he expects most S-REITs to report positive y-o-y growth in revenue and net property income (NPI).
Bright spots amid Daiwa’s gloomy S-REIT outlook the smaller-cap, high-yield names which it says presents the “best opportunities”.
Daiwa’s preferred picks include Frasers Commercial Trust (FCOT), Starhill Global REIT (SGREIT), CDL Hospitality Trusts (CDREIT), Ascott Residence Trust (ART), and Cambridge Industrial Trust (CREIT).
“Our view on S-REITs is probably slightly more cautious,” says Lum. “We are wary that unit prices could be getting too far ahead of the fundamentals of the physical markets, which could worsen further.” — theedgemarkets.com
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