SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>IREIT Global</h2>
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<h3>Growth spurt</h3>
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<li>1Q21 likely in line as portfolio occupancy was stable at 95.9%. No rent rebates or deferrals were provided.</li>
<li>New sale and leaseback of Decathlon portfolio in France to increase scale and diversification. Greater income stability from longer portfolio WALE of 4.5 years.</li>
<li>Maintain ACCUMULATE with lower DDM TP (7.85% discount rate) of S$0.68 from S$0.70. FY21e DPU dips 7% to reflect impending equity fund-raising. Our TP implies 7% yields and total prospective returns of 14.1%.</li>
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<p><strong>The Positives</strong></p>
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<li><strong>1Q21 likely in line.</strong> Portfolio occupancy inched up from 95.8% to 95.9% following expansion of an existing lease at Concor Park. Despite lockdowns in Germany and Spain, Covid-19’s impact on IREIT’s portfolio was limited. There were no requests for rental rebates or deferrals from tenants. All paid their rents in 1Q21.</li>
<li><strong>27 Decathlon properties in France to increase scale,</strong> diversification and WALE. IREIT’s AUM is expected to grow by 15.8% to €833.5m after its acquisition of 27 properties from Decathlon. The acquisition is expected to reduce its reliance on Germany, with the French portfolio expected to contribute 16% to portfolio GRI. The acquisition will also add a new trade sector – sports &amp; leisure – and one of the world’s largest sporting goods retailer to IREIT. GRI contribution by IREIT’s largest tenant, GMG, will drop from 39% to 33%. The 27 properties are 100% leased to Decathlon on triple-net leases with a WALE of 10 years and WALB of 6 years, extending its current WALE from 3.5 years to 4.5 years. We believe IREIT will be also able to benefit from strategic partner Tikehau Capital’s (TKO FP, Not Rated) market presence and expertise in the French real-estate market.</li>
<li><strong>Strategic stakeholders demonstrated support.</strong> IREIT intends to raise funds for the acquisition cost of €122.3mn via a private placement and/or a preferential offering. If the fund-raising includes a preferential offering, Tikehau Capital, CDL (CDL SP, BUY, S$10.68), AT Investments and IREIT - which collectively hold 56% of IREIT - have undertaken to subscribe for their full allotments. CDL will also subscribe to excess units to bring its total subscription to S$59mn. The balance will be funded by a bank loan of €51.4mn. IREIT’s market capitalisation is expected to increase by 20.7% to S$737mn. Should market conditions be unfavourable, IREIT may draw down a bridge loan facility from Tikehau Capital of up to €79.0mn.</li>
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<p><strong>The Negative</strong></p>
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<li>P<strong>ortfolio NAV to fall 6.2% after French acquisition</strong>; lower FY21e DPU by 7%. Assuming the rights issue and its Spanish and French properties were acquired on 1 January 2020 and operated through 31 December 2020, the French acquisition would have increased IREIT’s adjusted NPI yield from 5.5% to 5.7%. Adjusted DPU would have risen 1% to 2.84 € cents. This assumes €79.0m equity funding in the form of 212mn new units at S$0.596 a share and €51.4m of new debt. However, assuming the Spanish acquisition was completed on 22 October 2020, pro-forma FY20 DPU would have fallen by 2.2%. Aggregate leverage would have climbed by 1.2% to 36% while NAV would have fallen by 6.2% to €0.44. We lower FY21e DPU by 7% to factor in the impact.</li>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




IREIT Global




Growth spurt





1Q21 likely in line as portfolio occupancy was stable at 95.9%. No rent rebates or deferrals were provided.
New sale and leaseback of Decathlon portfolio in France to increase scale and diversification. Greater income stability from longer portfolio WALE of 4.5 years.
Maintain ACCUMULATE with lower DDM TP (7.85% discount rate) of S$0.68 from S$0.70. FY21e DPU dips 7% to reflect impending equity fund-raising. Our TP implies 7% yields and total prospective returns of 14.1%.





