Friday, December 17, 2010


REITs: DBSV has sector report. Note that S-REIT sector now trades at a normalized FY11F distribution yield of 6.1%, slightly below its historical mean of 6.5%. Spreads have narrowed but still remain attractive at 340bps above the long-term government bond yield, currently at 2.7%...

Add that S-REITs offer a good hedge against inflation given that earnings growth can potentially outpace inflation, which is expected to inch higher to 3.2% in 2011. Prefer S-REITs with the ability to deliver growing distributions organically while having the opportunity to acquire accretively….

Continue to hold view that hospitality and retail sectors offer a more robust outlook on the back of expected strong visitor arrivals in 2011. Office REITs are expected to see topline bpressure from negative reversions in 2011 though the sector is on an uptrend….

Over all, likes CMT, FCT, CDL HT and Ascott REIT, as they are expected to deliver strong organic growth potential coupled with sponsor injection possibilities. Note that P-Life REIT offers downside protection as rev is pegged to inflation, while MLT and Cache offer potential earnings surprise given their visible sponsor pipeline.

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