J.P. 摩根-亚太地区-房地产行业-新加坡房地产与REITs：前方岔路的明智选择-2019.10.11-278页.pdf

Asia Pacific Equity Research11 October 2019 Singapore Property and REITsDiverging paths ahead choose wiselyConglomerates and PropertyMervin Song,CFA AC(65)6882-J.P.Morgan Securities Singapore Private LimitedTerence M Khi AC(65)6882-Bloomberg JPMA TKHI J.P.Morgan Securities Singapore Private LimitedCusson Leung,CFA(852)2800-J.P.Morgan Securities(Asia Pacific)LimitedAjay Mirchandani(65)6882-J.P.Morgan Securities Singapore Private LimitedSee page 275 for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that thefirm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment We assume coverage of the Singapore property sector with a preference for Industrial REITs and developers.After a broad sector rally YTD,investors may need to navigate more divergent Developer and REIT subsector performance paths from here.We expect Industrial REITs to deliver sustained outperformance via yield+growth as pipelines for accretive acquisitions can offset flattish rentals.Developers offer near-term potential upside as higher residential sales reinforce prices and margins,with corporate actions bolstering earnings.Our non-consensus UW ratings on Office and Hospitality REITs are premised on global growth weakness creating downside risks to Street estimates and falling office rents from 2020.Our PTs reflect our thesis that Industrial REIT yields can re-rate closer to office REITs.Top picks:AREIT,MINT,CIT and CAPL;avoid office&hospitality REITs.Industrial REITs best positioned to deliver.Industrial REITs(25-58%total return)have beaten the STI(c.5%YTD)due to trading yields at or below asset yields providing scope to grow DPU via acquisitions despite a flattish rentaloutlook.Yields are still the highest(5%)amongst large-caps,despite substantialNAV premiums(1.5 P/B).Improved asset quality and freehold exposure to hi-tech spaces coupled with fewer SME risks should drive yields closer to office REITS.Our top picks are AREIT and MINT;we upgrade MINT to OW.Developers beneficiaries of resilient Singapore home buyer and corporate actions as steady sales on the back of healthy affordability are helping to allay fears over developers ability to clear their land-bank,resulting in 7-20%jumpsin developer share prices.We see further re-rating supported by lower inventories improving pricing power,coupled with new launches and corporate actions helping to unlock value.Our top picks are CIT,which benefits from a large land-bank and the privatization of M&C,and CAPL,which we see tradingclose to 1x P/B as it achieves its 9-11%ROE on active asset recycling.Following a period of restriction for CAPL,we assume coverage with an OW rating from a Not Rated designation(OW rating prior to restriction).Selectively defensive in Retail.We upgrade CT to OW for its steady 3%p.a.DPU growth and like FCT(OW)for its dominant malls exposure and visible acquisition pipeline.We expect fund flows into Retail as investors avoid the office sector.We downgrade MCT to N,following strong outperformance(+15%in 3M vs+2%for retail REITs),which seems to have priced in positives from the MBC 2 acquisition and recommend switching.Top Pick:FCT.Hospitality set to disappoint.Singapore focused hospitality REITs have rallied ahead of limited hotel supply from 2020.However,we expect consensus downgrades on price competition from upcoming serviced apartment supply with hotel licences.We reiterate our UW on CDREIT and downgrade FEHTto UW.Following a period of restriction,we move to an OW rating on ART from a Not Rated designation(rated Neutral before the restriction)on 2-3%DPU accretion post ASCHT merger,increased scale to conduct asset recycling and