The Positives

1Q21 likely in line. Portfolio occupancy inched up from 95.8% to 95.9% following expansion of an existing lease at Concor Park. Despite lockdowns in Germany and Spain, Covid-19’s impact on IREIT’s portfolio was limited. There were no requests for rental rebates or deferrals from tenants. All paid their rents in 1Q21.
27 Decathlon properties in France to increase scale, diversification and WALE. IREIT’s AUM is expected to grow by 15.8% to €833.5m after its acquisition of 27 properties from Decathlon. The acquisition is expected to reduce its reliance on Germany, with the French portfolio expected to contribute 16% to portfolio GRI. The acquisition will also add a new trade sector – sports &amp; leisure – and one of the world’s largest sporting goods retailer to IREIT. GRI contribution by IREIT’s largest tenant, GMG, will drop from 39% to 33%. The 27 properties are 100% leased to Decathlon on triple-net leases with a WALE of 10 years and WALB of 6 years, extending its current WALE from 3.5 years to 4.5 years. We believe IREIT will be also able to benefit from strategic partner Tikehau Capital’s (TKO FP, Not Rated) market presence and expertise in the French real-estate market.
Strategic stakeholders demonstrated support. IREIT intends to raise funds for the acquisition cost of €122.3mn via a private placement and/or a preferential offering. If the fund-raising includes a preferential offering, Tikehau Capital, CDL (CDL SP, BUY, S$10.68), AT Investments and IREIT - which collectively hold 56% of IREIT - have undertaken to subscribe for their full allotments. CDL will also subscribe to excess units to bring its total subscription to S$59mn. The balance will be funded by a bank loan of €51.4mn. IREIT’s market capitalisation is expected to increase by 20.7% to S$737mn. Should market conditions be unfavourable, IREIT may draw down a bridge loan facility from Tikehau Capital of up to €79.0mn.

The Negative

Portfolio NAV to fall 6.2% after French acquisition; lower FY21e DPU by 7%. Assuming the rights issue and its Spanish and French properties were acquired on 1 January 2020 and operated through 31 December 2020, the French acquisition would have increased IREIT’s adjusted NPI yield from 5.5% to 5.7%. Adjusted DPU would have risen 1% to 2.84 € cents. This assumes €79.0m equity funding in the form of 212mn new units at S$0.596 a share and €51.4m of new debt. However, assuming the Spanish acquisition was completed on 22 October 2020, pro-forma FY20 DPU would have fallen by 2.2%. Aggregate leverage would have climbed by 1.2% to 36% while NAV would have fallen by 6.2% to €0.44. We lower FY21e DPU by 7% to factor in the impact.


















(Non-SGX Report) IREIT Global: Growth Spurt

Acrophyte Hospitality Trust / Equity Bottom-Up

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    <div class='content-caption'>REIT watch</div>
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<p>WITHIN Singapore's Reits &amp; Property Trusts (S-Reits) that are listed for trading, there are five (ARA US Hospitality Trust, Manulife US Reit, Prime US Reit, United Hampshire US Reit, Keppel Pacific Oak US Reit) with 100 per cent of assets located in the US and three (IReit Global, Cromwell European Reit, Elite Commercial Reit) with 100 per cent of their assets in Europe.</p>

<p>These eight S-Reits have an average distribution yield of 7.5 per cent and generated positive average total returns of 8.9 per cent in the 2021 year-to-date till May 12.</p>

<p>In the past week, Cromwell European Reit (CE Reit), Manulife US Reit (MUST) and United Hampshire US Reit (UHU Reit) published their business/operational updates for the first quarter of 2021. Common outlook expectations revolved around the recovery of economic activities in 2021 as vaccination roll-outs progress, restrictions ease, daily activities resume and employment data rebound.</p>

