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Missed it the other day when it dropped to $2.33. FCT is a pure retail reits with all it' s asset in Singapore. With the relaxation on 29th March, it will be packed with more diners and movie goers at all their heartland mall.
Could it be that this is a pure retail REIT?
ttworld ( Date: 25-Mar-2022 13:46) Posted:
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but other reits are nt spiking at this rate.
PiRPiR ( Date: 25-Mar-2022 13:45) Posted:
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Could be due to yesterday's news on 29 March, SG relaxing Covid-19 rules
ttworld ( Date: 25-Mar-2022 13:26) Posted:
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Anyone can shed a light on the price jump today? +8c 3.4%
Quite a huge jump
Quite a huge jump
actually outlook is not improving.
it is deterioratining.
it is deterioratining.
Analysts stay positive on Frasers Centrepoint Trust in light of ' improving outlook'
Analysts from CGS-CIMB and Maybank Securities are optimistic about Frasers Centrepoint Trust (FCT) as the REIT' s portfolio saw resilient operating metrics &ndash including its portfolio occupancy &ndash during its business update for the 1QFY2022 ended December.CGS-CIMB analysts Eing Kar Mei and Lock Mun Yee have maintained ' add' on FCT, with a lower target price of $2.73 from $2.92, as they raise their cost of equity (COE) assumption to reflect the rising rate environment.
During the REIT' s management briefing, Eing and Lock note that management sounded " more optimistic" as Singapore moves towards normalisation.
" FCT expects shopper traffic and tenant sales to improve further as more workers return to the office. Leasing negotiation and rental reversions have been encouraging so far," note the analysts.
" Wellness, health and jewellery trade categories continued to do well in 1QFY2022 while sales of home furnishing, IT, electronics and supermarket slowed down due to the high base last year," they add. " Space demand from F& B operators was strong and they generally are surviving well despite the dine-in limits, as they pivot towards the omnichannel platform."
During the quarter, the REIT saw good leasing momentum, while its malls' strategic locations underpin stable income.
Of the nine retail malls in FCT' s portfolio, six of them demonstrated resilient performance with stable occupancies (-0.1% pts to +1% pts q-o-q) in 1QFY2022.
" Century Square, Changi City Point (CCP) and White Sands have relatively weaker occupancies (-0.7% pts to -2.9% pts q-o-q), partly due to higher renewal cycle concentration after asset enhancement initiatives (AEI) at Century Square while CCP was affected by the lack of office crowd," say the analysts. " FCT is proactively managing these malls, focusing on tenant re-mixing, space re-sizing and spreading out lease expiries.
On the vacated anchor space at Central Plaza, CGS-CIMB' s Eing and Lock estimate that the reconfigured space should improve rental yield once the space is leased out, as anchor tenants usually pay lower rental rates.
In addition, cinema operator Filmgarde will be moving out of FCT' s Century Square in 2HFY2022 but the impact should be minimal as cinema operators account for less than 2% of FCT' s total income, add the analysts.
To this end, Eing and Lock say they continue to " like" FCT for its " pure exposure to suburban malls" , which they believe should enable it to outperform peers.
As of 1QFY2022, 54% of FCT' s debt is hedged to fixed interest rates. " In view of the rising interest rate environment, FCT intends to further increase its fixed rate debt proportion," Eing and Lock say.
" Based on its internal estimates, if FCT were to hedge the remaining debt into fixed rate, every 10 basis point hike in interest rates would reduce its distribution per unit (DPU) by 0.5%," the analysts add.
Maybank analyst Chua Su Tye has also kept ' buy' rating on FCT with an unchanged target price of $2.90. " We continue to see suburban malls leading the retail sector recovery in Singapore' s long reopening phase, with stable operating metrics for FCT' s more sizeable suburban malls portfolio underpinning its DPU visibility," Chua explains.
Chua notes that FCT' s balance sheet remains strong with gearing at 34.5% (from 33.3% at end-Sep 2021) and interest cover of 5.8 times, which suggests a $1.5 billion debt headroom (at 45% limit). " Management expects to increase its proportion of fixed rate borrowings from 54% currently, ahead of rising interest rates," he adds.
" While we expect FCT will look to boost yields on its enlarged portfolio in the near term, we see room for assets under management (AUM) growth from its sponsor right of first refusal (ROFR)' s pipeline assets, which should provide upside to DPUs," Chua says.
To this end, Chua estimates FCT' s DPU to recover by 38% y-o-y in FY2021 after rental rebates were recognised in FY2020.