potential index inclusion.Office least preferred:We downgrade CCT,KREIT and SUN to UW onuncompelling risk-reward.We project 1-3%p.a.office rent declines over the next three years,as the economy slows and on risks that co-working(c30-40%of demand)expansions may ease.The timing of demolitions on older office redevelopment,a potential supply positive,is unclear.We expect concerns over potential peaking of the Australian office market to weigh on KREIT and SUN.Table 1:Coverage universeSector preferenceStockRatingUpside/DownIndustrial Most preferredAREITOW10.6%KDCREITOW8.6%MINTOW12.0%MLTOW9.8%DevelopersCAPLOW22.9%CITOW16.4%FPLN5.1%UOLOW17.0%RetailCTOW9.4%CRCTOW11.1%FCTOW7.1%MCTN1.7%ARTOW10.7%HospitalityCDREITUW-8.5%FEHTUW-9.2%Least preferred-OfficeCCTUW-8.2%KREITUW-4.8%SUNUW-3.7%Table 2:Key Recommendation ChangesStockRatingPreviousMINTOWUWCCTUWOWFEHTUWNKREITUWOWSUNUWNMCTNOWCTOWNCAPLOWNRARTOWNRSource:J.P.Morgan research2Asia Pacific Equity Research11 October 2019Mervin Song,CFA(65)6882- Table 3:S-REITs Valuation TableJPMSh PricePriceYieldFY18-2120 DayYTD ShSREITsRatingMkt Cap9-Oct-19TargetUpsideP/B1FY2FY3FYCAGRADTVGearingPerf(US$m)(S$)(S$)(%)(x)(%)(%)(%)(%)(US$m)(%)(%)Ascendas REITOW7,0333.123.4510.6%1.465.0%5.2%5.4%1.6%22.336%22.6%Ascendas India TrustOW1,1781.561.655.8%1.585.1%5.6%5.8%7.3%2.033%46.3%Ascott Residence TrustOW2,0651.311.4510.7%1.055.5%5.8%5.9%2.8%2.536%22.2%CAPL Commercial TrustUW5,7822.071.90-8.2%1.144.3%4.3%4.3%1.1%14.735%18.3%CAPL Mall TrustOW7,0792.652.909.4%1.304.5%4.7%4.8%3.5%16.034%15.5%CAPL Retail China TrustOW1,3351.531.7011.1%0.966.8%6.8%7.3%2.9%1.236%12.7%CDL Hospitality TrustUW1,4391.641.50-8.5%1.105.4%5.5%5.9%1.4%2.635%12.3%Far East Hospitality TrustUW9820.710.64-9.2%0.815.4%5.5%5.5%-0.7%0.740%15.7%Frasers Centrepoint TrustOW2,2642.803.007.1%1.354.4%4.7%4.8%3.9%9.229%29.1%Keppel DC REITOW2,1331.982.158.6%1.893.9%4.4%4.8%8.8%18.333%47.7%Keppel REITUW3,0971.261.20-4.8%0.914.4%4.4%4.7%1.8%5.536%11.4%Mapletree Commercial TrustN4,9492.362.401.7%1.484.0%4.2%4.3%3.7%24.133%41.8%Mapletree Industrial TrustOW3,9842.502.8012.0%1.665.0%5.2%5.3%2.7%12.635%31.4%Mapletree Logistics TrustOW4,3231.641.809.8%1.405.0%5.1%5.1%2.0%9.638%29.4%Suntec REITUW3,7891.871.80-3.7%0.894.9%5.0%5.3%-0.5%11.037%5.6%Total/Wtd Avg51,4334.3%1.304.7%4.9%5.0%2.6%35%23.5%Source:J.P.Morgan estimates,BloombergTable 4:S-Developers Valuation TableJPMSh pricePriceRNAVDividendYield20 DayYTD ShDeveloperRatingMkt Cap9-Oct-19TargetUpsideRNAVDisc/PremP/BFY19EFY20EADTVPerf(US$m)(S$)(S$)(%)(S$)(%)(x)(%)(%)(US$m)(%)CapitaLandOW12,7693.504.3022.9%5.70-39%0.793.4%3.7%12.813.5%City DevelopmentsOW6,4049.7511.3516.4%16.20-40%0.862.1%2.1%8.221.4%Frasers PropertyN3,7221.761.855.1%3.10-43%0.684.9%4.9%0.26.1%UOL GroupOW4,4657.318.5517.0%13.15-44%0.632.4%2.4%4.217.6%Total/Wtd Avg27,35918.0%-40%0.763.3%3.3%15.0%Source:J.P.Morgan estimates,Bloomberg.Figure 1:YTD total returns for STI,Developers and S-REITs*Developers and S-REIT total return based on arithmetic average of J.P.Morgan stock coverageSource:Bloomberg,J.P.Morgan estimates.Figure 2:YTD total returns for Office,Industrial,Retail and Hospitality REITs*Office(CCT,KREIT and SUN),Industrial(AREIT,KDCREIT,MINT and MLT),Retail(CT,CRCT,FCT and MCT)and Hospitality(ART,CDREIT and FEHT)Source:Bloomberg,J.P.Morgan estimates.95.0100.0105.0110.0115.0120.0125.0130.0135.0STIDevelopersS-REIT95.0105.0115.0125.0135.0145.0Avg S-REITOfficeIndustrialRetailHospitality3Asia Pacific Equity Research11 October 2019Mervin Song,CFA(65)6882- How Does the Sector Trade?How REITs tradeS-REITs P/B valuations are a function of recurring ROEs and book value growth.Figure 3:SREITs P/B vs recurring ROEs(FY1)Source:Bloomberg,J.P.Morgan estimatesFigure 4:SREITs