<p>With most of Europe still under tight restrictions during the quarter, GDP for the eurozone economy fell by 0.6 per cent quarter-on-quarter, based on preliminary data released by Europe's statistics office Eurostat. CE Reit noted that, barring a further deterioration of the current Covid-19 situation, the eurozone's 2021 GDP growth is projected at 4.1 per cent (according to Oxford Economics).<br><br>
CE Reit's gross revenue and net property income (NPI) declined marginally by 0.1 per cent and 0.4 per cent, respectively for Q1 FY2021. This was attributed to prolonged Covid-19 lockdowns in most of CE Reit's countries of operations. However, the Reit believes that there will be higher demand for light industrial /logistics space as e-commerce continues to expand in 2021, supplemented by further demand coming from the reconfiguration and expansion of supply chains so as to be better prepared for future disruptions and consumer demand shocks. In March 2021, CE Reit completed the acquisition of 11 modern logistics assets in Czech Republic and Slovakia. The Reit aims to increase exposure to logistics to 50 per cent of portfolio asset under management (AUM), up from the current 38 per cent.<br><br>
In contrast to Europe's GDP contraction in the Q1 2021, the US reported a quarter-on-quarter GDP growth of 1.6 per cent. Both MUST and UHU Reit noted that the GDP rebound indicates momentum coupled with improving unemployment rate, fast-paced vaccination roll-out and two rounds of federal stimulus payments.</p>

<p>In its Q1 FY2021 operational update, MUST reported strong lease renewals (93.6 per cent of leases by NLA) but minimal new leases as prospective tenants continue to stay cautious. Looking forward, MUST expects post Covid-19 themes such as the acceleration of population and company migration, growing technology sector, strong demand for healthcare and fast developing knowledge economy to provide uplift to the Reit. MUST intends to target cities that are business-friendly, have growing technology and healthcare industries as well as robust population growth.</p>

<p>Compared to IPO forecasts, UHU Reit's Q1 FY2021 distributable income was up 1.3 per cent while gross revenue and NPI were down 1.9 per cent and 1.8 per cent respectively. UHU Reit noted that, according to the National Retail Federation (NRF), US retail sales are expected to grow between 6.5 per cent and 8.2 per cent in 2021, underpinned by healthy consumer fundamentals, pent-up demand and widespread vaccination. This was evident in the new and renewal leases signed this quarter, most of which were food &amp; beverage and consumer services tenants.</p>

<p>The Reit also expects trends such as increase in consumer awareness of the benefits of self-storage, an increasingly mobile population and the decluttering of homes to create more efficient workspaces to continue even as the country transitions to a post-Covid environment.<br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/china-poised-to-drive-economic-growth"> </a><a href="https://www.businesstimes.com.sg/companies-markets/western-s-reits-sanguine-on-post-covid-outlook">read</a><a href="https://www.businesstimes.com.sg/companies-markets/bulk-of-s-reits-in-key-global-real-estate-indices"> </a>the original version.</em></strong></p>
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    REIT watch


WITHIN Singapore's Reits &amp; Property Trusts (S-Reits) that are listed for trading, there are five (ARA US Hospitality Trust, Manulife US Reit, Prime US Reit, United Hampshire US Reit, Keppel Pacific Oak US Reit) with 100 per cent of assets located in the US and three (IReit Global, Cromwell European Reit, Elite Commercial Reit) with 100 per cent of their assets in Europe.

These eight S-Reits have an average distribution yield of 7.5 per cent and generated positive average total returns of 8.9 per cent in the 2021 year-to-date till May 12.

In the past week, Cromwell European Reit (CE Reit), Manulife US Reit (MUST) and United Hampshire US Reit (UHU Reit) published their business/operational updates for the first quarter of 2021. Common outlook expectations revolved around the recovery of economic activities in 2021 as vaccination roll-outs progress, restrictions ease, daily activities resume and employment data rebound.

With most of Europe still under tight restrictions during the quarter, GDP for the eurozone economy fell by 0.6 per cent quarter-on-quarter, based on preliminary data released by Europe's statistics office Eurostat. CE Reit noted that, barring a further deterioration of the current Covid-19 situation, the eurozone's 2021 GDP growth is projected at 4.1 per cent (according to Oxford Economics).  
CE Reit's gross revenue and net property income (NPI) declined marginally by 0.1 per cent and 0.4 per cent, respectively for Q1 FY2021. This was attributed to prolonged Covid-19 lockdowns in most of CE Reit's countries of operations. However, the Reit believes that there will be higher demand for light industrial /logistics space as e-commerce continues to expand in 2021, supplemented by further demand coming from the reconfiguration and expansion of supply chains so as to be better prepared for future disruptions and consumer demand shocks. In March 2021, CE Reit completed the acquisition of 11 modern logistics assets in Czech Republic and Slovakia. The Reit aims to increase exposure to logistics to 50 per cent of portfolio asset under management (AUM), up from the current 38 per cent.  
In contrast to Europe's GDP contraction in the Q1 2021, the US reported a quarter-on-quarter GDP growth of 1.6 per cent. Both MUST and UHU Reit noted that the GDP rebound indicates momentum coupled with improving unemployment rate, fast-paced vaccination roll-out and two rounds of federal stimulus payments.