' Resilient' suburban retail malls lift FCT' s tenants' sales above pre-Covid levels
EVOLVING shopping trends amid the pandemic has lifted sales by tenants at Frasers Centrepoint Trust' s (FCT) Frasers Cpt Tr: J69U -0.44% portfolio of suburban retail malls to above pre-Covid levels in its first quarter ended December.
Portfolio tenants' sales rose 2 percentage points to draw level with pre-Covid levels in October 2021, before edging 1 per cent higher in November. With the relaxation of Covid-19 measures in Singapore in December, tenants' sales rose 6 per cent above 2019 levels.
However, as at December 2021, shopper traffic at its malls were still just two-thirds of pre-Covid levels.
" Especially in the month of December, we do see improvement year on year," said Richard Ng, chief executive officer of the real estate investment trust (Reit) manager, in a briefing on Wednesday (Jan 26) following its Q1 business update.
One of the reasons tenants' sales has increased faster than shopper traffic, he explained, is because of a shift towards more purposeful visits to the malls.
" (Pre-Covid), you have a lot of traffic, a lot of people going to the mall all the time, but not 100 per cent of them may be shopping or may be spending the same amount of money," Ng said. " Now we have more measured traffic (but) you can see that people are going to the mall more purposefully. They go there, they either eat (or) they go there to shop. They have something in mind, and they go there and do it."
" They may go less frequently, but each time they go, they may be buying more," he added. " The other thing is&hellip our malls provide essential services - your groceries, your food, your health and wellness services, the tuition centres - so that is the reason why our sales continue to hold up despite a drop in shopper traffic."
The raising of the capacity limit for dining in at food establishments to 5 individuals towards the end of 2021 also provided a boost to FCT' s food and beverage (F& B) tenants.
The F& B sector accounted for 37.5 per cent of the Reit' s gross rental income as at Dec 31, 2021.
However, Ng pointed out that some F& B tenants are doing better because they have adapted to the restrictions.
" In the past, the F& B operators depended mainly on physical sit-downs. So you could have 1 turn, 2 turns, maybe maximum 3 turns during lunch or dinner. But today it' s different because there are various platforms - you could do delivery, you could do click-and-collect," Ng said. " You' ve seen even some of the hotpot guys during the restriction, they started to offer bento sets. They change, they adapt, and they recognise that they need to expand their business beyond just the physical boundary space."
" We see that as a big plus because the space becomes more productive, the retailers are more sustainable, they generate better revenue. We also benefit from the additional sales that go into the online platform," he added. " Our consumers benefit because now they can choose - whether they want to sit down, or if it' s full, they can just take away, or they can actually order and have it delivered. So it' s a win-win-win for all."
FCT after market close on Jan 25 reported that committed occupancy for the retail portfolio was stable at 97.2 per cent in Q1 FY2022 ended December.
The Reit manager said the trust showed a " resilient performance" in Q1 despite the continuing impact from the Covid-19 pandemic, with demand for retail spaces within FCT' s well-located and dominant suburban retail malls remaining healthy.
Looking forward, Ng said the Reit manager is starting to turn its attention to retaining sustainable tenants that are doing well, as well as attracting new brand names to give " a new flavour" to the malls.
Meanwhile, the Reit manager said it remains on the lookout for " opportunistic" acquisitions.
" We are looking in the market (and) our teams are having conversations with owners of malls across Singapore. That is something that we continue to cast our eye on," Ng said.
Responding to a question on whether FCT would be interested in acquiring the south wing of Northpoint City mall, Ng said that it was " a question of when (sponsor) Frasers Property intends to sell the asset" .
" It definitely makes a lot of sense for us to have that asset as well because we already own the north wing," he added.
As at end-December, FCT' s gearing level stood at 34.5 per cent, with interest cover at 5.81 times and average debt maturity at 2.28 years. The trust said the current gearing level provides ample debt headroom to support growth.
" We are ready because our headroom is there, we have reconstituted our assets to make sure that we can take in assets and strengthen our portfolio. From that perspective, we' re always looking out for opportunities," Ng said.
Not only skip, coffee shop uncles told me from this year they will pay only twice yearly for dpu..... until the whole pandemic situation is over, then they see how.... true story.
john_ric ( Date: 26-Jan-2022 13:18) Posted:
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no div is mentioned, skip again ?