P/B vs recurring ROEs(FY2)Source:Bloomberg,J.P.Morgan estimatesFigure 5:DPU growth(FY1)vs P/BSource:J.P.Morgan estimatesFigure 6:DPU growth(FY2)vs P/BSource:Bloomberg,J.P.Morgan estimates*2020 DPU growth for non-Dec YEDeveloper ValuationsDevelopers are trading below mean P/B and average discounts to RNAV.This is largely reflective of a more challenging residential market in Singapore owing to the imposition of various property cooling measures.While do not expect a strong recovery in the Singapore residential market,based on our thesis of steady clearance of land bank,we expect the developers to rally from current levels.We see the potential for approaching the+1 s.d.P/B levels between January 2015 and June 2017 when we had similar annual primary unit sales.Table 5:Singapore Developers P/BDeveloperPrice(S$)BVPSP/B(x)9-Oct-19(S$)CurrentS.D.PeakTroughMean+1 s.d.+2 s.d.-1 s.d.-2 s.d.CapitaLand3.504.450.79-0.52.960.371.021.451.890.580.15City Developments9.7511.290.86-1.14.340.611.772.583.400.950.14Frasers Property1.742.590.67-1.00.900.620.740.810.880.680.61UOL Group7.2811.630.63-0.61.400.390.750.911.070.580.42Source:J.P.Morgan estimates,Company data,BloombergAREITARTCCTCTCRCTCDREITFEHTFCTKDCREITKREITMCTMINTMLTSUNy=13.523x+0.497R=0.70960.60.81.01.21.41.61.81.0%3.0%5.0%7.0%9.0%AREITARTCCTCTCRCTCDREITFEHTFCTKDCREITKREITMCTMINTMLTSUNy=12.435x+0.5059R=0.69220.60.81.01.21.41.61.81.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%AREITARTCCTCTCRCTCDREITFEHTFCTKDCREITKREITMCTMINTMLTSUNy=4.7289x+1.181R=0.42840.60.81.01.21.41.61.8(10.0%)(8.0%)(6.0%)(4.0%)(2.0%)0.0%2.0%4.0%6.0%8.0%AREITARTCCTCTCRCTCDREITFEHTFCTKDCREITKREITMCTMINTMLTSUNy=4.7904x+1.0402R=0.32510.60.81.01.21.41.61.80.0%2.0%4.0%6.0%8.0%10.0%12.0%4Asia Pacific Equity Research11 October 2019Mervin Song,CFA(65)6882- Table 6:Singapore Developers P/B between January 2015 and June 2017DeveloperPrice(S$)BVPSCurrentAverage-1 s.d.+1 s.d.MaxMin9-Oct-19CapitaLand3.504.450.790.800.730.870.910.65City Developments9.7511.290.860.930.801.061.150.73Frasers Property1.742.590.670.740.680.790.860.65UOL Group7.2811.630.650.650.570.730.810.56Source:J.P.Morgan estimates,Company data,BloombergTable 7:Singapore Developers discount to RNAVDeveloperPrice(S$)RNAVPremium/(discount)to RNAV(%)9-Oct-19(S$)CurrentS.D.PeakTroughMean+1 s.d.+2 s.d.-1 s.d.-2 s.d.CapitaLand3.505.65-38%-0.555%-72%-25%-3%20%-48%-71%City Developments9.7513.55-28%-0.661%-64%-11%15%42%-38%-65%Frasers Property1.742.90-40%-1.00%-46%-28%-17%-6%-40%-51%UOL Group7.2812.80-42%-0.64%-78%-34%-21%-8%-48%-61%Source:J.P.Morgan estimates,Company data,BloombergHow Developers TradeSingapore developers valuations are also determined by returns on capital.We believe as CAPL progressively improves its ROE,it should re-rate close to 1x P/B.Figure 7:Singapore Developers P/B vs trailing ROESource:J.P.Morgan estimates,BloombergCAPLCITFPLUOLWINGTGUOLy=7.627x+0.3607R=0.79350.300.400.500.600.700.800.901.001.0%2.0%3.0%4.0%5.0%6.0%7.0%5Asia Pacific Equity Research11 October 2019Mervin Song,CFA(65)6882- How we differ vs the Street Changing the conversation Street ViewJ.P.Morgan ViewIndustrial REITs are expensiveIndustrial REITs best positioned to deliver Yield+Growth despite trading at significant premiums to NAV(1.5x P/B)via yield-accretive overseas acquisitions with long WALE,healthy escalations,and attractive spreads vs funding costsInvestors are looking at the industrial REITs through an historical valuation lens of short land tenures and large exposure to Singapore SMEs However,industrial REITs have made material changes in their asset composition(increased amount of freehold assets and data centers)which justifies a tighter yieldWe have OW ratings on the