In its Q1 FY2021 operational update, MUST reported strong lease renewals (93.6 per cent of leases by NLA) but minimal new leases as prospective tenants continue to stay cautious. Looking forward, MUST expects post Covid-19 themes such as the acceleration of population and company migration, growing technology sector, strong demand for healthcare and fast developing knowledge economy to provide uplift to the Reit. MUST intends to target cities that are business-friendly, have growing technology and healthcare industries as well as robust population growth.

Compared to IPO forecasts, UHU Reit's Q1 FY2021 distributable income was up 1.3 per cent while gross revenue and NPI were down 1.9 per cent and 1.8 per cent respectively. UHU Reit noted that, according to the National Retail Federation (NRF), US retail sales are expected to grow between 6.5 per cent and 8.2 per cent in 2021, underpinned by healthy consumer fundamentals, pent-up demand and widespread vaccination. This was evident in the new and renewal leases signed this quarter, most of which were food &amp; beverage and consumer services tenants.

The Reit also expects trends such as increase in consumer awareness of the benefits of self-storage, an increasingly mobile population and the decluttering of homes to create more efficient workspaces to continue even as the country transitions to a post-Covid environment.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Western S-Reits sanguine on post-Covid outlook

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>IREIT Global</h2>
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<h3>Gearing up</h3>
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<p>Diversified earnings base with strategic acquisitions.</p>
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<p>Well spread out rental escalations</p>
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<p>Room for larger distributions</p>
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<p>We initiate coverage with BUY and TP of S$0.76</p>
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<p><strong>Enlarged and more diversified portfolio.</strong> IREIT’s acquisition of the Spanish Portfolio and recently proposed acquisition of retail portfolio in France reduces its key tenant, geographical, and sector concentration risks. We have assumed an EFR of EUR79m to part fund most recent deal, which supports a forward yield of 7.0% in FY22F.</p>
<p><strong>Stable and gradual increase in distributions</strong>. IREIT’s leases are stable and expected to rise gradually as they are mostly pegged to CPIs. Based on our estimations, we believe IREIT is positioned to benefit from rental escalations that are well spread out over the next few years.</p>
<p><strong>Room for larger distributions and acquisitions</strong>. The occupancy rates for its Spanish Portfolio averaged 85.2% as at 31 December 2020 and we believe this represents an opportunity to increase its rental income. We also foresee an opportunity to double its rental income at Berlin Campus in 2H24. We believe that more acquisitions are to come, and the next target could range EUR80-125m, which we have not priced in.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.






IREIT Global




Gearing up






Diversified earnings base with strategic acquisitions.


Well spread out rental escalations


Room for larger distributions


We initiate coverage with BUY and TP of S$0.76






Enlarged and more diversified portfolio. IREIT’s acquisition of the Spanish Portfolio and recently proposed acquisition of retail portfolio in France reduces its key tenant, geographical, and sector concentration risks. We have assumed an EFR of EUR79m to part fund most recent deal, which supports a forward yield of 7.0% in FY22F.
Stable and gradual increase in distributions. IREIT’s leases are stable and expected to rise gradually as they are mostly pegged to CPIs. Based on our estimations, we believe IREIT is positioned to benefit from rental escalations that are well spread out over the next few years.
Room for larger distributions and acquisitions. The occupancy rates for its Spanish Portfolio averaged 85.2% as at 31 December 2020 and we believe this represents an opportunity to increase its rental income. We also foresee an opportunity to double its rental income at Berlin Campus in 2H24. We believe that more acquisitions are to come, and the next target could range EUR80-125m, which we have not priced in.


















