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Author: SGX   |   Latest post: Thu, 2 Feb 2023, 9:02 AM

 

S-REITs Narrow Discount to Book Value on Global Rate Outlook

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  • With global inflation set to outpace global growth by 5% in 2022, the FTSE ST REIT Index has generated a 10% decline in total return this year, with the FTSE EPRA/NAREIT Developed Index declining 22%. This has brought the 5-year total return of the FTSE ST REIT Index to 15%, compared to 8% for the FTSE EPRA/NAREIT Developed Index.
     
  • The FTSE ST REIT Index ended 18 Nov at a 7% discount to book value, up from a 16% discount a month ago. Since 21 Oct, majority expectations for the 14 FOMC Fed Funds Rate have markedly moved from 75bps to 50bps, while the 10-year UST yields have declined from above 4.2% to below 3.8%.
     
  • The most defensive REIT and property trusts in the YTD included CDL Hospitality Trusts, Far East Hospitality Trust, Sabana Industrial REIT, CapitaLand Integrated Commercial Trust and Suntec REIT. Sabana Industrial REIT, CapitaLand Integrated Commercial Trust and CDL Hospitality Trusts also ranked among the five Trusts that booked the highest YTD net fund inflows proportionate to current market value. 
     

Over the past month, the FTSE ST REIT Index has generated a 12.0% total return on the back of a marginally less hawkish outlook for US Interest rates. This has also seen the 10-yr UST yields decline from above 4.2% on 21 Oct to below 3.8% at present, with the US Dollar Index also declining from above 113 to near 107. The partial rebound of the S-REIT Sector over the past month has also pared the FTSE ST REIT Index decline in total return for the 2022 year to 18 Nov to 10%, compared to the FTSE EPRA/NAREIT Developed Index declining 22%.

This brings the 5-year total return of the FTSE ST REIT Index to 15%, compared to 8% for the FTSE EPRA/NAREIT Developed Index. As illustrated below, the FTSE ST REIT Index has maintained some directional correlation, albeit not statistically significant correlation to the FTSE EPRA/NAREIT Developed Index over the past five years. While the FTSE EPRA/NAREIT Developed Index is more than 60% weighted to US-listed REITs, both S-REITs and US-listed REITs do compete with US Treasury Yields for fund inflows. The aforementioned decline in 10-yr US Treasury Yields coincided with the P/B ratio of the FTSE ST REIT Index increasing from 0.84x to 0.92x. Over the past five years, there have only been six weeks when the P/B ratio of the  FTSE ST REIT Index ended the week below 0.90x.

S-REITs Narrow Discount to Book Value on Global Rate Outlook

Overall the S-REIT sector has seen more than S$1 billion of net fund outflows in the 2022 year to 18 Nov, with 32 of the trusts booking net fund outflows and eight of the trusts booking net fund inflows. The five REITs that saw the highest net fund inflows currently average a 0.85x P/B ratio, whereas the five REITs that booked the highest net fund outflows currently average a 1.15x P/B ratio. The five trusts that saw the highest net fund inflows in the 2022 year to 18 Nov included CapitaLand Integrated Commercial Trust, Sabana Industrial REIT, CapitaLand Ascott Trust, CDL Hospitality Trust and Frasers Hospitality Trust, and averaged a 2.3% total return. The five trust that saw the highest net fund outflows in the 2022 year to 18 Nov included Mapletree Industrial Trust, Keppel DC REIT, Mapletree Pan Asia Commercial Trust, CapitaLand Ascendas REIT and Mapletree Logistics REIT while averaging a 10.1% decline in in total return.

Sort by the most traded REITs and Property Trusts of the S-REIT Sector, the table below details the 2022 year to 18 Nov total returns and net fund flows of the sector.

