On the back of new Covid-19 measures that will be effective from Sept 27 to Oct 24, DBS Group Research analysts Derek Tan, Rachel Tan, Dale Lai and Geraldine Wong are advising investors to “seek shelter in structural growth names”.

These include industrial S-REITs such as Mapletree Logistics Trust (MLT), Frasers Logistics & Commercial Trust (FLCT), Ascendas REIT (A-REIT), ARA LOGOS Logistics Trust (ALLT) and ESR-REIT.

Selected retail and office S-REITs such as Suntec REIT, Mapletree Commercial Trust (MCT) and Frasers Centrepoint Trust (FCT) are also within the analysts’ top picks.

Under the hospitality S-REITs sub-sector, Ascott Residence Trust (ART) is the team’s “medium term pick” as travel returns.

The government, on Sept 24, introduced a new round of curbs that include the reducing of dining-in groups to two from five previously. Working from home (WFH) is, again, the default. Social gatherings have also been limited to groups of two from five previously.

The way the team sees it, the measures will disrupt the recovery of businesses built up over the past month.

“It could also have long-term impact on the office and retail landlords, with the latter potentially being affected the most,” they write in a Sept 27 report.

On this, the team sees potential risks that may stem from higher vacancy rates due to owners choosing to close down their businesses, as well as further rental support beyond the expected 1.5 months’ worth in 2021/

Office focused S-REITs also face risks as the “the runway for landlords to price-up rents given looming supply in 2023/24 is now shorter”.

On this, investors looking to buy their “preferred names” should do so, given the current share price retreat, says the team.

The analysts also note that any retreat in share price is “likely fleeting”.

Furthermore, key retail and office proxies such as FCT, CapitaLand Integrated Commercial Trust (CICT) and Suntec REIT are already at year-to-date (y-t-d) lows and below historical average valuations (on a yield and price-to-net asset value or P/NAV basis).

The lows imply that most negatives are already priced in and that the share prices will likely see support, add the analysts.

“We, however, note that selected names like SPH REIT, Starhill Global (SGREIT), Lendlease Global Commercial REIT (LREIT) are trading 5%-10% above y-t-d lows due to recent news of EPRA NAREIT indexation catalysts and these have higher risks of a near term correction as trades unwind,” they write.

Photo: Bloomberg