Lobster ( Date: 25-Jan-2022 20:11) Posted:
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FCT&rsquo s 1QFY22 tenant sales recovered to pre-Covid 19 levels
On a portfolio basis, FCT&rsquo s occupancy remained stable at 97.2% in 1QFY22. Retail malls&rsquo occupancy rates were relatively stable qoq (-3% pts to +1% pts) but its only office asset, Central Plaza, saw a drop of 20% pts qoq to 71.1%, due to the exit of an anchor tenant. Although shopper traffic in 1QFY22 remained at 54-66% of pre-Covid 19 levels, tenant sales tracked close to pre-Covid 19 levels in Oct and Nov 2021 and exceeded pre-Covid 19 levels in Dec 2021. Leasing traction in 1QFY22 was good with only 22.8% (from 35.6% as at 4QFY21) by gross rental income to be renewed in FY22. We expect easing rental pressure as tenants adapt to the new norm. FCT&rsquo s expansion focus still remains on Singapore suburban retail assets. Its healthy gearing of 34.5% will support inorganic growth. We expect FCT to outperform its peers in operating metrics given its pure focus on suburban malls. Reiterate Add with an unchanged DDM-based TP of S$2.92.
On a portfolio basis, FCT&rsquo s occupancy remained stable at 97.2% in 1QFY22. Retail malls&rsquo occupancy rates were relatively stable qoq (-3% pts to +1% pts) but its only office asset, Central Plaza, saw a drop of 20% pts qoq to 71.1%, due to the exit of an anchor tenant. Although shopper traffic in 1QFY22 remained at 54-66% of pre-Covid 19 levels, tenant sales tracked close to pre-Covid 19 levels in Oct and Nov 2021 and exceeded pre-Covid 19 levels in Dec 2021. Leasing traction in 1QFY22 was good with only 22.8% (from 35.6% as at 4QFY21) by gross rental income to be renewed in FY22. We expect easing rental pressure as tenants adapt to the new norm. FCT&rsquo s expansion focus still remains on Singapore suburban retail assets. Its healthy gearing of 34.5% will support inorganic growth. We expect FCT to outperform its peers in operating metrics given its pure focus on suburban malls. Reiterate Add with an unchanged DDM-based TP of S$2.92.
Frasers Centrepoint Trust' s committed retail portfolio occupancy at 97.2% in Q1
THE manager of Frasers Centrepoint Trust Frasers Cpt Tr: J69U -0.44% (FCT) on Tuesday (Jan 25) reported that committed occupancy for the retail portfolio was stable at 97.2 per cent in Q1 FY2022 ended December, on the back of new retail concepts and brands introduced to refresh shopper experience and ensure sustainable trading.
In a business update after market close, FCT' s manager said the trust showed a " resilient performance" despite the continuing impact from the Covid-19 pandemic. There was also still healthy demand for retail spaces within FCT' s well-located and dominant suburban retail malls in Q1.
The manager attributed a 20.1 percentage point decline in occupancy in Central Plaza from end-September to end-December last year primarily to the exit of an anchor tenant. The trust is exploring opportunities for the reconfiguration of anchor space.
Meanwhile, proactive leasing management at Century Square, Changi City Point and White Sands is focused partly on tenant re-mixing and space re-sizing, said the manager.
The trust also reported strong leasing traction over the quarter under review, with only 22.8 per cent of leases by gross rental income set to be renewed over the remainder of FY2022. FCT noted that shopper traffic also recovered in December last year, following the easing of safe management measures and restrictions.
Portfolio tenants' sales tracked close to pre-Covid levels in October and November last year, and exceeded pre-Covid levels in December, noted the manager. This was due to the easing of dining-in restrictions and seasonality over the last quarter of 2021. FCT noted that the performance across trade sectors remains uneven, but the cessation of work from home as the default mode from January this year is expected to gradually increase shopper traffic.
FCT' s gearing level as at end-December stood at 34.5 per cent, up slightly from 33.3 per cent as at end-September last year. The trust said the current gearing level provides ample debt headroom to support growth.
Looking ahead, FCT' s manager said the trust is well-positioned to ride the reopening of the economy, which augurs well for retail performance. However, the coronavirus pandemic continues to pose risks to FCT' s business and financial performance.
1Q 2022 business highlights
@ FCT retail portfolio committed occupancy stable at 97.2%.
@ Good leasing traction over the first quarter with only 22.8% (by GRI) to be renewed over the remainder of FY2022.
@ Shopper traffic recovered in December 2021, following the easing of SMM restrictions.
@ Portfolio tenants' sales tracked close to pre-COVID levels in October and November 2021 and exceeded pre- COVID levels in December 2021.
@ Gearing level at 34.5%, strong financial position with ample debt headroom to support growth.
@ FCT received 5-Star rating in the GRESB 2021 assessment.
@ FCT established its Sustainable Finance Framework on 17 Dec 2021
@ FCT retail portfolio committed occupancy stable at 97.2%.
@ Good leasing traction over the first quarter with only 22.8% (by GRI) to be renewed over the remainder of FY2022.
@ Shopper traffic recovered in December 2021, following the easing of SMM restrictions.
