DBS Vickers says S-REITs’ 4Q10 results were “a continuation of the strong showing in 3Q10 with the sector reporting topline, net property income and distributable income growth of 10%, 13% and 11% respectively.”
It notes, hospitality REITs continued to outperform with strong organic growth, while acquisitions completed in 2010 lifted distributions for the remaining S-REITs.
“While retail and industrial S-REITs continue to deliver single digit growth, office REITs reported weaker results both on year and on quarter, as passing rents remained below the peak rents signed in 2007-2008. We expect this trend to continue in the coming quarters, only to reverse in 2012.”
The house adds, S-REITs are good inflation hedges given their ability to grow rental income above inflation. The house keeps its view that hospitality REITs will continue to exhibit the strongest earnings potential.
CDL Hospitality Trusts (J85.SG), rated buy with a $2.30 target, is its top pick, “to leverage on the robust growth from this sector.”
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