Contents
Investment Case .............................................................................................................................................................. 3
Maintain In-Line Industry View ............................................................................................................................................................3
Prefer S-REITs in Singapore Property Space… ..................................................................................................................................................... 3
…And A-REIT as Our Top Pick............................................................................................................................................................................... 3
Potential Catalyst – On the Positive Side................................................................................................................................................................ 3
Office & Retail Oversupply Remains a Concern ..................................................................................................................................................... 4
Upcoming Industrial Supply Also a Concern ........................................................................................................................................................... 4
Hospitality Segment – Cautious on 2009, 2010 a Toss Up..................................................................................................................................... 4
Moving to Mid-Cycle Valuations .............................................................................................................................................................................. 5
Leverage a Risk for Some S-REITS ................................................................................................................................ 7
Asset Devaluations Spur Equity-Raising................................................................................................................................................................. 7
Leverage Has 60% Regulatory Limit, but Ideal Is 35-45%...................................................................................................................................... 7
Leverage – A Sensitivity Analysis ........................................................................................................................................................................... 8
What’s Changing ............................................................................................................................................................ 10
New Top Pick: Ascendas REIT ...................................................................................................................................... 10
Supply, More Supply, and Even More Supply = Oversupply .......................................................................................... 12
Our Valuation Methodology Explained........................................................................................................................... 14
Bull Case – Rental Cycle Peaks........................................................................................................................................................14
Sensitivity of DCF Valuation to Cost of Debt and Risk-Free Rate ......................................................................................................16
12-month Forward NPI / EV Historic Yields (%) ................................................................................................................................19
Company Analysis
CCT (CACT.SI, S$1.00, EW, PT S$0.97)....................................................................................................................... 20
CapitaMall Trust (CMLT.SI, S$1.43, EW, PT S$1.47) .................................................................................................... 22
Suntec REIT (SUNT.SI, S$1.04, UW, PT S$0.80).......................................................................................................... 24
Ascott REIT (ASRT.SI, S$0.71, UW, PT S$0.54) ........................................................................................................... 26
CDL H-REIT (CDLT.SI, S$0.81, EW, PT S$0.89) .......................................................................................................... 28
Ascendas REIT (AEMN.SI, S$1.53, EW, PT $1.70) ....................................................................................................... 30