Following the news of Robinsons’ closure on Oct 30, DBS Group Research analysts Geraldine Wong, Derek Tan and Rachel Tan says the departure of the Al-Futtaim Group-owned department store is “unlikely to be one-off”.
Robinsons Singapore, on Oct 30, says it will be closing its remaining two stores at The Heeren and Raffles City Shopping Centre for good after suffering from at least six years of losses.
To the analysts, the closure didn’t come as a shock to them.
“While the timing came as a surprise to many, we note that department store formats have been struggling for years and the inability to establish an omni-channel presence has resulted in department stores rationalising their footprint over time,” they note in a Nov 2 report.
“The Covid-19 pandemic, which has further restricted these department stores from holding “atrium sales”, is putting further pressure on their revenues. Listed retail-focused S-REITs, which have proactively managed their exposures to department stores, have likewise declined over time and now account for only around 2-8% of revenues.”
A closer look into the Dubai-based Al Futtain group shows that they are one of the leading brand representatives in Singapore, with over 23 retail brands including familiar names such as Marks & Spencer, Zara and Mango under their portfolio.
The group oversees 111 retail outlets across these brands, with 56 of them in listed S-REIT retail malls.
“Robinsons may not be a “one-off” amongst its portfolio of brands given ongoing pressures due to capacity and travel limits,” they say.
“As such, the retail S-REITs’ fortunes are closely tied with that of the group. CMT, FCT, CapitaLand (at Jewel and ION Orchard) have the largest exposure by store count at 15, 11 and nine respectively. Orchard landlords such as SGREIT (nine stores), Lendlease REIT (seven stores) and VivoCity (eight stores) have close landlord-retailer relationships with the group,” they add.
As retail sales are gradually recovering to pre-Covid-19 levels as the country starts to reopen the economy and its borders, the analysts believe that selected S-REITs such as Frasers Centrepoint Trust (FCT), CapitaLand Mall Trust (CMT) and Lendlease Global Commercial REIT (LREIT) have malls with “dominant characteristics” which allow them to attract tenants. This in turn, will help keep the REITs’ malls’ occupancies higher than the industry average, and thus navigate well past the evolving landscape.
To this end, the analysts are positive on all three S-REITs with “buy” recommendations and target prices of $2.94, $2.40 and 90 cents for FCT, CMT and LREIT respectively.
AS at 4.29pm, units in FCT, CICT (formerly CMT) and LREIT are trading $2.13, $1.81 and 62.5 cents.
