SINGAPORE (May 16): RHB Research is maintaining its “overweight” on S-REITs despite market worries over higher interest rates, preferring the hospitality and industrial sub-sectors which are poised to tap into demand growth.
Key to the improving market outlook for S-REITs is a pickup in broad-based demand and supply tapering across most sub-segments. When it comes to balance sheet strength, S-REITs are generally well prepared with 80% of debts are hedged to mitigate rising interest costs. Many have also started exploring new markets in their quest to deliver inorganic growth and diversify their presence.
S-REITs are currently trading at a 330bps spread to the Singapore’s 10-year bond yield. By comparison, the 10-year average mean spread stands at 410bps – excluding the Global Financial Crisis (GFC) peaks.