ASTRA UPDATE ON SINGAPORE REITs
On October 28, 2022, we suggested investors to consider reviewing opportunities in Singapore REITs. We did some analysis on this market and highlighted these companies. The companies are CapitaLand Integrated Commercial Trust (C38U), Mapletree Industrial Trust (ME8U), and Parkway Life REIT (C2PU). After three months, we are reviewing them to see how the companies have performed.
According to the Development Bank of Singapore, Singapore REITs will remain appealing to investors due to their resiliency and attractive and growing distribution yields. In general, the Singapore property market is still a ‘safe haven’ for ultra-high net worth individuals (UHNWIs) to store their wealth. They are increasing their investments in Singapore's property market as a result of a number of factors, including the country's political stability and economic prosperity, as well as the city-state's status as a global financial and business hub.
The recent re-opening of China offers direct opportunities for Singapore, which will most likely be one of the primary beneficiaries. According to Goldman Sachs Group Inc., Singapore's GDP could increase by an additional 1.2% due to increased exports and tourism revenue. In terms of the companies we recommended, both CapitaLand Integrated Commercial Trust (C38U), a retail and office REIT, and Mapletree Industrial Trust (ME8U), an industrial REIT, stand to benefit greatly from this. We also wrote a detailed article about China's reopening and the opportunities that come with it; you can read it by clicking on this link(https://www.astragrouponline.com/post/short-term-opportunities-from-china-s-reopening).
Chart 1.1 presents the performance of each recommended REIT since the date we recommended it which was October 28, 2022. All REITs have performed well since then, but only CapitaLand Integrated Commercial Trust (+13.23%) has outperformed its index, the I-EDGE S-REIT INDEX (+9.66%).
Many factors have been attributed to this uptrend movement, including an improvement in global inflation rates and China's recent re-opening.
The table on the left shows the changes of their yield. When compared to the dividend yield in October 2022, these companies' dividend yields have changed only slightly. The dividend yields of CapitaLand and Mapletree are slightly lower compared to October 2022, while Parkway Life's dividend yield is higher. However, all of these companies saw continued increase in net property income, which is encouraging for long-term investors.
The top-performing CapitaLand Integrated Commercial Trust’s (C38U) net property income increased by 12.70% in the third quarter of 2022.
Mapletree Industrial Trust’s (ME8U) net property income increased 4.9% for the year 2022. Gross revenue also rose 5% and their occupancy slightly improved from 95.6% to 95.7% in 2022.
Parkway Life REIT’s (C2PU) distribution per unit in the second half of 2022 is up by 2.7% from 2021. This means more dividends are expected for the investors.
The continued weakness of the US dollar pushed Singapore's currency to a five-year high. This year, there is a growing expectation of lower inflation and less aggressive monetary tightening. The possibility of a recession in other advanced economies prompts investors to seek alternative safe havens. The current global macroeconomic outlook is favorable to Singapore, which could further strengthen the Singapore Dollar. This might help you to maximize foreign exchange opportunities.
We at Astra will continue to monitor developments in these companies, as well as the global and Singapore economy, to see how they affect our recommended REITs. Please contact us if you want to learn more about Singapore REITs. The next update on these companies will be in six months. Meanwhile, we are constantly exploring for new opportunities that will benefit our clients.