SREIT – JPM
JPM Tips 3 S-REITS To Short Based On “Crash Tests”
JPMorgan tips three Singapore REITS, or S-REITs, to own based on “crash-test” scenarios. “The S-REITs to own have sustainable income streams, relatively conservative asset values and gearing levels at the lower end of the risk spectrum. General risk aversion toward the sector as well as the debt refinancing overhang has created the most obvious valuation anomalies when risk is taken into account,” analysts Christopher Gee and Joy Wang say in report. Expects the market-weighted long portfolio to post 31% total return through end-2008. Says likes A-REIT (A17U.SG) with target price of S$2.93, CapitaMall Trust (C38U.SG) with target price of S$3.67, CapitaCommercial Trust (C61U.SG) with target price of S$2.27; all three rated Overweight. At Thursday’s close, A-REIT ended down 3.9% at S$1.98, CapitaMall +0.3% at S$3.11, CapitaCommercial down 3.6% at S$1.90.
JPM Cuts K-REIT Tgt To S$1.34; Keeps Underweight
JPMorgan cuts K-REIT (K71U.SG) target price to S$1.34 from S$1.52 on prospect of more substantial dilution to equity holders resulting from REIT’s proposed rights issue. Keeps at Underweight. “The key upside risks to our price target for K-REIT could come from an unexpected improvement in the outlook for office property in Singapore, or confidence being restored in real estate capital markets, thus allowing K-REIT to get out of the vicious cycle it is in currently.”
JPM Downgrades CDL Hospitality To Underweight
JPMorgan downgrades CDL Hospitality Trust to Underweight from Overweight, cuts target price to S$1.51 from S$2.55. Cuts follow house running worst-case scenario through valuation models for all S-REITs under coverage. Says S-REITs with highest lease expiries in 2008-09 are most exposed to sudden deterioration in demand conditions if either rental rates or occupancy levels were to drop unexpectedly. Adds, hospitality-oriented S-REITs, such as CDL Hospitality Trust, are most acutely affected in this test.