These 3 S-REITs May Outperform in 2024

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Investors have grown more optimistic about the REIT sector in recent months, following a weak performance in the earlier part of 2023 as share prices responded to signs that inflation is under control. This change in sentiment occurred after the US Federal Reserve pivoted to a more dovish stance in its December meeting and signaled that it will likely cut rates in 2024.

S-REITs recorded one of their best months ever with a 9% rally in December 2023, extending from a near 7% gains recorded in November.

Here we look at 3 REITs that may outperform in 2024, which we selected using the following three additional criteria.

REIT Ticker (SGX) 2023 share performance (%) Yield (%) P/B (times)
AIMS APAC OSRU +5 7.8 0.9
Starhill Global CRPU -2 7.8 0.6
Mapletree Pan Asia Commercial N2IU -6 6.6 0.8

Criteria #1

The FTSE ST REIT index and IEdge S-REIT index have both recorded a FY2023 performance of about +7%, after being in the negative range for most of 2023. We will identify REITs that have underperformed their peers with the potential for a mean reversion.

Criteria #2 – Yield above 6.3%

The 10-year MAS Benchmark government bond rate is currently at about 2.9%, with the average yield spread at 338 bps. This means that the average REIT yields about 6.3%. We will look for REITs yielding above 6.3%

Criteria #3 – P/B below 1.03 times

The REIT index is currently at about 0.85x, We will also look for REITs that are trading below 1.03x P/B as an indicator of their potential to catch up to the 10 year average.


AAREIT is one of the few REITs that has been able to grow its distribution to unitholders amidst an uncertain market environment with vacancies and high interest rate.

Source: AAREIT 1H24 Investor Presentation

AAREIT achieved a 4.4% increase in Gross revenue for 1HFY24 and a 5.1% increase in net property income.

Distributions to unitholders increased 7.1% YoY but distribution per unit decreased by 1.1% due to the recent equity fund raising of S$100 million, which fortified its balance sheet and put its gearing at 32.1%. This makes it one of the lowest among the industrial S-REITs and the entire S-REIT population.

AAREIT maintained a strong rental reversion of 37.7% for 1H FY2024 and a resilient portfolio occupancy at 98.1% compared to the JTC national average of 88.9%. It also has a long portfolio weighted average lease expiry (WALE) of 4.2 years. However this is weighted towards its business park segment with a WALE of 8.2 years, while its logistics & warehouse segment had a WALE of 1.7 years.

AAREIT maintained a diversified and high-quality tenant base with 81.1% of rental arising from tenants in defensive industries. Its top 10 tenants account for 51.5% of rental income, including well-known and stable companies such as Woolworths, Optus, Illumina, Kintetsu World Express and Schenker.

The equity fund raising allowed the REIT to reduce gearing by 3.3% and to capture opportunities in the uncertain market environment. The REIT plans to use the proceeds to fund asset enhancement initiatives and acquisitions.

Source: AAREIT 1H24 Investor Presentation

AAREIT also maintains a strong capital management profile with the cost of funds increasing by just 1% YoY. There are also no refinancing requirements in FY24.

AAREIT is optimistic about its key markets, namely Singapore and Australia. Specifically, Singapore’s manufacturing sector remains resilient, reinforcing its appeal as an attractive regional hub. Demand continues to outpace supply, and rents for most industrial properties remains on an upward trend. Singapore continues to attract advanced manufacturing, logistics, biomedical and food sectors, with several corporations expanding their facilities or looking to establish a presence in Singapore.

2) Starhill Global (SGX: P40U)

SGREIT recently renewed its master lease with Toshin, the tenant occupying most of the retail area in its flag ship Ngee Ann City property, known as Takashimaya to locals.

The previous lease commenced in June 2013 and was originally set to expire in June 2025, causing some uncertainty among investors. The early renewal removed this overhang as Toshin accounted for nearly a quarter of Starhill’s gross rent.

The Renewed Master Lease is for an initial term of 12 years, commencing from June 2025 and expiring on June 2037. In addition, the Renewed Master Lease may be further renewed (i) at the option of either party for a further 6 years to expire on June 2043, and (ii) at the option of Toshin for a further 3 years to expire on June 2046.

