S-REITs to generate yields despite economic weakness
Singapore Business Review|April-Jun 2020
The average yields of S-REITs have bounced back to around 5.5%, despite seeing a 6.5% decline in prices early in the year, according to DBS Group Research. This figure implies a spread of over 4% against the Singapore 10-year bond yields.
S-REITs to generate yields despite economic weakness

“The broad-based sell-off in S-REITs of up to 4-5% in a day is certainty noteworthy,” said Derek Tan, an analyst at DBS Group Research. “We see [this] as an opportunity to accumulate S-REITs on expectations that the low interest environment and high headline yields will attract investor interest back to S-REITs after the market stabilises.”

The report stated that their preference includes industrial S-REITs because of their longer weighted lease expiry (WALE) supporting distributions. Office REITs, including US office REITs, are also attractive as their potential acquisitions may drive distributions higher.

As for hospitality REITs, the report cited Ascott Residence Trust (ART) and Far East Hospitality Trust (FEHT) as having high fixed rents (up to 70% of revenues) which limited the current downside risks. ART and FEHT were projected to deliver yields of up to 4.7% and 4.9%, respectively.

“In the medium term, we believe S-REITs will continue to be an important and relevant component of investors’ portfolio, especially given the sector’s increasing representation in major indices (current and future) such as the MSCI, STI, and the EPRA Nareit Developed World Index. Coupled with high yields of 5.5%, investors will eventually be drawn back into the S-REITs sector,” Tan added.

Healthy margins

S-REIT investors need not worry about the possibility of facing margin calls as well, as large-cap stocks are finding greater demand, despite the lower absolute yield. The average leverage ratios have also been conservative.

Denne historien er fra April-Jun 2020-utgaven av Singapore Business Review.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.

Denne historien er fra April-Jun 2020-utgaven av Singapore Business Review.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.

FLERE HISTORIER FRA SINGAPORE BUSINESS REVIEWSe alt
How TikTok powers cross-border shopping for Singapore retailers
Singapore Business Review

How TikTok powers cross-border shopping for Singapore retailers

The yellow basket feature allows viewers to purchase items directly during livestreams.

time-read
3 mins  |
Issue No. 109
Income Insurance seeks to fill billion-dollar financing gap in climate transition
Singapore Business Review

Income Insurance seeks to fill billion-dollar financing gap in climate transition

The region skimmed its carbon intensity by 2.8%, far below the 17.2% needed.

time-read
3 mins  |
Issue No. 109
SIDS fights misconceptions in interior design with accreditation, education
Singapore Business Review

SIDS fights misconceptions in interior design with accreditation, education

The organisation is setting up a digital platform to speed up accreditation from 6 to 2 months.

time-read
3 mins  |
Issue No. 109
IHH's proton therapy takes aim at tumours with precision and low risk
Singapore Business Review

IHH's proton therapy takes aim at tumours with precision and low risk

Leaving surrounding organs at risk during cancer treatment might become a thing of the past.

time-read
2 mins  |
Issue No. 109
SingPost pivots from mail to logistics as e-commerce demand drives growth
Singapore Business Review

SingPost pivots from mail to logistics as e-commerce demand drives growth

It is banking on e-commerce to drive its logistics unit, which accounts for 69% of revenue.

time-read
3 mins  |
Issue No. 109
Singapore needs SEA neighbours to power renewable energy transition
Singapore Business Review

Singapore needs SEA neighbours to power renewable energy transition

Experts favour Malaysia and Indonesia as renewable energy import sources.

time-read
2 mins  |
Issue No. 109
Singapore's architecture blueprint spurs push to tackle brain drain in other sectors
Singapore Business Review

Singapore's architecture blueprint spurs push to tackle brain drain in other sectors

Paying the country's architects just right will hopefully stop the brain drain.

time-read
3 mins  |
Issue No. 109
Millionaires eye a piece of Singapore's rich colonial era
Singapore Business Review

Millionaires eye a piece of Singapore's rich colonial era

The country's remaining 6,500 shophouses are in high demand amongst the ultra-rich.

time-read
3 mins  |
Issue No. 109
HDB resale portal unlikely to cut out property agents
Singapore Business Review

HDB resale portal unlikely to cut out property agents

The portal enables sellers to list their units themselves.

time-read
3 mins  |
Issue No. 109
Factory and retail spaces shine as housing heads for worst market slump in 16 years
Singapore Business Review

Factory and retail spaces shine as housing heads for worst market slump in 16 years

Its manufacturing and tourism rebound will spur demand for industrial and high-street shops.

time-read
4 mins  |
Issue No. 109