 

S-REIT Sector

Stock  Code

Avg. Daily Trading T/O S$M

Mkt Cap S$M

QTD Total Return %

YTD Total Return %

YTD Net Fund Flow S$M

P/B (x)

CapLand IntCom Trust

C38U

49.0

13,463

6

2

102.7

0.96

CapLand Ascendas REIT

A17U

33.2

11,553

2

-2

-110.5

1.12

Mapletree PanAsia Com Trust

N2IU

27.7

9,163

3

-7

-127.7

0.94

Mapletree Log Trust

M44U

25.3

7,936

7

-9

-72.5

1.05

Suntec REIT

T82U

18.6

4,026

-7

-2

-7.0

0.62

Mapletree Ind Trust

ME8U

16.8

6,219

-2

-10

-174.8

1.13

Frasers L&C Trust

BUOU

13.4

4,214

-4

-20

-69.3

0.87

Keppel DC REIT

AJBU

11.5

3,180

9

-22

-136.4

1.35

Keppel REIT

K71U

10.2

3,387

-9

-16

-52.8

0.63

Frasers Cpt Trust

J69U

7.4

3,459

-4

-7

-42.9

0.87

CapLand Ascott Trust*

HMN

7.4

3,291

-3

-3

9.4

0.75

Lendlease REIT

JYEU

6.2

1,624

-7

-13

-9.3

0.74

CapLand China Trust

AU8U

4.9

1,791

3

-5

-71.9

0.66

DigiCore REIT USD

DCRU

4.8

908

-20

-47

-13.4

0.67

ESR-LOGOS REIT

J91U

4.1

2,352

-1

-23

-25.0

0.85

CapLand India Trust**

CY6U

3.3

1,428

17

-8

-36.9

1.03

CDL Hop Trust*

J85

2.9

1,559

8

12

9.2

0.96

ParkwayLife REIT

C2PU

2.7

2,456

-4

-19

-19.7

1.69

SPHREIT

SK6U

2.4

2,560

3

-3

-7.4

0.89

Manulife REIT USD

BTOU

2.0

903

-17

-41

-25.7

0.53

Frasers Hosp Trust*

ACV

1.9

838

-7

-3

6.5

0.67

AIMS APAC REIT

O5RU

1.7

912

1

-6

-24.6

0.66

Sasseur REIT

CRPU

1.5

952

10

-2

-38.5

0.81

StarhillGbl REIT

P40U

1.2

1,214

0

-12

-12.4

0.66

Prime US REIT USD

OXMU

1.1

811

-11

-33

-23.6

0.58

Far East H Trust*

Q5T

1.1

1,193

3

7

0.3

0.70

Cromwell REIT EUR

CWBU

0.9

1,270

-10

-37

-12.6

0.60

Keppel Pac Oak REIT USD

CMOU

0.9

840

2

-19

-17.3

0.70

OUE Com REIT

TS0U

0.7

1,885

1

-17

-15.8

0.29

Daiwa Hse Log Trust

DHLU

0.7

426

5

-18

-23.0

0.75

First REIT

AW9U

0.4

525

-1

-8

-11.6

0.69

Elite Com REIT GBP

MXNU

0.4

385

7

-28

-8.4

0.79

Utd Hampshire REIT USD

ODBU

0.3

388

-11

-18

-14.6

0.66

Sabana REIT

M1GU

0.3

471

0

4

12.4

0.82

EC World REIT

BWCU

0.3

393

-3

-32

-5.9

0.61

IREIT Global SGD

UD1U

0.3

613

6

-13

-12.3

0.65

Lippo Malls Trust

D5IU

0.2

239

-11

-38

-8.2

0.26

Dasin Retail Trust**

CEDU

0.2

221

-4

-20

-1.7

0.23

ARA HTrust USD*

XZL

0.1

293

-5

-21

0.6

0.52

BHG Retail REIT

BMGU

0.1

259

-7

-15

1.5

0.57

Note *Stapled Trust, ** Business Trust. Data as of 18 Nov 2022 (Source: SGX, Refinitiv, Bloomberg)

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