S$5bn capital raised for the sector, how much more do we need? We estimate that S$5bn capital has been raised from the S-REIT sector with S$2.9bn from equity capital market and S$2.1bn from debt capital market (including debt extension) The sector is currently geared at 31% with interest coverage ratio comfortably at above 4.0x on our estimates, with no more debt refinancing for most of the S-REITs over the next 6 months. That said, we are still looking for about S$1bn equity capital to be raised in the space to convert some of the debt to permanent capital.
Opportunistic capital raising to come? Despite the substantial amount of equities being raised YTD, J.P. Morgan S-REITs index has increased by 30% since its March low. Share prices for some of the S-MID cap REITs have more than doubled from the trough, which in our view could help to propel management's decision on potential opportunistic equity capital raisings. In addition, the ever closing gap between the listed and public real estate could provide trust management with more reasons to further strengthen its balance sheet.
Our top picks for large-cap S-REITs remain A-REIT and CMT, which we believe would generate more than 15% in total return at this level. Our picks amongst the SMID-cap S-REITs are FCT and AIT.
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