Reits: DSBV notes S-REITs now offer a prospective FY11-12F distribution yield of 6.5-6.7%, which is >500 bps spread above the longterm govt bond and is now closer to - 1SD of the sector historical yield trading range. With earnings forecasted to be growing steadily and supported by an expected strong SGD, the house believes that S-REITs continue to offer a compelling investment proposition for income investors.
Prefers retail REITs and selected Industrial REITs.
Believes retail REITs should continue to deliver a sustained earnings growth profile in the coming quarters on the back of sustained positive consumer sentiment. Notes even in past economic downturns, retail REITs’ exposure in necessity shopping (eg. Supermarkets, F&B outlets) have kept earnings fairly stable.
Says industrial S-REITs also offer strong stability and visibility given a larger proportion of their income deriving from master-lease structures.
Top picks are:
Capitamall Trust (BUY, TP $2.05)
Mapletree Commercial Trust (BUY, TP $1.05)
Mapletree Logistics Trust (BUY, TP $1.07)
Cache Logistics Trust (BUY, TP $1.07)
Frasers Commercial Trust (BUY, TP $1.05)
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