S-REITs Bi-Weekly Updates (1-15 Sep 22)
It is a tumultuous time for S-REITs with elevated inflation dominating headlines. The sector has nevertheless eked out a small gain of 0.5%. S-REITs are resilient due to their stable cash flows. Investors are likely to turn their attention to S-REITs when economic growth and inflation start to moderate more meaningfully. Our bottom-up and diversified BUY picks are FCT (Target: S$2.74), LREIT (Target: S$0.99), MINT (Target: S$3.36) and MLT (Target: S$2.08). Maintain OVERWEIGHT.
WHAT HAPPENED IN THE LAST TWO WEEKS
• Mercatus portfolio becoming smaller and more digestible. According to the Business Times, Mercatus Co-operative has withdrawn AMK Hub from its portfolio to be divested. AMK Hub sits on state land alienated to statutory board Singapore Labour Foundation (SLF). The lease stipulated that at least 50% of GFA must be used by SLF, National Trades Union Congress and related entities. Thus, Mercatus Co-operative would only be divesting three properties, namely Jurong Point, NEX and Swing By @ Thomson Plaza.
• FCT increased its stake in Waterway Point. FCT has entered into an agreement with Japanese developer Sekisui House to acquire an additional 10% stake of Waterway Point, a dominant suburban mall located next to Punggol MRT station, for S$132.3m. Waterway Point has consistently performed well and Punggol is a vibrant and growing HDB housing estate. FCT will increase its stake in Waterway Point from 40% to 50%.
• FSTREI gained 0.5% in the past two weeks but underperformed the STI that gained 1.4%. Markets remained concerned with elevated inflation with US CPI at 8.3% for Aug 22. The yield for 10-year Singapore government bonds rose 16bp to 3.16%, a whisker away from the recent peak of 3.24% set in mid-June.
• Top outperformer: MPACT gained 2.7% as Festival Walk will benefit if Hong Kong ends hotel quarantine requirements by Nov 22. New economy plays DCREIT, MLT and MINT gained 3.3%, 1.8% and 1.2% respectively.
• Top underperformer: FHT lost 22.9% after the privatisation lapsed without obtaining the required 75% approval. IREIT, ELITE and CERT, with exposure predominantly to real estate in Europe, declined 6.3%, 5.1% and 1.9% respectively. US REITs PRIME and KORE declined 2.4% and 2.3% respectively.