@ Portfolio tenants' sales tracked close to pre-COVID levels in October and November 2021 and exceeded pre- COVID levels in December 2021.
@ Gearing level at 34.5%, strong financial position with ample debt headroom to support growth.
@ FCT received 5-Star rating in the GRESB 2021 assessment.
@ FCT established its Sustainable Finance Framework on 17 Dec 2021
This once mighty REIT used to give 4 quarterly dpus, but last year they missed out on the 1Q dpus.
according to coffee lady, they might skip it again this year. If this is true, market may gets impatient with this once market darlings, below $2.10 might happen also...... results on 25 January by the way.
according to coffee lady, they might skip it again this year. If this is true, market may gets impatient with this once market darlings, below $2.10 might happen also...... results on 25 January by the way.
DBS' s favourite, but at the moment I think 2.20 can' t get.
vested . Pdyohwadfmb
vested . Pdyohwadfmb
Time to ' bask in the sun' as recovery trends continue for these S-REITs: DBS
While the emergence of Omicron viral strain is a setback for Singapore& rsquo s reopening plans, DBS Group Research analysts Derek Tan, Rachel Tan, Dale Lai and Geraldine Wong do not see domestic clampdown as a base case scenario for now.
" With the Singapore economy still strong, we see stronger domestic retail sales driving an approximately 5-6% rise in distribution per unit (DPUs) for retail and selected commercial S-REITs," write the analysts.
It is now " time to bask in the sun" with S-REITs, write the analysts in a Dec 14 note, highlighting Frasers Centrepoint Trust (FCT), Lendlease Global Commercial REIT(LREIT), CapitaLand Integrated Commercial Trust (CICT) and Suntec REIT (SUN).
Construction delays are pushing back office supply completions to 2023 or 2024, implying that rentals are likely to remain firm, say the analysts. " We like plays such as Ascott Residence Trust (ART) for its globally diversifed portfolio which will lead peers in a recovery."
DBS analysts project two-year DPU CAGR of some 8.0%. " The income disruption due to the Covid-19 pandemic in 2020 was unprecedented and some of its after-effects dragged our 2021 estimates down, especially in retail and hospitality sectors."
But portfolio net operating income (NOI) should gradually recover towards pre-Covid-19 levels, add the analysts. " As such, we project a robust 8.0% CAGR in DPUs over FY2022-2023F for the overall S-REITs sector, led by hospitality subsector and most of the subsectors achieving pre-Covid-19 levels in 2022."
" While the recent emergence of the Omicron variant has injected some uncertainty to the outlook in the near term, we believe that it will delay but not derail the current recovery trends," they add.
Retail and office S-REITs will see strong rebound in earnings, say the analysts, but DPUs will be marginally ahead of pre-Covid levels. " The retail S-REITs were hit in 2020-2021 due to rental rebates which we believe to be a one-off. Additional rebates to tenants should be minimal in 2022 as recovery in consumer sentiment brings retail sales close to pre-Covid-19 levels, while the arrival of tourists may push malls focused on discretionary shopping higher in 2022."
The focus in 2022 will be on the recovery in ancillary income sources such as improved foot traffic, eased restrictions on mall advertisements and promotions and restart of atrium sales, they add.
Office S-REITs are projected to deliver better performance brought about by acquisitions and tapering of rental rebates, say DBS analysts. " That said, with more companies adopting flexible working arrangements given improved productivity aided by technology, we see potential shadow space returning to the market in search of tenants."
Hotel S-REITs should mount a return of the & ldquo dark horse& rdquo in 2022, say analysts. " Hospitality-focused S-REITs should deliver strong growth in distributions as domestic travel momentum dials up with a boost from leisure travel given the establishment of vaccinated travel lanes (VTL). As such, we project a robust approximately 30% CAGR in DPUs over FY2022-2023F for this sub-sector."
Meanwhile, industrial S-REITs are a new economy play, say the analysts. " The industrial sector will remain in an oversupply situation in 2022 but we see the warehouse and business park space still remaining in a sweet spot. While organic growth prospects remain stable, acquisitions and development opportunities present upside to distributions as we expect acquisitions to continue."
" We believe that investors should take a balanced approach in their S-REIT picks for 2022, with a focus on growth and ability to deliver pre-pandemic DPUs. We also prefer S-REITs with pipelines which give them the ability to drive earnings surprises either through acquisitions or redevelopments."
