Macquarie initiates coverage on 11 S-Reits with top picks including data centre plays
MACQUARIE Research initiated coverage on 11 Singapore real estate investment trusts (S-Reits) that it prefers amid a higher-for-longer interest rate environment.
It named top picks including data centre and industrial names, with an “outperform” rating on nine out of the 11 it listed.
S-Reits are trading at levels yielding around 6 per cent, close to the troughs seen before the US Federal Reserve cut interest rates. Macquarie said there is potential for an upside of around 20 to 60 per cent if the economic outlook improves.
Macquarie analysts Rachel Tan and Jayden Vantarakis said in a November report that the earnings of S-Reits are likely to bottom in fiscal 2025, indicating the same for their distributions per unit (DPU). And if the Fed cuts interest rates by another 25 basis points next month as widely expected, the impact to DPU could range between neutral and a positive 3 per cent.
The analysts are positive on Reits in the industrial and suburban retail sectors, as these can weather a climate of moderated rate cut expectations. A Trump administration is said to mean a slower pace of interest rate cuts.
Macquarie analysts wrote.
Given that rate cut expectations have moderated and a higher-for-longer interest rates scenario is back in play as the base case, our sector, in the order of preference are industrial, retail, office, and hospitality,
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Macquarie initiates coverage on 11 S-Reits with top picks including data centre plays, source
