Broker's take: Muted outlook for Singapore Reits

OCBC Investment Research: Following the conclusion of the Q2 CY2015 results season, we note that out of the 23 S-Reits (real estate investment trusts) under our coverage, all four hospitality Reits reported earnings which fell short of our expectations, while the rest delivered results which were in-line.

Despite the positive boost from the SEA Games in June, it was not sufficient to offset continued softness in tourist arrivals and weak corporate sentiment.

We also note the trend of continued moderation in rental reversions across the various sub-sectors, and Reit Managers are largely cautious on the outlook.

We opt to maintain 'neutral' on the S-Reits sector for now, despite the FTSE ST Reit Index plunging to a 3-year low recently.

Nevertheless, we do see some opportunities to bargain hunt for selective stocks, and recommend Frasers Centrepoint Trust (BUY; target price: S$2.24), Keppel DC Reit (BUY; target price: S$1.24), Frasers Commercial Trust (BUY; target price: S$1.65) and Starhill Global Reit (BUY; target price: S$0.93) as our top sector picks.