As financial markets continue to rebound from the impact of Covid-19, several Singapore-listed REITs (S-REITs) could ride on the recovery, according to analysts.
Phillip Securities says its top picks are Manulife US REIT (MUST) and Ascendas REIT (A-REIT).
The brokerage notes that the former has a long weighted average lease expiry (WALE) of 5.7 years and lower downsizing risks in the mature, remote-working-adjusted US office market.
The latter, it says, is positioned to capture new economy sectors.
The brokerage adds that some 93% of A-REITs assets are hi-spec, logistics and business park assets catering to the biomedical, hi-tech, e-commerce and knowledge-driven industries.
“These counters look attractive at current valuations and will remain resilient despite the weaker sector outlook, in our view,” Phillip Securities analyst Natalie Ong writes in a Jan 18 note.
SEE: PhillipCapital recommends investors 'look beyond near-term weakness' for S-REITs
Phillip Securities has “buy” calls for both MUST and A-REIT with target prices of 92 US cents and $3.61 respectively.
Meanwhile, UOB Kay Hian (UOB KH) says its top picks are ARA LOGOS Logistics Trust, Far East Hospitality Trust (FEHT), Lendlease Global Commercial REIT (LREIT), Suntec REIT and United Hampshire US REIT.
The brokerage says ARA LOGOS has a diversified tenant base, with its top 10 tenants accounting for 52.6% of gross rental income as at Sept 20.
FEHT, it notes, is less impacted from Covid-19 due to its master lease structure, under which fixed rents accounted for 72% of its 2019 gross revenue from hotels and serviced residences.
On LREIT, UOB KH says it will benefit from the recovery in visitor arrivals in 2022 as tourists account for 18% of shopper traffic at 313@Somerset.
As for Suntec REIT, the brokerage says it expects Suntec City Office to maintain positive rental reversion as the average expiring rent is low at $8.76psf pm for 2021.
Finally, UOB KH says United Hampshire US REIT has more than 70% of its base rental income derived from tenants in businesses deemed essential.
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Overall, UOB KH says the quality of these REITs’ real estate portfolios could be “comparable” to blue-chip S-REITs, although they are “underappreciated” by many investors.
“Their more attractive valuations could represent market inefficiency and opportunities for long-term investors,” UOB KH analysts Jonathan Koh and Loke Pei Hao write in a note dated Jan 11.
UOB KH has “buy” ratings for ARA LOGOS, FEHT, LREIT, Suntec REIT and United Hampshire US REIT with target prices of 85 cents, 74 cents, 97 cents, $1.75 and 92 cents respectively.
