Developers have had a tough 2020 between supporting their REITs, supporting their tenants, and having to revalue their hospitality portfolios downwards. Among the developers, JP Morgan likes CapitaLand — which is very diversified — and UOL Group for the Singapore reflation play. As part of the usual developers versus REITs battle, the large-cap developers are trading at discounts to their book values while the large-cap REITs are trading near or above their net asset values (NAVs).

Earnings for developers in FY2020 are likely to have been worse than in FY2019. Last year, both developers and REITs had to support their tenants over and above the rebates given by the government. Add to that two months of “circuit breaker” when malls and offices were virtually empty, and then a gradual reopening of the economy in phases.

These curbs, coupled with safe-distancing measures and continued restrictions on the number of people gathering together, are likely to depress mall visits, office occupancy and showflat visits. Hence, developer earnings excluding revaluations are likely to be lower y-o-y. On a positive note, these low levels of earnings provide a low comparable base for 2021 levels.

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