Brokers' take
Compiled by Navin Sregantan
SINGAPORE RESIDENTIAL SECTOR | NEUTRAL (MAINTAINED)
OCBC Investment Research, March 18
Following a turbulent 2018, a more risk-on market sentiment this year has aided a recovery in the share prices of the Singapore developers under our coverage. After a soft January, private home sales in February showed a more encouraging uptick of 4.4 per cent quarter on quarter and 18.5 per cent year on year to 455 units (excluding executive condominiums).
This was driven in part by the Government's announcement in late January about the new Cross Island Line, with projects located near the line selling more units.
Looking ahead, we expect transaction volumes to gather momentum with more new projects to be launched. While valuations remain cheap, we maintain "Neutral" on the Singapore residential sector in light of the softer macroeconomic outlook and expected sizeable launches, which may stymie price growth.
Our preferred sector picks are UOL Group (Buy, fair value: $8.45) and CapitaLand[BUY; S$3.98].
SINGAPORE REITS | OVERWEIGHT (MAINTAINED)
RHB Research Institute, March 18
We expect fund flows to continue with market volatility likely to persist and rate hikes on pause.
Year to date, S-Reits have outperformed the Straits Times Index and are in line with returns in major global Reit markets. S-Reits still offer the highest absolute yields and yield spreads among Reits globally.
They are also well supported by the favourable demand-supply outlook across most of the sub-sectors.
The dovish interest rate outlook has also mitigated the threat of a sharp spike in interest costs, which could have impacted distribution per unit (DPU).
We prefer small- to mid-cap Reits and are largely neutral on large-cap Reits.
Office rents have been on a steady uptrend, but the positive effects are likely to be seen in DPU only in late 2019 and seem to be largely priced in.
While retail Reits have remained steady despite challenges, the opening of three large malls this year could pose some pressure. We recommend investors to buy on dips retail and office Reits.
Key risks include a change in the interest rate outlook from dovish to neutral or hawkish, worsening of the US-China trade tensions impacting Singapore's export-driven economy and fund flows out of yield stocks.
Our top picks are CDL Hospitality Trusts (Buy, target price: $1.80), ESR Reit[BUY, S$ 0.61], Starhill Global Reit[BUY, S$0.80], Manulife US Reit.
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
Get The New Paper on your phone with the free TNP app. Download from the Apple App Store or Google Play Store now
