SECTOR ROUND-UP
Deal momentum spilled into June with hospitality and retail REITs also getting into the action. Ascott Residence Trust (ART SP, Accumulate, S$1.17) acquired three Japan rental-housing assets for S$85.2mn, or an EBITDA yield of 4%. It also bought a 45% stake in a student accommodation in South Carolina, US. The remaining 45%/10% stakes will be held by sponsor Ascott Limited (not listed) and an unnamed US student-housing developer. The development costs S$146.2mn and carries an EBITDA yield of 6.2%. Elsewhere, Lendlease Global REIT (LREIT SP, Accumulate, S$0.82) will raise its holding in integrated office and retail property, JEM, from 3.75% to 31.8%. Prime US REIT snapped up two office towers in San Diego and Florida for US$245.5mn.
NYSE-listed Digital Realty Trust Inc (DLR US, Not Rated) is evaluating a data-centre REIT IPO in Singapore, potentially by year-end. The IPO could raise US$300-400mn, backed by a geographically diversified portfolio of 10 assets. This brings the number of potential REIT IPOs in 2021 to three. City Developments (CIT SP, Buy, S$10.68) and unlisted Mapletree Investments are also mulling REIT IPOs.
As of 25 June 2021, 53% of the Singapore population had received at least one dose of COVID-19 vaccines. Another 36% had received two doses. The government has ramped up vaccination capabilities. From 26 June, Singapore will be able to administer up to 80,000 doses daily, a 70% increase from its previous 47,000. Singapore aims to vaccinate two-thirds of its population fully by National Day on 9 August. It is, moreover, considering allowing larger gatherings and COVID-19 testing in lieu of stay-home notice for vaccinated travellers. Vaccinations so far appear to be effective in containing rates of infection, transmissions and the severity of disease in individuals who contract the virus after vaccination.
Retail
Shopper footfall thinned after Phase 2 Heightened Alert on 16 May 2021. Restrictions included a ban on dining in, work-from-home as the default and two unique household visitors per day. These measures hurt downtown malls more than heartland malls, which have the benefit of close proximity to household catchments. While group sizes have been increased from two to five since 14 June and 2-pax in-restaurant dining has been allowed since 21 June, the uplift is expected to be muted as lunch and dinner gatherings involving more than 2 persons will likely take place at home.
The government has enhanced its Job Supports Scheme to help retailers affected by Phase 2 Heightened Alert. From 16 May to 13 June 2021, F&B and gyms will receive 50% of wage support. Retail stores, cinema operators and affected personal care services will be given 30%.
As part of Phase 3 Heightened Alert, F&B and gym operators will receive 10% wage support from 21 to 30 June 2021.
May’s retail sales index was -7.3% below 2019 levels. The F&B index was down 17.5%. Consumer spending has normalised at these levels since the pandemic. The rental index slipped 16.5% YoY in 1Q21 but vacancy improved to 8%, -0.5ppt shy of 1Q20 levels. We think that retail rents have bottomed. Still, given a 3-year rent cycle, negative reversions in the mid-single to mid-double digits can be expected as leases expire over the next 12 months.
During the pandemic, major landlords had established e-store and food-delivery platforms to provide tenants with online channels to capture retail spending. Support from landlords will be more targeted and operational going forward, instead of outright rental rebates. It may come in the form of advertising, promotions and waivers of listing, delivery and service charges for purchases made through their e-commerce platforms. The support is expected to lower sales and fulfilment costs for tenants as well as help malls keep consumer spending within their ecosystems.
Hospitality
May’s hotel RevPAR fell 23% MoM on cancellations and postponements due to the two guest limits imposed during the Phase 2 Heightened Alert. YoY, it grew 58% from a low base. RevPAR of S$61 was 68% below the 2019 average as borders remained closed to leisure travel. Singapore hoteliers will receive 30% wage support from April to June 2021, which will taper off to 10% from July to September 2021.
Near-term catalysts for the sector could include a substitution of COVID-19 testing for stay-home notice for vaccinated travellers. This is expected to provide a shot in the arm for business travel.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note: