- The S-REITs Index edged up 0.4% in June, following a 1.6% decline in May. CapitaLand Integrated Commercial Trust (CICT SP, non-rated) was the best performer, rising 4.4%, while IREIT Global (IREIT SP, non-rated) was the worst performer, declining 12.8% following an update on the ongoing DRV litigation, which progressed to formal court proceedings, with DRV seeking repayment of €8.4mn plus interest. The Singapore diversified REIT sub-sector was the best performer for the month, gaining 3%, while the overseas commercial REIT sub-sector was the weakest, declining 6.5%.
- For the 2Q26 earnings preview, we expect S-REITs to report c.3% YoY DPU growth on average, driven by stronger NPI from higher rents and lower financing costs amid a lower interest rate environment than a year ago. Retail, office, and industrial REITs are expected to continue delivering mid- to high-single-digit rental reversions, while hospitality REITs are likely to see softer operating performance due to higher airfares and travel disruptions stemming from the Middle East conflict.
- We maintain OVERWEIGHT on S-REITs, though we remain selective given the current interest rate backdrop. Our preference is for REITs with robust balance sheets, defensive earnings profiles, and a higher proportion of fixed-rate debt to limit exposure to interest rate volatility. Within the sector, we continue to favour retail S-REITs, supported by healthy tenant sales and limited new supply, which should underpin mid- to high-single-digit rental reversions in 2026. Our top picks are high-yielding REITs with resilient portfolios: Stoneweg Europe Stapled Trust (SERT SP, BUY, TP: €1.89), Elite UK REIT (ELITE SP, BUY, TP: £0.41), and United Hampshire US REIT (UHU SP, BUY, TP: US$0.69). We also like Prime US REIT (PRIME SP, BUY, TP: US$0.32) on valuation grounds. At 0.3x P/NAV, it offers an attractive entry point with improving cash flow visibility and DPU growth potential.
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