Over the past two months, we have observed strong investor interest in Singapore REITs (S-REITs). The iEdge S-REIT Index generated a total return of +10%, in just the first eight weeks of 2H24. The turn in sentiment was largely driven by the shift in the Fed’s policy direction, as the Fed is expected to kick-start rate cuts in September.
Even more encouraging is that we start to see institutional investors returning to S-REITs. Since the end of June, institutional investors have net bought S$79 million in S-REITs, reversing the net selling trend seen in H1 2024.
In this article, we will highlight the top five best-performing S-REITs year-to-date (YTD) in the iEdge S-REIT Index and their H1 2024 earnings.
Top 5 best performing S-REITs YTD
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT leads S-REITs YTD with a +14.6% total return, driven by data center optimism.(Total return includes both share price appreciation and distributions received.)
Keppel DC REIT invests in a diversified portfolio of income-producing real estate assets used primarily for data center purposes. The REIT has a globally diversified portfolio of 23 data centers. By asset value, 53% of the properties are located in Singapore, while the rest are located in various countries including Australia, China, Germany, and Japan.
Its operations remain robust, reporting a net property income of S$132.6 million in 1H2024, a +4.2% YoY increase. Occupancy stands strong at 97.5%, with the REIT securing a major lease renewal with its sponsor in H1, achieving a positive rental reversion exceeding 40%.
Distributions per share (DPU), nevertheless, dipped to 4.5 cents, a -10% drop compared to last year. This is due to a loss allowance for the Guangdong DCs in China, higher finance costs, and the depreciation of foreign currencies against the SGD. The latest indicated yield is around 4.1% p.a.
Based on 11 analyst ratings, Keppel DC REIT has a HOLD rating.
OUE Real Estate Investment Trust (SGX: TS0U)
OUE Real Estate Investment Trust (OUE REIT) delivered a total return of +11.1% in YTD.
The company focuses on a diverse range of commercial and hospitality properties across Singapore and China. Its key properties in Singapore include three Grade A office buildings in the Central Business District (CBD) area: OUE Bayfront, One Raffles Place, and OUE Downtown. It also owns two hotels, Hilton Singapore Orchard and Crowne Plaza Changi Airport, as well as one retail property, Mandarin Gallery. Overall, its assets are Singapore-focused, with 93% of its assets located in Singapore.
For 1H 2024, its net property income increased by +1.7% YoY to S$117.1 million. This resilient performance was driven by the strength of the Singapore commercial property market and strong performance from the hospitality sector. Taking into account increased finance costs, higher retention for working capital, and payment of management fees, DPU dropped -11.4% to 0.93 cents. However, the indicated distribution yield remains attractive at around 6.3%.
Based on 5 analyst ratings, OUE REIT has a BUY rating.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust (CICT) has achieved a total return of +8.6% YTD.
CICT is the first and largest REIT listed on the Singapore Exchange (SGX), with its properties located mainly in Singapore. CICT’s portfolio comprises 21 properties in Singapore, two in Germany, and three in Australia. By asset value, 94.3% of its portfolio is based in Singapore. By asset mix, office properties make up around 40%, and integrated developments account for 30%.
CICT’s H1 2024 earnings demonstrated strong momentum. The retail sector showed resilience, and the office sector continued to deliver strong rental reversions. Net property income reached S$582.4 million, a decent increase of 5.4% YoY. DPU also increased by 2.5% YoY to 5.4 cents. The indicated distribution yield is around 5.0%.
Based on 13 analyst ratings, CICT has a BUY rating.
Frasers Centrepoint Trust (SGX:J69U)
Frasers Centrepoint Trust (FCT) has delivered a total return of +7.7% YTD.
FCT is one of the largest suburban retail mall owners in Singapore. Its Singapore retail portfolio includes Causeway Point, Century Square, Hougang Mall, NEX, Northpoint City North Wing (including Yishun 10 Retail Podium), Tampines 1, Tiong Bahru Plaza, Waterway Point, and White Sands. These retail malls are conveniently located near residential areas and within minutes of transportation hubs.
For the quarter ended June 2024, FCT demonstrated continued resilience. Its properties maintained a high occupancy rate of 99.7%, with rental reversions in the high single digits across its suburban malls. Shopper traffic improved by 4.1% YoY, and tenant sales remained stable with a 0.7% increase. Its indicated distribution yield is 5.1%.
Based on 12 analyst ratings, FCT has a BUY rating
Parkway Life Real Estate Investment Trust (SGX: C2PU)
Parkway Life Real Estate Investment Trust (PREIT) has delivered a total return of +4.5% YTD.
PREIT is one of Asia’s largest listed healthcare REITs, with properties located mainly in Singapore and Japan. By asset value, 67.6% of the assets are based in Singapore and 32.2% in Japan. Three private hospitals in Singapore under PREIT include Mount Elizabeth Hospital, Gleneagles Hospital, and Parkway East Hospital. PREIT is differentiated by its defensive nature and offers high-quality earnings visibility.
For its H1 2024 results, net property income declined 2.5% YoY, mainly due to the depreciation of the JPY against SGD. DPU grew by 3.5% YoY to 7.5 cents. The indicated distribution yield of PREIT is around 4.0%.
Based on 4 analyst ratings, PREIT has a BUY rating
Building a diversified S-REIT Portfolio
“Diversification is the only free lunch in investing” holds true for REITs just as it does for stocks. When building a REIT portfolio, it’s crucial to maintain diversification across various real estate sub-sectors like retail, commercial, industrial, residential, hospitality, and healthcare.
Beyond choosing the right REITs, investors also need to consider the market outlook for these sectors. If you lack the time or inclination to delve into financial statements, announcements, and market news, consider Syfe REIT+, a portfolio holding 20 of Singapore’s largest REITs.
If you prefer a DIY approach, Syfe Brokerage offers easy and affordable access to the Singapore market. With low trading fees and no platform or withdrawal fees, it’s a convenient option for building your own REIT portfolio.
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