SINGAPORE (Nov 9): Investors now have a chance to accumulate Singapore REITs while the market overshoots, according to a Tuesday report by DBS.

Lead analyst Derek Tan notes the recent share price weakness of S-REITs was due to increased macro uncertainties, coupled with the fourth quarter traditionally being unhappy times for REIT investors.

Uncertainties arising from the outcome of the US presidential election, potential rate hike in December and profit-taking as REITs remain ahead since the start of the year have also resulted in net outflows for Singapore REITs, notes Tan.

“Month-to-date prices have come down by 5% to 10%,” says Tan.

Thus lies the opportunity for investors to accumulate. The share price is also further supported by the headline FY17 yield of 6.45%, notes Tan, which represents a yield spread of 4.6%, above historical mean.

“Using historical price performance as a guide, we believe that further downside from current levels appear limited,” says Tan.

REITs fit the bill for investors looking for yields in the uncertain economic outlook, notes Tan. While interest rates remain an overhang, Tan notes that most S-REITs have refinanced their loans ahead of expiry and hedged in a substantial portion of the interest rates profile into fixed rate debt.

Among the S-REITs, Tan believes that selected office and hospitality REITs such as Keppel REIT and CDL Hospitality REIT are attractive, with “buy” calls and target prices S$1.23 (RM3.74) and S$1.59 respectively.

Ascendas REIT (buy with target price S$2.65), Frasers Logistics and Industrial Trust (buy: S$1.10) and Mapletree Commercial Trust (buy: S$1.62) are attractive in terms of growth, notes Tan.

For small-cap REITs, Tan notes that Croesus Retail Trust (buy: 99 cents) offers an attractive yield of more than 8%.

As at 11.49am, Keppel REIT is trading at S$1.08, CDL Hospitality Trusts is trading at S$1.33, Ascendas REIT is trading at S$2.31, Frasers Logistics and Industrial Trust is trading at 96.5 cents, Mapletree Commercial Trust is trading at S$1.49 and Croesus Retail Trust is trading at 85 cents. —  theedgemarkets.com.sg

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