Brokers' take: Mixed commercial S-Reits to offer stronger growth in FY2022, DBS says

MIXED commercial S-Reits will offer stronger growth in 2022, propelled by the reopening of the economy and return-to-office recovery, DBS said in a sector note on Monday (Dec 13).

The research team projects a growth trajectory of 8-20 per cent for mixed commercial S-Reits from a low base in FY2021.

DBS's top picks in the sector were Suntec Reit T82U, CapitaLand Integrated Commercial Trust (CICT) C38U and Mapletree Commercial Trust (MCT) N2IU , as they offer the strongest distribution per unit growth compared to their peers for FY2022, according to DBS estimates.

"Looking beyond the risk from the Omicron variant, we believe that reopening and return-to-office will continue to be a key theme as 2022 unfolds and Singapore heads towards a new normal," the research team said.

DBS has "buy" calls on Suntec, CICT and MCT.

Its Suntec Reit target price of S$1.90 represents a potential upside of 27.5 per cent from the counter's trading price of S$1.49 as at 1.28 pm, while its CICT target price of S$2.50 represents a potential upside of 21.4 per cent from the stapled group's trading price of S$2.06 as at 1.28 pm on Monday (Dec 13).

Meanwhile, its MCT target price of S$2.45 represents a potential upside of 17.8 per cent from the stapled group's trading price of S$2.08 at the same time.

For most of 2021, Singapore remained on "work-from-home" as a default option. Nonetheless, office rents showed a stronger recovery as vacant spaces at key buildings are now close to fully committed, DBS said in a sector note.

Additionally, further delays in completion of large new incoming supply provide a longer runway for office rents to recover. DBS noted the increasing "flight to quality" trend shows that good quality prime office buildings are still desired and will likely lead the recovery come 2022.

"As we move onward to a third year of the pandemic in 2022, the adoption of hybrid working could increase as corporations increasingly adopt a more core-flex approach which gives more agility in times of uncertainty" DBS added.