Retail S-REITs on the rise for FY2022
DBS Group Research analysts Geraldine Wong and Derek Tan say that Singapore' s retail sector is at an inflection point, with more positives in 2022 as consumer confidence remains high and tourists return, with top picks Frasers Centrepoint Trust (FCT), CapitaLand Integrated Commercial Trust (CICT), Lendlease Global Comm REIT (LREIT) and CapitaLand China Trust (CLCT) for overseas retail maintained.According to Wong and Tan, retail value (ex-F& B) has recovered to approximately 92% of normalised levels despite periodic " lockdowns" as local spending continued to outweigh the " lost tourist dollar" .
" We believe that the pivot to more online spending will not be a significant disruptor in Singapore, as we have seen landlords and tenants embark on an omni-channel strategy with brick-and-mortar stores complementing online offerings," say the analysts. " With brighter economic prospects driving wage increases coupled with tourists returning into our shores, we see the retail sector on a stronger footing come 2022."
Additionally, Wong and Tan foresee more catalysts ahead, with stronger traffic at malls to drive further upward trajectory in tenant sales, and retail S-REITs to post an approximate 5.6% jump in distributions.
" With Singapore' s ' endemic approach' towards the COVID-19 pandemic, we believe that the risk from the Omnicron virus is unlikely to lead to a fullblown domestic lockdown. We believe that it is only a matter of time that border reopening and further domestic relaxation will restart sometime in 1QFY2022," say the analysts.
Vaccinated travel lanes with partner countries encompass approximately 57% of historical inbound markets and will be a lift to tourist retail sales in FY2022 as well. In addition, the potential relaxation of restrictions on " atrium sales" will be a positive earnings surprise for selected landlords&ndash FCT, MCT, and CICT, which contribute between 3-5% of revenues, which have been " lost" since 2020.
Sector valuations are currently trading below book at 0.97 times close to its five-year historical mean of 1.01 times, where forward FY2022 yields are compelling at 5.6% for defensive big cap names FCT and CICT, according to the analysts.
" We see lower downside risk of rental rebates in 2022 and conservatively priced in 0.5 months in our view, from 1-1.5 months this year," say Wong and Tan.
Wong and Tan maintain top sector picks FCT on resilient tenant sales, CICT, and LREIT on border reopening and domestic relaxation play. " We also pick CLCT amongst foreign retail plays for attractive valuations at a 0.8x book and a rare 8% forward yield," the analysts added.
From UOBKH
* Re-position from Reopening Plays to New Economy Plays. We expect a knee jerk reaction to sell S-REITs. The selling pressure is likely to be cushioned by S-REITs& rsquo defensive cash flows. Investors could de-risk by trimming positions in hospitality REITs, such as ART (BUY/Target: S$1.20), CDREIT (HOLD/Target: S$1.24) and FEHT (BUY/Target: S$0.71). Switch to New Economy Plays, such as AREIT (BUY/Target: S$3.83), FLT (BUY/Target: S$1.79) and MINT (BUY/Target: S$3.72). FCT (BUY/Target: S$2.98) provides resiliency from necessity spending at suburban retail malls.
* Frasers Centrepoint Trust (FCT SP/BUY/Target: S$2.98)
* Ready to pounce when opportunities arise. FCT has divested three sub-scale suburban malls, namely Bedok Point (completion: 9 Nov 20), Anchorpoint (completion: 22 Mar 21) and YewTee Point (completion: 28 May 21), for total proceeds of S$438m. The reconstitution enhances resiliency from dominant suburban malls. FCT&rsquo s balance sheet has deleveraged with aggregate leverage at 33.3%. It could tap on its sponsor pipeline, such as Northpoint City South Wing. It will also explore opportunities for acquisitions from third-party vendors, such as the remaining 60% stake in Waterway Point.
I will be posting this in all REITs stock in which I have some interests. But please hor, due diligence please, do not take this as the final and only positive statement and cheong to take up positions.....if you are lazy to read through the entire article, just focus on the highlighted parts....
Why is the Singapore REIT market going so strong after two years of COVID-19?
SINGAPORE: Singapore real estate investment trusts or S-REITs have emerged as a resilient segment of the local stock exchange in the past two years.
Traditionally a key pillar of the portfolios of individual investors in Singapore, the iEdge S-REIT Index, regarded as the S-REIT benchmark, reported a total return of 5.2 per cent since the start of 2020 to Nov 17.
This was despite S-REITs raising new equity from unitholders, creating additional units and leading to potential dilution risk. In the past 23 months, S-REITs raised a total of S$8 billion through placements and rights issues led by mega-issuances from Ascendas Real Estate Investment Trust and Frasers Commercial Trust.
Most S-REITs largely maintained their dividends, compensating for the fall in unit prices in this period.
Global financial markets including S-REITs initially crashed when COVID-19 became a pandemic, with investors panicking and selling liquid financial assets. For investors daring and savvy enough to put money to work during the trough in end-March 2020, total returns from capital gains have been a whopping 57 per cent.