(Non-SGX Report) IREIT Global: Gearing Up

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    <div class='content-caption'>Up for the year</div>
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<p>ELEVEN smaller cap Reits in the iEdge S-Reit Index with market capitalisation under S$1 billion have all generated positive returns in Q1 2021. The 11 Reits posted 14.0 per cent total returns in the year-to-date (YTD) through to April 8, outperforming the index's 2.4 per cent total returns.</p>

<p>The top five best performing smaller cap Reits of the index in the YTD through to April 8 are: ARA Logos Logistics Trust (25.6 per cent), Sabana Shari'ah Compliant Reit (23.9 per cent), ARA US Hospitality Trust (22.2 per cent), First Reit and Lippo Malls Indonesia Retail Trust (both 16.9 per cent).</p>

<p>These five were also among the six best performing Reits in the overall iEdge S-Reit index, with Starhill Global Reit (market cap of S$1.3 billion) coming in fourth at 16.9 per cent total returns.</p>

<p>In terms of price-to-book ratios, the 11 smaller cap Reits trade at an average 0.86 times, while the index trades closer to 1.05 times.<br><br>
ARA Logos Logistics Trust (ALOG) has a portfolio of 27 logistics warehouses in Singapore and Australia valued at S$1.28 billion. In its recently published annual report, the Reit attributes its growth in 2020 to its new sponsor, Logos, which owns logistics spaces across the Asia-Pacific. ALOG's portfolio remained resilient and delivered a 3.4 per cent and 4.8 per cent growth in FY2020 gross revenue and net property income, respectively. The Reit also inked new leases and achieved positive rental reversion of 4.8 per cent in the financial year and has a gearing ratio of 39.0 per cent.<br><br>
Sabana Reit's portfolio has 18 Singapore properties across high-tech industrial, warehouse and logistics, chemical warehouse and logistics, and general industrial sectors with a total value of S$0.9 billion. In its FY2020 results, the Reit reported 2.29 cents for its H2 2020 distribution per unit (DPU), a 47.7 per cent increase year-on-year, bringing its full year DPU to 2.76 cents. Amid a challenging 2020, the Reit achieved positive rental reversion of 0.9 per cent and maintains a gearing ratio of 33.5 per cent. On March 10, the Reit announced that its NTP+ Mall at New Tech Park has received temporary occupancy permit and is set to open in Q2 2021.</p>

<p>ARA US Hospitality Trust (ARA H-Trust) is a stapled security with a portfolio of 41 upscale select-service hotels across 22 states in the United States operating under the Marriott and Hyatt brands. The trust notes in its latest annual report that despite having recorded a net property loss of US$5.0 million and nil distributable income in FY2020, all 41 hotels have since reopened in July 2020 and the trust has generated positive cash flows from operations for FY2020. ARA H-Trust remains confident in the long-term fundamentals of the US hospitality market. Its properties are oriented towards domestic transient leisure and business travellers and is less reliant on group and international demand.</p>

<p>SPH Reit, first to kick off the current reporting season for S-Reits, announced an improvement across its portfolio of retail malls. Gross revenue increased 4.9 per cent year-on-year and Q2 FY2021 DPU was issued at 1.24 cents, a 3.3 per cent increase quarter-on-quarter. SPH Reit noted that tenant sales at its Singapore malls have shown signs of recovery, following the phased lifting of safe distancing measures.</p>

<p>Frasers Logistics &amp; Commercial Trust (FLCT) has announced that it will join the Straits Times Index (STI) on April 13. FLCT will replace Jardine Strategic on the STI following Jardine Matheson's announcement on March 8 to simplify the parent company structure and acquire Jardine Strategic.<br><br><strong><em>REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/s-reits-under-s1b-lead-sector-in-q1-2021">read</a> the original version.</em></strong></p>
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    Up for the year


ELEVEN smaller cap Reits in the iEdge S-Reit Index with market capitalisation under S$1 billion have all generated positive returns in Q1 2021. The 11 Reits posted 14.0 per cent total returns in the year-to-date (YTD) through to April 8, outperforming the index's 2.4 per cent total returns.

