Singapore REITs: A January 2025 Deep Dive Analysis
UOB Kay Hian, Thursday, 02 January 2025
Singapore’s Real Estate Investment Trusts (S-REITs) present a compelling investment opportunity in the current market climate. With the Federal Reserve expected to implement gradual rate cuts and government bond yields stabilizing after the US presidential election, many blue-chip S-REITs offer attractive yields of 6-7%. UOB Kay Hian maintains an OVERWEIGHT rating on the sector.
December 2024 Market Overview
The FTSE ST All-Share REITs Index (FSTREI) slipped 1.3% in December 2024, underperforming the STI’s 1.3% gain. US core PCE inflation remained stable at 2.8% year-on-year in November 2024, while the yield for 10-year Singapore government bonds increased by 18 basis points month-on-month to 2.92%.
Deep Dive into Individual S-REITs
CapLand Ascendas REIT (CLAR) – BUY
CLAR acquired the DHL Indianapolis Logistics Centre for S\$150.3 million, expanding its US logistics AUM by 35.3% to S\$587.5 million. This acquisition enhances CLAR’s presence in the Midwest logistics market, with DHL USA leasing back the property for 11 years with renewal options. Target Price: S\$3.74
Digital Core REIT (DCREIT) – BUY
DCREIT increased its stake in a Frankfurt data centre to 65% at a discounted price, funding the acquisition through multi-currency credit facilities. The acquisition is expected to increase pro forma 2023 DPU by 3.1% and NAV per unit by 4.3%. Target Price: US\$0.95
CDL Hospitality Trusts (CDREIT) – BUY
CDREIT entered the purpose-built student accommodation (PBSA) sector by acquiring a 404-bed property in Liverpool, UK. The acquisition includes adjacent land with planning consent for a hotel, offering potential for further PBSA development. This is projected to boost pro forma 1H24 DPS by 1.3%. Target Price: S\$1.50
Frasers Logistics & Commercial Trust (FLT) – BUY
Despite a recent downgrade by a bulge bracket broker, FLT remains a BUY recommendation. Target Price: S\$1.33
Lendlease Global Commercial REIT (LREIT) – BUY
LREIT is also a BUY recommendation. Target Price: S\$0.77
Mapletree Industrial Trust (MINT) – BUY
MINT is another BUY recommendation. Target Price: S\$3.05
Other Notable REITs
- CapLand Integrated Commercial Trust (CICT): BUY, Target Price: S\$2.59
- Keppel DC REIT (KDCREIT): BUY, Target Price: S\$2.64
- Frasers Centrepoint Trust (FCT): BUY, Target Price: S\$2.79
- Suntec REIT (SUN): NR (Not Rated)
- Keppel REIT (KREIT): BUY, Target Price: S\$1.25
- CapLand Ascott Trust (CLAS): BUY, Target Price: S\$1.38
- PARAGON REIT (PGNREIT): NR
- ParkwayLife REIT (PREIT): BUY, Target Price: S\$5.12
- ESR-LOGOS REIT (EREIT): NR
- OUE REIT (OUEREIT): NR
- Cromwell European REIT (CERT): NR
- CapLand China Trust (CLCT): NR
- Far East Hospitality Trust (FEHT): BUY, Target Price: S\$0.82
- Starhill Global REIT (SGREIT): NR
Key Market Observations
Frasers Hospitality Trust (FHT) saw a significant 39.3% price increase due to privatization speculations. Suntec REIT (SUN) gained 2.6% following a conditional cash offer, while Prime US REIT (PRIME) rose 3.6% after its inclusion in the FTSE Global Small Cap Index. US office REITs, Manulife US REIT (MUST) and KepPacOak US REIT (KORE), experienced corrections of 13.6% and 6.8%, respectively.
Conclusion
UOB Kay Hian remains optimistic about the S-REIT market, maintaining an OVERWEIGHT rating. The sector offers a variety of opportunities across different asset classes, with several REITs presenting attractive yields and growth prospects. Investors are encouraged to consider the individual REIT analyses and recommendations provided in this report.