Despite headlines on troubles in the retail space and how work-from-home has made offices redundant, occupancies measured by leases have remained high for S-REITs holding shopping malls and offices in Singapore, with little problems in rental collection, even if fewer are using these spaces.
In the hardest hit hotel sector, the fall in physical property asset value was contained to less than 10 per cent at a portfolio level among the S-REITs tracked by OCBC, a good outcome despite the pandemic curbing travel.
Hospitality REITs will likely need time to recover and could do better in a 24-month timeframe as borders reopen further.
S-REITs today generate a significant volume of trading activity for the stock exchange - about one-fourth of the daily turnover before COVID-19. Primary equity markets in Singapore also skew towards S-REITs.
S-REITs, at S$110 billion, represents 12 per cent of Singapore& rsquo s whole equity market by market cap & ndash a figure that is 6 per cent for Australia and only 2 per cent for Japan, the other two top REIT markets in the Asia-Pacific with large domestic economies.
WHY S-REITS STILL ATTRACT SO MANY INVESTORS
The top-performing Singapore stock in the past 23 months goes to iFAST Corporation, an investment products distribution platform, which generated total returns of 771 per cent during this time, superseding the Bloomberg Bitcoin Galaxy Index at 750 per cent.
This is lower than the 1,131 per cent on the Bloomberg Galaxy Crypto Index tracking cryptocurrencies.
Still, S-REITs and the Singapore commercial property market continue to attract significant investor attention.
Investors in Singapore are very familiar with the nuts and bolts of running a property, and understand how policies like stamp duties, urban planning, zoning, tenancy and ownership rules influence whether and when investors should buy an investment property and what to look out for in assessing a property& rsquo s attractiveness.
Many like the idea of owning a passive, stable and recurring income stream. S-REITs generate fairly stable revenue, with the iEdge S-REIT Index reporting revenue per unit of S$132.5 in 2019.
Though it dropped 6.3 per cent in 2020, analysts expect a rebound to S$135.6 this year.
S-REITs are a good source of income. Qualifying S-REITs are encouraged to pay gains to unitholders instead of hoarding profits as they not taxed on dividends distributed to unitholders.
The key challenge is share dilution when S-REITs need to raise to acquire new properties.
Past transactions that have stirred market discussions include K-REIT Asia& rsquo s (now known as Keppel REIT) 87.5 per cent interest in Ocean Financial Centre in 2011, Ascott Residence Trust& rsquo s acquisition of Ascott Orchard Singapore, Citadines City Centre Frankfurt and Citadines Michel Hamburg in 2017 and Lippo Malls Indonesia Retail Trust& rsquo s acquisition of Puri Mall in 2021.
S-REITs are also regulated as a collective investment scheme under the Securities and Futures Act, where there is a 50 per cent cap on the leverage limit for S-REITs to keep credit risks in check. As listed entities, S-REITs also follow SGX rules on the disclosure of information and the right for minority investors to vote on major matters.
S-REITS MORE ACCESSIBLE THAN EVER
Until S-REITs were launched in July 2002, the commercial property market was inaccessible to most individual retail investors, with ticket sizes of each standalone commercial property in the millions and billions of dollars.
Today, all it takes is S$230 at last Wednesday& rsquo s prices for an individual investor to buy into CapitaLand Integrated Commercial Trust (& ldquo CICT& rdquo ), Singapore& rsquo s largest REIT, and enjoy a portion of CICT& rsquo s rental income from shopping malls and offices.
Few investment opportunities provide such stability for 4 to 7 per cent dividend yield per year. It& rsquo s little wonder such investment classes with a dividend income and the potential for capital gains appeal to investors with a neutral risk profile at Singapore& rsquo s median age of 42.
Singapore has maintained an encouraging ecosystem for the development of S-REITs. Regulatory uncertainty is minimised as regulators routinely seek industry feedback from REIT managers, investors and lawyers before introducing new rules.
The market has grown to include fund managers who invest in S-REITs as their specialty, REIT exchange traded funds and REIT derivatives.
Bank lenders and bond investors in Singapore are highly familiar with S-REITs, together providing a pool of liquidity that allows the S-REIT market to grow bigger. Brokerages are also prepared to lend individual investors buying larger amounts of REIT units.
WILL GAINS IN S-REITS CONTINUE?
The bigger question is whether we will continue to see capital gains in the coming 12 to 24 months as interest rates rise.
In a world where stock market prices are affected by sentiments, Reddit fads and breaking news, S-REITs continue to see strong investor demand because their valuation is backed by commercial properties where asset value has seen a continued upward trend.