The top five best performing smaller cap Reits of the index in the YTD through to April 8 are: ARA Logos Logistics Trust (25.6 per cent), Sabana Shari'ah Compliant Reit (23.9 per cent), ARA US Hospitality Trust (22.2 per cent), First Reit and Lippo Malls Indonesia Retail Trust (both 16.9 per cent).

These five were also among the six best performing Reits in the overall iEdge S-Reit index, with Starhill Global Reit (market cap of S$1.3 billion) coming in fourth at 16.9 per cent total returns.

In terms of price-to-book ratios, the 11 smaller cap Reits trade at an average 0.86 times, while the index trades closer to 1.05 times.  
ARA Logos Logistics Trust (ALOG) has a portfolio of 27 logistics warehouses in Singapore and Australia valued at S$1.28 billion. In its recently published annual report, the Reit attributes its growth in 2020 to its new sponsor, Logos, which owns logistics spaces across the Asia-Pacific. ALOG's portfolio remained resilient and delivered a 3.4 per cent and 4.8 per cent growth in FY2020 gross revenue and net property income, respectively. The Reit also inked new leases and achieved positive rental reversion of 4.8 per cent in the financial year and has a gearing ratio of 39.0 per cent.  
Sabana Reit's portfolio has 18 Singapore properties across high-tech industrial, warehouse and logistics, chemical warehouse and logistics, and general industrial sectors with a total value of S$0.9 billion. In its FY2020 results, the Reit reported 2.29 cents for its H2 2020 distribution per unit (DPU), a 47.7 per cent increase year-on-year, bringing its full year DPU to 2.76 cents. Amid a challenging 2020, the Reit achieved positive rental reversion of 0.9 per cent and maintains a gearing ratio of 33.5 per cent. On March 10, the Reit announced that its NTP+ Mall at New Tech Park has received temporary occupancy permit and is set to open in Q2 2021.

ARA US Hospitality Trust (ARA H-Trust) is a stapled security with a portfolio of 41 upscale select-service hotels across 22 states in the United States operating under the Marriott and Hyatt brands. The trust notes in its latest annual report that despite having recorded a net property loss of US$5.0 million and nil distributable income in FY2020, all 41 hotels have since reopened in July 2020 and the trust has generated positive cash flows from operations for FY2020. ARA H-Trust remains confident in the long-term fundamentals of the US hospitality market. Its properties are oriented towards domestic transient leisure and business travellers and is less reliant on group and international demand.

SPH Reit, first to kick off the current reporting season for S-Reits, announced an improvement across its portfolio of retail malls. Gross revenue increased 4.9 per cent year-on-year and Q2 FY2021 DPU was issued at 1.24 cents, a 3.3 per cent increase quarter-on-quarter. SPH Reit noted that tenant sales at its Singapore malls have shown signs of recovery, following the phased lifting of safe distancing measures.

Frasers Logistics &amp; Commercial Trust (FLCT) has announced that it will join the Straits Times Index (STI) on April 13. FLCT will replace Jardine Strategic on the STI following Jardine Matheson's announcement on March 8 to simplify the parent company structure and acquire Jardine Strategic.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - S-Reits under S$1b lead sector in Q1 2021

