OCBC Report 11 Dec 13

Industrial REITs: Downside risks lurking Summary: Industrial REITs continued to turn in firm results in 3Q13. However, subsector portfolio occupancy encountered a marked sequential decline of 2.9ppt to 94.8%. For 2014, we are keeping our cautious view on the industrial REIT subsector, as we believe industrial rents may stay relatively flat amid the influx of industrial supply and scale back in leasing enquiries for factory space. We also highlight again the possibility that industrial REITs may continue to face difficulties in acquiring industrial properties that are yield-accretive. Nevertheless, more industrial REITs are turning to asset enhancement initiatives/(re)developments to grow their income, and this should help to cushion the moderating growth trend. We are maintaining our NEUTRAL view on the industrial REIT subsector. We choose Ascendas REIT [BUY, S$2.45 FV] and Cache Logistics Trust [BUY, S$1.30 FV] as our preferred picks due to their strong earnings visibility, robust financial position and compelling yields. (Kevin Tan)

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NEWS HEADLINES - US stocks ended lower on Tue, with the S&P 500 retreating from the previous session’s record close and halting a two-session winning streak. - Profitability for the telco sector in Singapore is set to remain stable, with data revenue cushioning the bumps on the road ahead, according to the Fitch Ratings 2014 outlook report. - The competition for Singapore bond benchmarks is heating up with a new set of indices created through a collaboration between SGX and Thomson Reuters. - Lum Chang Holdings is buying a London property, now being operated as a hotel by the sole tenant, for about S$52m. - Top Global Limited is entering the Indonesian property market through a proposed acquisition of a 71.5% stake in PT Suryamas Dutamakmur Tbk for a deemed value of ~S$153m. - Losses at entertainment company Scorpio East Holdings widened in the first half ended 31 Oct 2013 to S$2.3m, from S$257,000 a year earlier.