CFA Society Singapore
SINGAPORE (Oct 10): CGS-CIMB Securities continues to rate Singapore REITs as “overweight” following media reports that home-grown electronics retailer Newstead Technologies is currently in liquidation.
The retailer that also operated DigitalStyle, Nubox and @ notebook.com has stores located in Nex, Sim Lim Square, Suntec City, Marina Square, Bedok Mall, City Square Mall, Raffles City, Causeway Point, Jem, Tampines Mall, Waterway Point and Jurong Point.
The affected REITs from the closure of Newstead stores are Capitaland Mall Trust (CMT), Frasers Centrepoint Trust (FCT) and Suntec REIT (see figure 1).
The research house has as “hold” call on CMT with a target price of $2.21. Newstead’s Nubox occupies about 1,000 sf of floor space each in Raffles City (0.2% of total retail NLA), Tampines Mall (0.3% of total NLA) and Bedok Mall (0.4% of total NLA).
It has also reserved 15,000 sf of space in the upcoming Funan, which will represent 4.5% of the total NLA.
In a Tuesday report, analyst Eing Kar Mei says, “Due to the small floor space occupied in the existing malls, we believe DPU impact will be minimal. Although Newstead has taken up 4.5% of the total Funan retail space, Funan has yet to open and is receiving favourable lease queries. Hence, we believe CMT will be able to find a replacement if Newstead pulls out.”
CGS-CIMB recommends to “add” FCT at a target price of $2.49.
According to the analyst, FCT will see a minimal impact on the closure of Newstead’s Nubox in Causeway Point, which occupies 1,900 sf or 0.5% of the total NLA. The unit is also located at level 1, which makes it easier to find a replacement.
Suntec REIT will also see minimal impact, as the research house has an “add” call on the REIT with a target price of $2.08.
Newstead occupies about 0.4% of Suntec Mall’s NLA and is currently well-located at level 1 in the North Wing, which Eing believes that it would not be an issue to fill the vacated space in the future.
“In conclusion, the liquidation of Newstead could have a net negative impact on landlords; however, the impact on overall REITs’ earnings should not be substantial, “ says Eing.
Moreover, REITs typically hold two to three months’ rent as security deposit from tenants, which can be used as a buffer, as the REITs or Newstead look for new tenants.
As at 11.00am, units in CMT, FCT and Suntec REIT are trading at $2.15, $1.43 and $1.83, respectively.