Profile 1: Samantha, 26 years old, female (see cover story here)
Twenty-six-year-old Samantha has just started working and is about to get married. She stays in Jurong East and travels to the Central Business District (CBD) for work. She shops online for her clothes, shoes and IT gadgets regularly and buys groceries for her family at the shopping mall near her home twice weekly.
On weekends, she could be out shopping or clubbing with her friends, taking a taxi home after partying into the wee hours. Occasionally, she has a good meal with her family, joins them for a staycation at a local hotel or travels to Bali, Phuket or Hong Kong for the year-end holidays.
This profile is oversimplified and will not apply to everyone but it describes most of the activities of a young working adult. We will use Samantha’s activities to highlight some of the stocks investors can consider.
For example, the bus she travels on to work might belong to SBS Transit, which owns the majority of the buses on the road, as well as the North East Line and Downtown Line. When she takes the taxi back home from clubbing, it could be one from ComfortDelGro.
When she goes to an office building, chances are it is owned by one of the office REITs listed on the Singapore Exchange (SGX), like Keppel REIT or CapitaLand Integrated Commercial Trust (CICT), or if the office is in industrial parks, CapitaLand Ascendas REIT (CLAR) or Mapletree Industrial Trust (MINT).
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In terms of shopping, the shopping malls in downtown Singapore are owned by REITs like Starhill Global REIT for Ngee Ann City, or CICT for ION Orchard.
Some REITs are more diversified and own a range of properties, like Mapletree Pan Asia Commercial Trust (MPACT), which owns malls like VivoCity and office buildings like Mapletree Anson and Bank of America Harbourfront.
For the heartland mall sub-segment, Frasers Centrepoint Trust (FCT) is the dominant player. A sizeable portion of its property portfolio is located in the heartland, including malls such as Northpoint City, Tampines 1 and Waterway Point.
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What is the difference between downtown malls and heartland malls? Aren’t all malls equal? REITs derive most of their revenue from rentals, which means that if no one is in a mall spending money, tenants are not likely to rent space, and therefore, the REITs see lower earnings.
Research reports by analysts during the Covid-19 pandemic suggest that heartland malls are more resilient during lockdowns. This is because as people started to work from home, they still needed to head to the nearby mall to get their daily essentials but those in the CBD were left high and dry as shops and eateries remained shuttered.
For Samantha, a large part of her shopping can be done online and while the SGX does not have a direct e-commerce stock like Sea, which owns Shopee, or Alibaba Group Holding, the parent company of Lazada, it does have logistics providers and logistics REITs that can ride the rising trend of e-commerce.
In Singapore, the most well-known logistics providers are brands like Ninja Van or J&T Express. One that is listed is Singapore Post, which currently sees its fortunes in package delivery rather than snail mail.
Some logistics REITs, which basically manage warehouse space, are also indirect beneficiaries of the e-commerce boom. Packages in transit have to be stored somewhere secure so e-commerce platforms have to rent space from warehouses, some of which are owned by these REITs.
The big players in this space are Mapletree Logistics Trust (MLT) and Frasers Logistics and Commercial Trust (FLCT). While there are other REITs that are larger and have logistics properties, like CLAR, MLT and FLCT are predominantly composed of logistics assets.
MLT primarily has assets in the Asia Pacific, and as at June 30, it has a portfolio of 185 properties across the region with assets under management of $13 billion.
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FLCT has 105 properties with $6.7 billion of commercial value as at Sept 30, with 97 of those assets being logistics assets.
MLT expects the acceleration of e-commerce will continue to drive demand growth for logistics space, particularly modern logistics properties in prime locations. It also notes that Covid-19 has further underscored the importance of building supply chain diversification and resiliency.
For travel and hotels, these are not everyday expenses, but there are stocks that investors can look at to ride on the trend of recovering tourism as countries open up and tourists come to Singapore, or as Singapore residents start to travel for leisure and business.
A story last December from a Singaporean media outlet put it as such: “Singaporeans have two main pastimes, apparently, lamenting their predicaments and clearing their annual leave with overseas trips.”
An April article from travel news site Travel Market Report revealed that younger travellers, both millennials and Gen Z, are planning more travel post-pandemic than older travellers, though the vast majority of all generations are planning at least one trip this year.
Therefore, the big name to watch in the aviation industry on the SGX is undoubtedly the national carrier Singapore Airlines (SIA). But it is not just SIA. More travel means more demand for ancillary services, like maintenance and food.
Maintenance for SIA’s planes is provided by its subsidiary SIA Engineering, while Sats handles the ground operations at Changi Airport and airline catering.
Sats also provides food to not just airlines at Changi Airport, but also institutions such as prisons, hospitals, and military camps.
As such, the fortunes of these companies are inextricably linked to air travel, although Sats does have some form of diversification in the form of its food business and cargo handling.
But the life of Samantha only presents one perspective; mature investors hold different worldviews and investing attitudes.
See our suggestions for 40-year-old Joey and 65-year-old Robert.