The base rent of the new master lease for the first three years shall be the higher of (i) an agreed sum that is approximately 1% above the existing base rent under the Current Master Lease; and (ii) the prevailing market annual rental value as at the commencement of the Renewed Master Lease.

Additionally, an annual turnover rent (“Annual Turnover Rent”) is payable, comprising a portion of Toshin’s annual operating income over and above agreed revenue and profit margin thresholds. This profit-sharing arrangement provides potential upside for SGREIT while taking into consideration Toshin’s profit margin. There is no profit-sharing component in the Current Master Lease.  

As part of the Renewed Master Lease, SGREIT has agreed to contribute up to S$5.2 million to Toshin for renovation and upgrading works to be carried out on the premises. The asset enhancement will ensure the mall is upgraded and maintained as a high-class and prestigious shopping complex. This would enhance the remaining areas not leased by Toshin, as well as the office complex situated at the same site.

SGREIT’s FY23 earnings was also stable, with Gross Revenue and DPU flat YoY as higher finance expenses of 4.4% offset the net property income gain of 2.2%, which arose from lower property expenses.

Capital management remains healthy for SGREIT as gearing stood at 36.7% with an average interest cost of 3.67% for FY23 and a fixed debt ratio of 84%.

3) Mapletree Pan Asia Commercial Trust (SGX: N2IU)

Unlike AAREIT and SGREIT, MPACT has not fared as well, mainly due to its diversified portfolio which has a 41% of its revenue from China, Hong Kong, Japan and Korea. These countries have experienced underperformance or have returns affected by foreign exchange headwinds.

On the bright side, MPACT generates 59% of its revenue from its core Singapore holdings, mainly from the MCT portion of its portfolio which will serve to keep its total portfolio robust until its overseas properties recover.

MPACT’s 2QFY24 results performed slightly better than its 1QFY24 results across all key measures but when comparing YoY, the DPU was 8.2% lower, mainly because of higher property expenses, with utility expenses accounting for half the increase, as well as higher finance costs.

MPACT has about 45% of its net property income arising from its two sizeable Retail assets, VivoCity in Singapore and Festival Walk in HK. MPACT actively manages and enhances these trophy assets. For example, VivoCity continues to excel and MPACT is already initiating enhancements on an F&B cluster on Level 1 to further elevate the mall’s performance. In Hong Kong, Festival Walk continues to adapt with a retail mix increasingly aligned with local preferences, and has seen improving operational metrics.

MPACT has also always been proactive with its capital management strategies, increasing the fixed rate debt from 74.2% to 79.9%. MPACT also swapped a portion of HKD loans into CNH, optimising the debt mix, reducing the HKD component from 30% to 27% and increasing the CNH component from 0.3% to 4% of the total debt.

This adjustment better aligns MPACT’s debt with the AUM composition, yielding risk management and most importantly interest rate savings with HKD loans costing more than CNH loans in the current interest rate environment.

MPACT’s leverage ratio stood at 40.7%, levels similar to those seen at the time of the merger while its weighted average cost of debt stands at 3.34%, only 0.9% higher than a year ago, despite a negative outlook placed on its corporate rating by Moody’s.

Closing statements

These three REITS fit our three criteria, namely, underperforming the broader index, a yield above the average yield of 6.3% and a price-to-book ratio below the long-term average.

These three REITS are also very strong fundamentally. AAREIT has grown its revenue and DPU in spite of the current macroeconomic environment and took the chance to reduce its gearing by an opportunistic equity fund raising.

SGREIT was able to lock in a key tenant for nearly the next two decades, not only at a higher base rate but also with a new turnover rent fee which will enable the REIT to capture any potential upside should footfall and tourism in the Orchard Road precinct improve.

MPACT has been affected by its overseas assets and a key requirement for the REIT to outperform in 2024 would be for its assets in China and Hong Kong to improve year-on-year while we expect its Singapore assets to continue from its position from strength.

All three REITs also have excellent balance sheet and prudent capital management strategies in place, giving potential investors the confidence that they may outperform their peers in 2024.

To learn more about how to invest in Singapore REITs, read our comprehensive guide on:
How to Invest in Singapore REITs 2024

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