Top 5 REITs that Benefit from China’s Reopening

CapitaLand China Trust REIT

Billy Toh

January 11, 2023

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It has been a difficult year for Singapore REITs (S-REITs) in 2022 amid the US Federal Reserve (Fed)’s aggressive rate hikes to fight rising inflation.

However, China’s reopening at the beginning of this year could boost the recovery of REITs with the expected surge in outbound travel.

According to Trip.com Group bookings, the most popular destinations so far are Singapore, South Korea, Hong Kong, Japan and Thailand.

China Outbound Tourism Research Institute (COTRI) shared that leisure travel will pick up in the second quarter of this year when passport and visa approval processes are running smoothly as well as the full resumption of flights.

Here are the top 5 REITs that could benefit from the reopening in China.

1. CapitaLand Integrated Commercial Trust

One of the biggest REITs in Singapore, CapitaLand Integrated Commercial Trust (SGX: C38U), also known as CICT, will benefit from China’s reopening.

The return of Chinese tourists into Singapore is expected to boost the recovery for downtown malls.

With about 25% of its net profit income (NPI) derived from downtown malls frequented by tourists, we should see a pickup in earnings.

Higher portfolio occupancy and contributions from assets acquired in 2021 will also boost revenue growth.

Dividend yield is not as attractive at 2.7% but CICT has a strong track record in Singapore and will be the right fit for investors looking for a defensive play.

2. Sasseur REIT

The reopening in China will also benefit China-focused outlet mall operator, Sasseur REIT (SGX: CRPU).

Sasseur REIT’s portfolio consists of four premium outlet malls in China.

Given its exposure in China, the reopening and pivot away from “zero-COVID” policy in China will benefit the REIT player.

It also has an attractive forward dividend yield of 9.7%.

3. Lendlease Global Commercial REIT

Lendlease Global Commercial REIT (SGX: JYEU), or short for LREIT, is another beneficiary of the return of Chinese tourists to Singapore.

About a quarter of its NPI is derived from the downtown mall in Singapore.

Among some of the big assets under its portfolio include the [email protected] and Jem in Singapore, as well as a collection of three commercial buildings in Milan, Italy, that is known as Sky Complex.

While gearing level is relatively high at 45%, the built-in rental escalations and positive rental reversion for its retail leases could provide rental growth for LREIT.

At current level, LREIT’s forward dividend yield is also relatively attractive at 6.8%.

4. Mapletree Pan Asia Commercial Trust

The retail and commercial behemoth Mapletree Pan Asia Commercial Trust (SGX: N2IU) owns a host of properties across Singapore, Hong Kong, Mainland China, South Korea and Japan.

In fact, the REIT, which is known as MPACT, in short, already had a strong earnings report during the first six months ending 30 Sept 2022.

MPACT would be among the greatest beneficiary of China’s reopening given that around 45% of its NPI is derived from the Festival Walk in Hong Kong and VivoCity in Singapore.

It offers a forward dividend yield of about 2.96% at current level.

5. CapitaLand Ascott Trust

CapitaLand Ascott Trust (SGX: HMN) is the leading hospitality trust in the Asia Pacific region.

As the largest lodging trust in the region with an asset value worth S$7.6 billion as at 30 June 2022, the return of tourists will benefit CapitaLand Ascott Trust.

With a portfolio across 15 countries, it also has a diversified geographic mix.

Its gross profit in Q3 FY2022 had recovered to around 90% of its pre-COVID levels.

Based on its current price, CapitaLand Ascott Trust has a forward dividend yield of 6.4%.

REITs will recover this year

After a lacklustre performance in 2022, S-REITs are expected to recover this year.

Based on the latest retail sales volume data, growth has slowed to 8.8% but remains above the 2019 levels.

Despite the upcoming GST hike, the recovery in tourism especially with the reopening in China will drive recovery for retail sales and boost sentiment for REITs players.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

About the Author: Billy Toh

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Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.