• Residential sales powered further ahead. Units sold in 1Q21 in Singapore and China catapulted 3.9x and 3.3x YoY. Higher capital recycling lifted total fee income by 9% YoY.
• Retail, office and industrial properties resilient. Lodging recovery stalled by movement restrictions in several countries.
• Maintain BUY and TP of S$4.38, based on probability-weighted RNAV and SOTP. We assume 80% probability of approval for demerger. CAPL still our top pick for the sector. High recurring income and pivot to New Economy assets are expected to keep earnings stable and portfolio future-ready.

Positives

+ Strong recovery in residential sales. The number of homes sold in 1Q21 in Singapore and China catapulted 3.9x/3.3x YoY to 81/1,333 units. Sustained momentum is expected in FY21. In Vietnam, sales were negative due to delays in securing permits for units sold previously and buyers’ return 212 units in FY20. Returned units in 1Q21 eased YoY from 48 to eight. Delays in permit issuance are expected to ease after the Vietnamese Communist Party’s central committee was elected on 1 February 2021.

+ Recovery in fee income on the back of higher capital recycling. Fee income grew 30% YoY, lifting total fee income by 9% YoY. This was led by higher transactions from improved market sentiment, resulting in higher acquisition/divestment fees and an enlarged base of REIT fund AUM. Fund AUM grew S$1.6bn or 2% QoQ to S$79.2bn, inching closer to CAPL’s 2024 S$100bn target.

+ Retail, office and industrial properties resilient. Retail occupancy was resilient QoQ with better tenant sales across its markets. Reversions were still flat to negative single digits. In Japan and South Korea, office occupancy improved from 89.9%/90.9% to 95.5%/98.7% QoQ. Occupancy in Singapore, China and Germany ranged from -0.3ppt to +1.4ppts QoQ. Industrial occupancy varied from -2.5ppts in Australia to +1.1ppts in Europe. Average reversions for office and industrial were mostly positive in all the markets.

Source: Phillip Capital Research - 17 May 2021