S-REITs Bi-Weekly Updates (15-30 November 2021)

  • FSTREI corrected 3.5% in the past two weeks.
  • New Omicron variant creates uncertainties. The World Health Organisation named the coronavirus variant B1.1.529 first detected in South Africa as the Omicron variant and designated it a variant of concern. It has 50 mutations, including 32 on the spike protein. The mutations make the new variant more transmissible. The new variant is more likely to overcome our immune response triggered by existing vaccines or prior infections.
  • Scientists are studying the ability of existing vaccines to combat the new Omicron variant and  whether it causes severe symptoms for those who are fully vaccinated. Pfizer/BioNTech said they could adapt their mRNA vaccine within six weeks and ship initial batches within 100 days. Moderna expects a reformulated vaccine to be ready by Mar 22. At the moment, it is uncertain if a new vaccine would be needed.
  • Top outperformer: FIRT gained 5.5% due to the renewal of master lease agreement for Imperial Aryaduta Hotel & Country Club. It also reported 9M21 DPU of 3.83 S cents, an increase of 15.7% yoy. OUECT gained 1.1% possibly due to the appointment of new CEO Mr Han Khim Siew with effect from 7 Feb 22.
  • Top underperformer: The emergence of the Omicron variant understandably caused anxiety and panic. Hospitality REITs CDREIT, FHT, FEHT and ART suffered the brunt and dropped 11.1%, 8.0%, 7.9% and 7.5% respectively. MLT corrected 6.4% after sizeable equity fund raising to raise S$700m to finance the acquisition of logistics properties in China, Vietnam and Japan.
  • Maintain OVERWEIGHT. The new Omicron COVID-19 variant is more contagious. Existing vaccines still offer some protection but their efficacy is expected to be affected. Pharmaceutical companies are working feverishly on new vaccines and booster shots  specifically designed to combat the new Omicron variant. Switch from reopening plays to new economy plays. BUY AREIT (Target:  S$3.83), FLT (Target: S$1.79), MINT (Target: S$3.72) and FCT (Target: S$2.98).