Outperformance in S-Reits in STI reserve list

WITH a 7.6 per cent gain in total returns for the year-to-date, the Straits Times Index (STI) remained among the best performing stock benchmarks globally this year. Based on data from FTSE Russell as at Jun 30, 2022, there are 7 S-Reits in the STI with combined indicative weight of more than 14 per cent. For the June 2022 quarterly review, FTSE Russell announced that there were no changes to the constituents of the STI and the next review is expected to take place in early September 2022.

Post the June review, the STI reserve list, which consists of the 5 highest ranking non-constituents of the STI, were: Olam International, Suntec Reit, Keppel Reit, Frasers Centrepoint Trust and Mapletree North Asia Commercial Trust (MNACT). Four out of the 5 stocks in the STI reserve list were in the S-Reits and Property Trusts sector. The stocks on the reserve list will replace any STI constituents that become ineligible as a result of corporate actions before the next review.

With the merger of Mapletree Commercial Trust and MNACT to form Mapletree Pan Asia Commercial Trust (MPACT), MNACT is expected to be replaced in the STI reserve list during the upcoming September review while the index weight of MPACT is also expected to be revised.

The 3 remaining S-Reits in the STI reserve list saw average year-to-date total returns of 4.4 per cent, outperforming the 7 S-Reits constituents within the STI, which saw average declines of 3.6 per cent during the same period.

Suntec Reit, in its latest 1H2022 financial release, declared distribution per unit (DPU) of 4.810 cents for the period, which was 15.8 per cent higher year-on-year. The Reit attributed the higher DPU to better gross revenue, which grew 22 per cent year-on-year, and net property income (NPI), which increased 35.8 per cent year-on-year. This was driven mainly by contributions from The Minster Building and Nova Properties in London as well as Suntec City in Singapore.

Suntec Reit’s manager observed good recovery of businesses at Suntec City Mall and Suntec Convention. It also noted that with the easing of safe management measures in April 2022, both mall traffic and tenant sales posted strong growth, with tenant sales exceeding pre-pandemic levels for 3 consecutive months from April to June. The Reit is also expecting strong revenue contribution from its Singapore office portfolio, driven by tight vacancy and limited supply with continual demand from Technology, Media and Telecommunications and Financial Services sectors.

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Keppel Reit, in its latest 1H2022 financial release, noted that distribution to unitholders grew 4.6 per cent year-on year to $110.5 million while DPU for the period increased 1.0 per cent year-on-year to 2.97 cents. During the period, Keppel Reit secured a new A$100 million green loan facility, bringing its total green borrowings to approximately half of its total borrowings.

Frasers Centrepoint Trust (FCT), in its latest 3Q2022 business update, noted that its retail portfolio committed occupancy eased slightly from 2Q2022 largely due to pre-termination by an anchor tenant, but maintained at a healthy rate of 97.1 per cent. The trust is in advanced negotiations with replacement tenants for this space. FCT also noted that its 3Q2022 tenants’ sales and shopper traffic grew 23 per cent and 32 per cent year-on-year respectively. SGX RESEARCH

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.

Source: SGX Research S-Reits & Property Trusts Chartbook.