In Maybank’s Singapore REITs sector outlook for 2025, analyst Krishna Guha reiterates his “positive” sector view on the back of continued rate cuts, resilient growth and reasonable valuations.
He expects distributions to stabilise in 2H2025, and start growing from FY2026, and his REIT sub-sector preference continues to be commercial, industrial and hospitality.
He names CDL Hospitality Trusts (CDHLT), CapitaLand Integrated Commercial Trust (CICT), CapitaLand Ascendas REIT (CLAR), CapitaLand Ascott Trust (CLAS), Far East Hospitality Trust (FEHT), Lendlease Global Commercial REIT (LREIT), Mapletree Industrial Trust (MINT), Mapletree Logistics Trust (MLT) and OUEREIT as his top picks.
“We expect distribution to decline about 3% y-o-y led by hospitality (high base effects) and industrial (operational weakness),” says Guha. “Sequentially, distributions should stabilise excluding the seasonal effects. Asset values are likely to be stable in Singapore (recent disclosures Suntec REIT).”
However, the analyst says that FX movement and valuation of overseas assets may hurt net asset value. His base case for stable occupancy for the industrial sector of S-REITS is that reversion will moderate further.
Commercial reversion meanwhile should be “flat-to-negative” with frictional vacancies for overseas portfolio.
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Sluggish visitor arrivals, higher supply and high base effect will affect hotel revenue per average room (RevPARs), and the analyst looks forward to any changes in funding cost guidance given decline in base rates.
Following the declines in 4Q resulting from a rally in the US dollar yield curve, investors are more favorable towards the S-REITs sector, says Guha.
The industry’s average yield of 6.3% compares “favourably” against the Straits Times Index yield of 4.8%, he says. Maybank’s preference for the commercial sector, he notes, has pushed back on shadow space and sluggish retail sales in Singapore.
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On stock picks, he notes that MLT’s exposure to China remains a concern, while his recent initiation on Parkway Life REIT (PREIT) has seen investors appearing cautious on France acquisition and expect asset enhancement initiatives (AEIs) in Singapore to be prioritised.
“On our comment of PREIT being expensive, feedback is the stock is inexpensive on book (Singapore net property income capitalised at 5% accounts for the investment portfolio, with no implied value for Japan) and dividend yield spread is tight as further distribution per unit (DPU) growth is likely from the Singapore AEI,” the analyst notes.
Guha has “buy” calls on CDHLT, CICT, CLAR, CLAS, FEHT, LREIT, MINT, MLT and OUEREIT, with target prices of $1.10, $2.34, $3.10, $1.15, 80 cents, 70 cents, $2.60, $1.60, 34 cents respectively.
