Local Reits, transport operators should gain from Singapore's domestic reopening

SINGAPORE real estate investment trusts (Reits) and transport operators will likely benefit from easing Covid-19 restrictions locally, analysts said.

Thursday marks the start of the second of four steps in Singapore's plan to transition to an endemic Covid-19 status, with some movement restrictions eased and more people allowed back in offices and at events.

Transport operator ComfortDelGro C52 will likely be a key beneficiary, as more people use public transport amid an easing of movement measures, DBS Group Research said on Thursday. The counter's shares are down S$0.02 or 1.2 per cent at S$1.62 as at the midday break.

A return to the workplace will also benefit Reits with office assets. Under the new measures, working from home would no longer be the default, and up to 50 per cent of employees will be allowed back to the office.

These include Mapletree Commercial Trust N2IU and Suntec Reit T82U , DBS Group Research said.

Maybank Kim Eng analyst Chua Su Tye, who also recommends Mapletree Commercial Trust as one of his top buys, expects that Grade A office rents will likely be flat this year, against his initial estimate of a 5 per cent decline.

"Office Reits saw weak leasing in Q2, from the tightened Covid-19 measures in May, but demand is turning a corner, and the sector offers a cyclical opportunity as staff return to workplaces," Mr Chua said on Wednesday.

Additionally, DBS also expects Suntec Reit to gain from an increase in event sizes for meetings, incentive travel, conventions and exhibitions, or Mice, events. Large-scale gatherings such as religious services, cinema screenings, live events and marriage solemnisations can host up to 1,000 attendees, while wedding receptions can host up to 250 people, as long as all participants are fully vaccinated.

Units of Mapletree Commercial Trust were trading at S$2.10 as at the midday break, down S$0.01 or 0.5 per cent, while units of Suntec Reit were flat at S$1.47.

Mr Chua said, however, that he still preferred industrial Reits given their resilient distributions per unit (DPUs), stronger asset profiles and multiple catalysts.

He expects acquisitions will gain traction, as the industrial Reits move past resilient DPUs in H1, and grow their business park, data centre and logistics assets. The Reits he recommends include Ascendas Reit A17U and Mapletree Industrial Trust ME8U .

Units of Ascendas Reit fell S$0.02 or 0.6 per cent to trade at S$3.11 at the midday break, while units of Mapletree Industrial Trust were flat at S$2.93.

Meanwhile, retail-focused Reits should also benefit from an increase in occupancy limits for malls. Under the new measures, the maximum occupancy for public venues will be raised to 50 per cent for attractions, museums and libraries; and from one person per 16 square metres (sq m) of gross floor area for shopping centres and showrooms, to one person per 10 sq m.

DBS and Maybank KE's Mr Chua both said Frasers Centrepoint Trust J69U will likely be a beneficiary; Mr Chua also has CapitaLand Integrated Commercial Trust C38U in his list of top buys, while DBS mentioned Starhill Global Reit P40U .

As at the midday break, units of Frasers Centrepoint Trust were down S$0.03 or 1.3 per cent at S$2.32, CapitaLand Integrated Commercial Trust fell S$0.04 or 1.9 per cent to S$2.09, while Starhill Global Reit slipped 0.5 Singapore cent or 0.8 per cent to 61.5 cents.

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