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  • Prohibition of unvaccinated people to head malls and attractions to have limited impact on retail S-REITs.
  • Travel is back in focus; introduction of vaccinated travel lanes to breathe life to travel related stocks
  • Prefer suburban retail (FCT, LREIT) on prolonged ‘endemic mode’, Sentiment uplift for Orchard plays (SPH REIT,SGREIT); Prefer ART, CDLHT and FEHT amongst hotel plays
  • Prefer Genting over SATs and SIA on valuations
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Enhanced vaccinated differentiated measures to have limited impact on retail S-REITs. Singapore’s strategy towards a COVID-19 endemic world has begun. With vaccination rates at c.83%, the multi-ministry task force (“MTF”) has announced a simplified set of health protocols, further vaccinated travel lanes (“VTL”) but at the same time tightened rules for the unvaccinated, prohibiting dining-in at all F&B venues and visiting of malls and attractions. Nonetheless, we do not see significant shifts in traffic patterns at malls given our high vaccination status and continue to expect suburban malls (FCT, LREIT) with dominant positioning to see recurrent traffic and sales and lead the retail recovery. Surprise in tourist spend could mean upside to Orchard focused plays (SPH REIT, SGREIT). 

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Travel is back in focus.  The key to a leisure travel restart is to remove the need for quarantine upon arrival. The expansion of countries on VTL scheme (from 2 to 11) has placed the hospitality sector back in focus. After struggling with sub-optimal occupancies for over 1.5 years, the chance for a meaningful improvement in occupancy and rooms rates is here. While these 11 countries contribute just c.16.5% of our normalized tourist count, growth is exponential from current levels. The addition of countries like Australia and New Zealand on the scheme in the future should drive inbound numbers more meaningfully going forward. Amongst peers, we prefer ART, CDLHT, FEHT given their ability to capture demand (both inbound/outbound). 

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Prospects for the aviation sector could be brighter than we thought. We initially anticipated that airlines would have to offer flights at a discount to stimulate demand, given there could be some apprehension amongst the public, and hefty testing costs. However, the robust uptrend in air fares we witnessed clearly demonstrates that travellers are willing and ready to splurge for their next trip.