Indeed, S-REIT indices are not a good representation of the underlying economy. They are weighted towards larger S-REITs, rather than each S-REIT& rsquo s contribution to the Singapore economy.
The iEdge S-REIT& rsquo s top five components make up 43.3 per cent of the index which have an outsized influence on total returns.
Three are large-cap industrial REITs with industrial properties in Singapore and countries across Asia-Pacific, Europe and the United States & ndash in a world where logistics, data centres, business parks and manufacturing facilities have been resilient through the pandemic.
The remaining two are large-cap commercial REITs owning quality assets with tenants largely staying put despite the economic downturn, with occupancies remaining above 90 per cent.
Beyond the broad index, S-REITs that hold hotels and shopping malls located in the city centre have been dragged by the pandemic. With the city centre hollowed out as we work from home and international travelers non-existent, these S-REITs have underperformed Industrial REITs.
Furthermore, the S-REIT industry has been kept buoyant by an inflow of capital. The broad money supply in Singapore has surged by 10.9 per cent year-on-year as of September. With interest rates on cash near-zero, all that money needs to go somewhere.
The S-REITs market is unlikely to cool anytime soon. There is momentum. Thirteen out of the 80 IPOs with primary share offering in Singapore since 2016 were S-REITs raising S$5.6 billion collectively at an average offer size of S$430 million.
Outside of S-REITs, a further S$2.7 billion was raised for two listings, Kakao Corp, the Internet company global depository receipt listing and NetLink NBN Trust, a business trust which holds infrastructure assets.
The remaining 65 had an average offer size of S$28 million & ndash small cap listings with limited liquidity.
Tellingly, the two upcoming IPOs in Singapore - Daiwa House Logistics Trust and Digital Core REIT - are both S-REITs.
The equity analyst community is still optimistic and forecasting a rise in S-REIT dividends in the next 12 to 24 months.
Driven by the growth and resiliency of industrial assets, particularly logistics warehouse and data centres, the Big Three industrial REITs of Ascendas Real Estate Investment Trust, Mapletree Logistics Trust and Mapletree Industrial Trust also recorded average total returns of 15.6 per cent in the past 23 months.
DON& rsquo T DISMISS SGX
Looking ahead, Singapore investors should not be so quick to dismiss the SGX, given the current slew of corporate restructuring exercises with the potential for capital gains, which may not be immediately apparent to new individual investors in the market.
Buying S-REITs is likely to remain a cornerstone investment strategy for many individual investors. The more pertinent decision points remain how much S-REITs should feature as a percentage of one& rsquo s investment portfolio and which specific ones to invest in.
Still, until a next financial crisis with significant liquidity stress, we are unlikely to repeat the kind of capital gains seen from March 2020 to date in S-REITs.
A lot of the negatives has since been priced in, with the broad iEdge S-REIT Index trading at 1.1 times the price-to-book value, indicating that the market cap of the S-REITs as a broad basket is now higher than the value of the underlying properties.
Analysts optimistic on FCT, UOB KH saying it is &lsquo ready to pounce&rsquo when opportunities arise
UOB Kay Hian&rsquo s Jonathan Koh has maintained his &ldquo buy&rdquo call on Frasers Centerpoint Trust with a lower target price of $2.98, down from the previous figure of $3.06.
While he did not reveal any specific reason for the lowering of the target price, he is optimistic on the stock, pointing out the REIT&rsquo s increase in distribution per unit (DPU) for 2HFY2021.
FCT declared a DPU of 6.089 cents for 2HFY2021, up 39.3% y-o-y. The results reflected full six-month contributions from the acquisition of the remaining 63.1% stake of AsiaRetail Fund (ARF), which was completed on 27 Oct 2020.
Furthermore, occupancy in its malls has risen higher, with retail occupancy improving slightly by 0.9ppt q-o-q to 97.3% in 4QFY2021.
Koh notes the sequential improvement was led by Causeway Point, Tiong Bahru Plaza and Waterway Point (where FCT owns a 40% stake) where occupancy improved 0.5%, 2% and 4.6% respectively to 98.6%, 98.3% and 98.4%.
At Waterway Point, retail space vacated by H& M was reconfigured and backfilled by smaller specialty shops, such as Hä agen-Dazs, Levi, fashion brand YISHION, Gram Cafe & Pancakes and Toys R Us.
Tenant sales are also &ldquo tracking close&rdquo to pre-Covid-19 levels, with shopper traffic at about 60% of pre-Covid-19 levels in 4QFY2021.
As group size for dining in at F& B outlets was eased from two to five vaccinated persons on 10 Aug 2021, tenant sales improved from 93% in August to 98% of pre-Covid-19 levels in September.