industrial REITs vs consensus price targets implying Neutral or UW ratings.We project industrial REITs yields to converge with office REITsFlat to 3%declines in house prices Developers may struggle to clear inventory and resort to price cutsDevelopers are in a position to clear well located properties steadily on healthy affordability and upgrader demandResidential price index to increase by 2-3%owing to higher prices of new launches,which should also translate to accelerating earnings growth from FY20 onwardsP/B multiple to expansion with discount to RNAV narrowing on corporate actions(CIT privatising M&C,CAPL actively asset recycling and UOL gaining control of Marina Square properties)Avoid retail REITS due to the lack of growth optionsWhile we acknowledge there are limited opportunities for retail REITs to expand in Singapore(with the exception of FCT),we believe in the current uncertain macro environment,CT and FCT offer near-term DPU growth(c.3%p.a.)from recent acquisitions,making them sufficiently compelling investmentsWe also expect fund flows as investors switch from the office and hospitality REITs Slowing hospitality supply growth is positive for Singapore RevPARsThe market is ignoring competition from non-hotel supply such as servicedapartments with hotel licences and co-living Heightened regulatory risk with serviced apartments to potentially offer rooms for short staysSlower growth in regional economies and depreciation of CNY combined with cautious corporate spend resulting in weaker-than-expected demandUW CDREIT and FEHT versus consensus being OW/NeutralOffice rents are at decade-highs and even if rents were to flat-line,reversions will sustain DPU growthTight cap rates for office REITs and limited new supply support a neutral/positive stance on office REITsWith increasing uncertainty over funding for co-working operators to sustain their expansion and the slowdown in the Singapore economy,we project rents to fall 1-3%p.a.over the next three yearsOffice REITs share prices typically lead spot office rents by 6-12 monthsThe risk reward for office REITs is not compelling as flattish DPUs over the coming year are lower than what industrial or retail REITs offerThus,office REITs are our least preferred stocksSource:J.P.Morgan.6Asia Pacific Equity Research11 October 2019Mervin Song,CFA(65)6882- Table of ContentsHow Does the Sector Trade?.3How REITs trade.3Developer Valuations.3How Developers Trade.4How we differ vs the Street Changing the conversation.5Investment Summary.7Stock ratings and price targets.16Developers.16Industrial REITs.16Office REITs.16Retail REITs.17Hospitality REITs.17REIT Valuations.17Seven property investment themes.20Theme 1:Lower interest rates for longer to sustain premium valuations for REITs.20Theme 2:Rally in developers to continue.25Theme 3:Flattish rental outlook.30Theme 4:The growing divide the strong get stronger.31Theme 5:Industrial REITs in a sweet spot.32Theme 6:Falling office rents risk reward not favourable for office REITs.35Theme 7:Index inclusion.36Risks to our view.38Segment Deep Dives.40Industrial.40Portfolio revitalization opportunities and high industrial yields offset domestic headwinds.40Retail.45Supply overhang removed;Defensive best-in-class suburban malls supported by positive reversions.45Peak supply passes with limited impact on portfolios.45Rentals have stabilized with reversions turning positive.47Resilient occupancy with remixing opportunities from tenant shifts and upside from acquisitions.48Office.49Headline rents to dip although rental reversions should remain positive.49Hospitality.55Supply shock and slowing demand to curb RevPAR growth.55Supply shock of over 10,000 rooms.55De