[SINGAPORE] The reporting season for Singapore real estate investment trusts (S-Reits) has begun against a backdrop of higher interest rates, giving investors a window to assess how individual trusts are navigating the changing macroeconomic environment.
As at Oct 14, a total of 26 S-Reits have confirmed the release of their latest financial results or business updates between Oct 21 and Nov 6. Of these, three will report full-year financial results, three will report first-half financial results, and 20 will provide quarterly business updates.
Aims Apac Reit (AA Reit) kicked off the season with its financial results on Oct 15, reporting a 4 per cent increase in distribution per unit (DPU) for H1 FY2027. Net property income rose 11.1 per cent, driven by acquisitions, completed asset enhancement initiatives and lower property expenses.
It also reported positive rental reversions of 5.7 per cent and stable portfolio occupancy of 93.7 per cent. Borrowing costs fell to S$15.4 million from S$16 million a year earlier, with blended debt funding cost falling to 3.9 per cent from 4.2 per cent.
Ahead of its earnings release, USmart initiated coverage of AA Reit with an “outperform” rating on Oct 5, noting that the Reit was expected to benefit from resilient industrial income and continued DPU growth, balanced against a higher post-redemption debt burden.
While inflation and the Federal Reserve’s 25-basis-point rate hike in September continue to dominate headlines, analysts remain broadly optimistic about the resilience of the S-Reit sector.
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Phillip Securities Research maintained its overweight recommendation on S-Reits, citing stable sector operating fundamentals. With valuations still at a discount to book, the analyst notes further re-rating potential, particularly for S-Reits with strong balance sheets. Retail-focused Reits remain a preferred segment, underpinned by resilient tenant sales and limited new supply.
S-Reits with significant retail exposure include Frasers Centrepoint Trust and Lendlease Global Commercial Reit (LReit), which are scheduled to release their results on Oct 22 and Oct 30, respectively.
Analysts from DBS Group Research noted in an end-September report that despite the recent rate hike, the muted S-Reit price reaction suggested that much of the near-term rate risk had already been priced in.
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The analysts noted that S-Reit balance sheets are better protected today, with more staggered maturities and many Reits still refinancing expensive 2022 to 2023 debt at lower all-in rates. Meanwhile, funding conditions in Singapore also remain supportive, with the Singapore Overnight Rate Average well below US rates.
DBS highlighted S-Reits such as CapitaLand Integrated Commercial Trust , Parkway Life Reit and LReit as growth plays; Mapletree Logistics Trust and CapitaLand Ascendas Reit for their valuation appeal; and Suntec Reit as a value-unlocking play.
These S-Reits demonstrate balance-sheet resilience and relatively high levels of fixed or hedged debt. About half of DBS’ preferred S-Reits have gearing ratios below the S-Reit average of 38 per cent, based on the latest quarterly filings.
Elsewhere, Suntec Reit announced on Sep 21 that it had undertaken a strategic review following the change in its sponsor. The review outlined plans to grow its Singapore portfolio, reduce its overseas exposure starting with Australia, and improve its capital structure by lowering leverage and/or undertaking unit buybacks.
RHB Research maintained its “buy” recommendation on Sep 22, viewing the strategy as a potential value-unlocking move, although execution and mitigating the impact on DPU remain key considerations.
Against this backdrop, the upcoming reporting season will allow investors to assess whether resilient operating fundamentals and ongoing portfolio initiatives are translating into performance across the S-Reit sector. SGX RESEARCH
Chan Rui Qi is director, and Raphael Lim is associate director of capital market development at SGX.
For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the S-Reits & Property Trusts Chartbook.