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Maybank keeps ‘neutral’ on S-REITs, names CICT as preferred pick

Khairani Afifi Noordin
Khairani Afifi Noordin • 2 min read
Maybank keeps ‘neutral’ on S-REITs, names CICT as preferred pick
This is amid normalising growth after the “Taylor Swift effect” wears off. Photo: Albert Chua/The Edge Singapore
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Maybank Securities’ Krishna Guha is keeping “neutral” on Singapore REITs amid normalising growth after the “Taylor Swift effect” wears off.

In his June 6 report, Guha notes that international visitor arrivals in April slowed to 1.36 million, following the high of 1.48 million in March. Consequently, room rates and revenue per available room (RevPAR) fell 6.6% and 13.6% from March. The performance was down across all the hotel categories from the prior month, he adds.

“Only luxury and upscale categories managed to grow their RevPARs on a y-o-y basis. Notwithstanding the slowdown in April, performance is still up from the prior year. Room rates and RevPAR are up 3.2% and 2.8%, respectively,” Guha highlights.

The ytd visitor arrivals stood at 5.71 million, up 41% y-o-y. Maybank views Singapore Tourism Board’s target of 15 million to 16 million visitor arrivals as achievable. The firm maintains its view of 2024 RevPAR growth of 3% y-o-y to $232 compared to 2023’s $226, led by occupancy. 

In April, retail sales fell 1.2% y-o-y. Excluding motor vehicles, retail sales fell 4.5% y-o-y. The decline was broad-based, with apparel and footwear declining 16.2%. Food and beverage sales, on the other hand, grew 4.7% y-o-y. The total ytd retail sales excluding motor vehicles stood at $13.8 billion, unchanged from a year ago. 

The softening is not surprising, Guha says. “Discretionary spending is likely to be lower in an uncertain economic environment. Visitor arrivals fell in April and tourist-spending behaviour has likely changed. This has been visible in REIT results for the quarter ending March,” he adds.

See also: Grab Holdings ‘undervalued’ despite multiple growth catalysts and levers: Morningstar

Maybank is keeping its “buy” ratings on CapitaLand Integrated Commercial Trust C38U -

(CICT) and Frasers Centrepoint Trust J69U - (FCT), with the former being its preferred pick. CICT is a proxy for Singapore’s commercial real estate and will benefit from a diversified revenue profile and its strong credit, Guha says. 

Meanwhile, FCT is a suburban retail pure play with a strong track record of distribution per unit (DPU) and net asset value (NAV) growth. It is strategically repositioning its portfolio towards prime suburban malls, Guha points out.

“While we are mindful RevPAR growth in hospitality may be muted henceforth, the sector offers a relatively high average yield of 6.5% and trades at a 30% discount to book. Further, master leases and/or long stay assets along with a diversified geographic footprint will cushion any revenue shortfall from Singapore,” he concludes.

As at 3.34pm, units in CICT and FCT are trading at $2 and $2.21 respectively. 

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