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong></em>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</p>
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<h2>IREIT GLOBAL</h2>
<h3>Another year of resilience</h3>
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<li>FY20 NPI and DPU at 102%/103% of our forecasts, in line. Rental collection exceeded 99%.</li>
<li>FY21 lease breaks/expiries minimal at 3.7%/3.3%. Portfolio occupancy remained high at 95.8%. Portfolio valuation increased by 1.2% with high occupancies anchored by blue-chip tenants in German portfolio.</li>
<li>Maintain ACCUMULATE with raised DDM TP (7.85% discount rate) of S$0.70, from S$0.68. Our TP implies yields of 7.3% and total prospective returns of 14.2%. FY21e DPU has been raised by 7% for better operational performance.</li>
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<p><strong>Results at a glance</strong></p>
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<p>Source: PSR, Company</p>
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<p><strong>The Positives</strong></p>
<p>+ <strong>FY20 better than expected, rental collection high.</strong> Gross revenue and NPI in FY20 were up 7.2% and 7.3% YoY respectively, following consolidation of its Spanish properties after their acquisition on 22 October 2020. FY20 NPI, distributable income and DPU were slightly better than expected, at 102%/104%/103% of forecasts. Rental collection exceeded 99%. Outstanding were rental rebates and deferrals granted to a few tenants.</p>
<p>+ <strong>High portfolio occupancy, minimal FY21 expiries, stable portfolio valuation.</strong> Portfolio occupancy remained high at 95.8%, though down 0.5% from a quarter ago as two tenants exercised their break option at Delta Nova IV. FY21 lease breaks/expiries are minimal at 3.7%/3.3% by gross rental income (GRI). Despite Covid-19, portfolio valuation increased by 1.2%. High occupancy of 99.6% anchored by blue-chip tenants led to a 2.3% valuation increase for its German portfolio. This constituted 82% of its total portfolio valuation. Valuation of its Spanish portfolio, in contrast, was down 3.5% due to longer vacancy assumptions.</p>
<p><strong>The Negativ</strong>e</p>
<p><strong>Chunky FY22 expiries, 5% likely de-risked</strong>. About 32.5%/24.6% of leases by GRI will be due for lease breaks/expiries in FY22. About 5% of the lease breaks are attributable to DRB* for its lease at Berlin Campus due in June 2022. DRB is likely to keep its lease as rental rates are attractive. It recently leased a new building adjacent to Berlin Campus for more than double Berlin Campus’ passing rents. Other properties up for lease breaks/expiries are IREIT’s Darmstadt and Munster Campus, leased by Deutsche Telekom (DT). IREIT has started to engage DT for early renewals.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




IREIT GLOBAL
Another year of resilience





FY20 NPI and DPU at 102%/103% of our forecasts, in line. Rental collection exceeded 99%.
FY21 lease breaks/expiries minimal at 3.7%/3.3%. Portfolio occupancy remained high at 95.8%. Portfolio valuation increased by 1.2% with high occupancies anchored by blue-chip tenants in German portfolio.
Maintain ACCUMULATE with raised DDM TP (7.85% discount rate) of S$0.70, from S$0.68. Our TP implies yields of 7.3% and total prospective returns of 14.2%. FY21e DPU has been raised by 7% for better operational performance.





Results at a glance






Source: PSR, Company





The Positives
+ FY20 better than expected, rental collection high. Gross revenue and NPI in FY20 were up 7.2% and 7.3% YoY respectively, following consolidation of its Spanish properties after their acquisition on 22 October 2020. FY20 NPI, distributable income and DPU were slightly better than expected, at 102%/104%/103% of forecasts. Rental collection exceeded 99%. Outstanding were rental rebates and deferrals granted to a few tenants.
+ High portfolio occupancy, minimal FY21 expiries, stable portfolio valuation. Portfolio occupancy remained high at 95.8%, though down 0.5% from a quarter ago as two tenants exercised their break option at Delta Nova IV. FY21 lease breaks/expiries are minimal at 3.7%/3.3% by gross rental income (GRI). Despite Covid-19, portfolio valuation increased by 1.2%. High occupancy of 99.6% anchored by blue-chip tenants led to a 2.3% valuation increase for its German portfolio. This constituted 82% of its total portfolio valuation. Valuation of its Spanish portfolio, in contrast, was down 3.5% due to longer vacancy assumptions.
The Negative
Chunky FY22 expiries, 5% likely de-risked. About 32.5%/24.6% of leases by GRI will be due for lease breaks/expiries in FY22. About 5% of the lease breaks are attributable to DRB* for its lease at Berlin Campus due in June 2022. DRB is likely to keep its lease as rental rates are attractive. It recently leased a new building adjacent to Berlin Campus for more than double Berlin Campus’ passing rents. Other properties up for lease breaks/expiries are IREIT’s Darmstadt and Munster Campus, leased by Deutsche Telekom (DT). IREIT has started to engage DT for early renewals.





















(Non-SGX Report) IREIT GLOBAL: Another Year of Resilience

Singapore

IREIT Global is a Singapore-listed real estate investment trust (REIT) that primarily invests in a portfolio of income-producing office, retail, and industrial properties across Europe. Its portfolio includes assets in Germany, Spain, and France. The company was listed on August 13, 2014, and its corporate office is located in Singapore.

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