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Broker's take: Buying opportunities in S-Reits, says RHB Research
THE current correction in the prices of Singapore Reits (S-Reits) offers a buying opportunity given the widest spread against the yield of government bonds among the global Reit sector, RHB Research said in a report on Monday.
This comes as S-Reit prices have corrected by 3 per cent since the US elections amid a global shift in demand away from low-risk yield instruments.
"We believe the recent weakness presents buying opportunities and expect the sector to continue to be in favour in 2017," said RHB Research, which has an "overweight" rating on the sector. "We recommend a bottom up approach in selecting S-Reits and expect those with strong balance sheets, good quality portfolios and stock specific catalysts to outperform their peers."
It said S-Reits currently offer a forecast average yield of 6.6 per cent for fiscal 2017, a 430 basis-point spread over 10-year government bond yields and the highest among the global Reit sector. The yield on government bonds is typically used as a benchmark for the risk-free rate.
RHB Research's top picks are Ascendas Reit, CapitaLand Commercial Trust and Frasers Centrepoint Trust. In the small-cap space, it recommends Manulife US Reit and Viva Industrial Trust.