- The S-REITs Index rose 0.7% in January 2026, matching the 0.7% gain in December 2025. Prime US REIT (Prime SP, BUY, TP US$0.32) was the top performer for the month, rising 14.2% on anticipation of a higher payout ratio, which was increased to 65% from 4Q25. Frasers Centrepoint Trust (FCT SP, BUY, TP S$2.74) was the worst performer, falling 3.9% as investors worried about potential retail sales leakage from the upcoming JB-SG RTS, which we believe is overdone. Among the sub-sectors, overseas commercial led gains, rising 4.6%, while Singapore retail was the weakest, declining 3.2%.
- FY25 results for SREITs were broadly in line with expectations. Singapore-focused commercial names outperformed our estimates, driven by stronger domestic operating performance and material savings in finance costs (SUN, OUEREIT). On average, SREITs under our coverage delivered c.2% DPU growth, supported by improved asset-level performance and prudent capital management. Valuations are undemanding. The sector trades at a forward dividend yield spread of c.3.4% (-0.7x s.d.) and P/NAV of 1.0x (0.1x s.d.). We see room for stronger DPU growth in FY26 as refinancing savings, particularly on SGD-denominated debt, become more evident.
- We reiterate our OVERWEIGHT recommendation on S-REITs, as their stable performance highlights SREITs as a defensive play amid global uncertainties. Within sub-sectors, we prefer retail, where rental reversions are expected to remain strong in the high single-digits in 2026. We also favour overseas S-REITs offering high yields of over 8% with resilient portfolios, such as 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). In addition, we like Prime US REIT (PRIME SP, BUY, TP US$0.32), for its cheap valuation (0.37 P/NAV) and improving portfolio occupancy.
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