4 Singapore REITs to watch: Ascendas, Suntec, Mapletree Industrial Trust
These four S-REITs could potentially produce healthy dividend yields and share price upsides in the next 12 months, according to top investment analysts.
Singapore real estate investment trusts (REITs) are among some of the most popular stocks on the Singapore Exchange (SGX), thanks to their attractive dividend yields and reasonable buy-ins.
In this article, we examine four large REITs that investment analysts are anticipating the biggest share price upsides for in the next 12 months.
Ascendas REIT (SGX: A17U)
Share price target (average): S$3.64
Estimated upside from last traded price: 9.97%
Share price of Ascendas REIT (A-REIT), the largest industrial REIT listed in Singapore, declined 8.2% in August 2020, amid growing market volatility and a weakened global economic outlook.
Nevertheless, 20 brokers surveyed by Bloomberg have given the stock an average price target of S$3.64 per share, representing a nearly 10% upside from August’s closing price of S$3.31.
JP Morgan raised their price case on A-REIT to S$4 from S$3.70 previously, alongside an ‘overweight’ (equivalent of ‘buy’) rating.
Their investment thesis is based on the fact that A-REIT provides investors with resilient exposure in the midst of a global downturn, due in large part to a core Singapore portfolio (forming around 75% of net property income).
‘Given the expected recession, we believe investors will gravitate towards REITs such as A-REIT with its strong balance sheet and diversified portfolio,’ JP Morgan analysts wrote on 30 July 2020.
Furthermore, after the ‘rebasing’ of its dividends, or distribution per unit (DPU) in 2020 (impact of rental waivers/deferrals), JP Morgan is projecting a two-year DPU CAGR of 5%, which it deems ‘healthy’.
Suntec REIT (SGX: T82U)
Share price target (average): S$1.60
Estimated upside from last traded price: 15.1%
Despite laying off nearly half of its workforce last week, Suntec REIT's’s market cap was able to rise 4% throughout the month of August.
On 28 August 2020, it was reported that a total of 85 personnel (out of 178 roles) from sales, operations, finance and human resources would be cut via a one-off retrenchment exercise.
Brokers polled by Bloomberg foresee the events venue trust hitting an average share price target of S$1.60 within the next 12 months.
This represents an upside of roughly 15.1% from Monday’s closing price of S$1.39 per share.
Mizuho Securities analysts wrote on 11 August 2020 that while the outlook for Suntec’s retail and convention business continues to remain challenging in the second half of fiscal 2020, they believe that its Australian portfolio ‘should remain resilient with stable occupancy’.
They added that new contributions from 21 Harris Street, Sydney, as well as Olderfleet, 477 Collins Street, Melbourne, will also likely help to improve Suntec REIT’s income portfolio.
Finally, a dividend yield of 5.7% is still expected for FY2020.
Their price objective of S$1.46 per share is derived using a 6.2% cost of equity.
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Far East Hospitality (SGX: Q5T)
Share price target (average): S$0.57
Estimated upside from last traded price: 4.6%
Far East Hospitality Trust, a hotel and serviced residence-focused trust, has an average share price target of S$0.57 from seven analysts polled by Bloomberg.
This equates to an upside of 4.6% from the stock’s last traded price of S$0.545 on Monday 31 August 2020.
DBS analysts added the stock to its ‘dividend’ category on 25 August 2020, recommending for investors to purchase 22,000 shares at an entry price of S$0.505 a share.
They noted that the easing of travel restrictions, a recent extension of government wage support to March 2021, as well as reopening of selected hotels across the island should help occupancy rates to improve in the coming months, ‘albeit at ‘sub-optimal levels’.
Finally, fixed master lease rents have kicked in for the hotels segment to support hotel revenues and provide a strong safety net for yield, the analysts concluded.
Mapletree Industrial Trust (SGX: ME8U)
Share price target (average): S$3.18
Estimated upside from last traded price: 4.3%
Another real estate stock with a majority ‘buy’ call is Mapletree Industrial Trust (MIT).
MIT currently has an average 12-month price target of S$3.18 from 15 analysts surveyed by Bloomberg.
This represents an upside of 4.3% from August 2020’s concluding stock price of S$3.05 per share.
Maybank analysts raised their price target on MIT to S$3.40 from S$3.30 per share previously, naming the stock among its ‘top sector buys’.
They wrote on 25 August 2020 that they continue to like the industrial trust for its ‘positive growth fundamentals and more resilient portfolio’.
They further noted that MIT’s DPU (dividend) visibility has also been strengthened by its rising hi-tech asset investments and overseas diversification, as well as the industrial REIT sector’s ‘relatively resilient’ DPU in the first half of 2020 even despite the pandemic.
On the other hand, Bloomberg Intelligence analysts cautioned that MIT could experience further negative rental reversions from its economically challenged factory segment, offset by recent and upcoming data-centre purchases.
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