But he does point out that sales from trade sectors remain uneven. Jewellery and watches are the best performing, while sectors like education, supermarkets & grocers and sports apparel & equipment also registered positive y-o-y growth.
Koh also points out that the majority of FCT&rsquo ssuburban malls registered mild positive reversions. Rental reversion was -0.6% in FY2021.
White Sands, Waterway Point, Tiong Bahru Plaza and Causeway Point achieved positive rental reversions of 2.5%, 1.3%, 0.8% and 0.6% respectively.
On the other hand, Changi City Point suffered a severe negative rental reversion of 9.8% due to the drop in footfall from Changi Business Park and Singapore Expo.
More notably, leases expiring in FY2022 accounted for a sizeable 38.7% of total NLA and 35.6% of gross rental income.
Koh thinks that FCT presents a &ldquo defensive yield from necessity consumption&rdquo , saying its malls are well located with connectivity to MRT stations and bus interchanges, close proximity to dense population catchments, and cater to essential services and non-discretionary spending.
He also sees that current elevated new cases of Covid-19 infections are expected to persist for another 3-6 months, before reaching a &ldquo new normal of manageable new cases&rdquo at a few hundred per day.
Singapore&rsquo s Multi-ministry Taskforce said if the weekly growth rate for Covid-19 infection falls below 1x, they would consider easing safe distancing measures.
Koh says this could mean that the government could allow groups of up to five household members to dine in at F& B outlets, which would usher shoppers back to suburban malls.
In addition, FCT has completed its reconstitution to refocus on larger and dominant suburban malls. FCT has divested three sub-scale suburban malls, namely Bedok Point, Anchorpoint and YewTee Point, for total proceeds of $438 million. The reconstitution enhances resiliency from dominant suburban malls
This has also allowed it to repay $220 million of borrowings with proceeds from the divestment of Yew Tee Point.
As such, aggregate leverage improved 0.6% q-o-q to 33.3% in 4QFY2021, while average cost of debt remains unchanged at 2.2% and improves overall cost efficiency.
Koh thinks that some share price catalysts can be a gradual but steady recovery in shopper traffic and tenant sales, accompanied by progressive easing of social distancing measures, as well as an acquisition of Northpoint City South Wing from sponsor Frasers Property.
Separately, DBS Group Research&rsquo s Geraldine Wong and Derek Tan also maintain their &ldquo buy call&rdquo and target price of $2.90.
Wong and Tan observes that there are retail headwinds, but &ldquo remain convinced that FCT&rsquo s portfolio of suburban malls is well-anchored against the recent tightening measures.&rdquo
They, like the UOB analysts, note the high occupancy of FCT&rsquo s malls, and say &ldquo While Singaporeans get used to periodic lockdowns and plan their lives around restriction measures, dominant suburban malls continue to benefit from the work-from-home trend with prime slots &lsquo changing hands quickly&rsquo and negative reversions on the brink of a reversal.
They expect more deals in the pipeline,saying there could be the prospective acquisition of Northpoint City South Wing and further stakes in Waterway point on the horizon. Central Plaza (linked to Tiong Bahru Plaza) is also another possible asset where value can be crystalised, Wong and Tan say
From UOBKH
Frasers Centrepoint Trust (FCT SP)
2HFY21: Deleveraged And Ready To Pounce
FCT&rsquo s retail occupancy improved 0.9ppt qoq to 97.3% in 4QFY21 while rental reversions were mildly negative at 0.6% in FY21. Tenant sales recovered to 98% of pre-COVID-19 levels in September. FCT divested of Bedok Point, Anchorpoint and YewTee Point to refocus on dominant suburban malls. It is well positioned to pursue acquisitions after lowering aggregate leverage to 33.3% as of end-Sep 21. Maintain BUY for its defensive distribution yield of 5.6% for FY22. Target price: S$2.98.
Remarks : Vested. Pls DYODD before buying or trading.
Frasers Centrepoint Trust (FCT SP)
2HFY21: Deleveraged And Ready To Pounce
FCT&rsquo s retail occupancy improved 0.9ppt qoq to 97.3% in 4QFY21 while rental reversions were mildly negative at 0.6% in FY21. Tenant sales recovered to 98% of pre-COVID-19 levels in September. FCT divested of Bedok Point, Anchorpoint and YewTee Point to refocus on dominant suburban malls. It is well positioned to pursue acquisitions after lowering aggregate leverage to 33.3% as of end-Sep 21. Maintain BUY for its defensive distribution yield of 5.6% for FY22. Target price: S$2.98.
Remarks : Vested. Pls DYODD before buying or trading.