DBS Group Research has added Ascott Residence Trust (ART), Far East Hospitality Trust (FEHT) and CapitaLand as its equity picks for Singapore on the back of recovery prospects post-Covid-19.
In a research note dated March 17, DBS highlights that the Straits Times Index (STI) has risen is up 9.2% year-to-date, buoyed by a rising yield environment that boosted the banks as well as corporate developments by the Jardine Group.
DBS expects ART to be the prime beneficiary among hospitality REITs to ride on the coming of warm weather in the northern hemisphere that should see a corresponding easing of domestic and possibly regional movement restrictions.
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ART has significant exposure to northern hemisphere countries, including the US and UK which are both leading in the global progress to get their population vaccinated. Its portfolio includes a 28% revenue exposure in US/Europe with a further 27.4% exposure in Japan, China, and South Korea.
For FEHT, DBS expects the REIT to benefit from local staycation demand and the World Economic Forum that will be held in Singapore in August. Acquisitions are anticipated to drive distribution per unit growth as the REIT looks to diversify its earnings base. DBS also notes that the redevelopment of the Science Park is an interesting prospect that has been overlooked by the market.
For CapitaLand, DBS notes the stock was added following its positive 4QFY2020 ended December 2020 results which exceeded expectations with operational and cash patmi at $860 million. In addition, the brokerage notes that CapitaLand’s share price has dropped 10% since January, calling it a “sell on rumour, buy on news” trade.
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Meanwhile, DBS has removed Frasers Centrepoint Trust from its picks due to its 5.1% underperformance relative to the STI, while UOB was also removed following its substantial 12.3% gain while DBS also see a possible near-term upside cap at $25.70. SPDR STI ETF was also removed, as DBS looks to “free up capital and switch to better alternatives should opportunities arise”.
As at 2.39pm shares in ART, FEHT and CapitaLand are trading at $1.09, 61.5 cents and $3.31 respectively.
