DMG says the low interest rate environment will support S-REITs prices in 2011; it maintains Overweight stance on the sector.

“We expect prices to be supported as investors continue to pursue yields. Investors are also likely to be attracted to assets that offer an inflation hedge by allowing for continuous re-pricing of cash flows with a dynamic earnings model.” 

 

Notes, tourist arrivals are expected +10% in 2011, thus expects hospitality counters, such as CDL Hospitality Trusts (J85.SG)—rated Buy, $2.39 target— to benefit from the influx of visitors. 

 

It adds, office rents are chalking up increasing rates of growth since 2Q10 and concerns about large volumes of shadow space coming on-stream have dissipated, on the back of brisk leasing activities. 

 

Suntec REIT (T82U.SG), rated Buy with $1.71 target, has reported strong increases in Suntec City office occupancy, while CapitaCommercial Trust (C61U.SG), rated Neutral, SD$1.55 target, “is confident that take up would come from both existing tenants expanding and newcomers.”