Last month, the US Federal Reserve opted to maintain its benchmark interest rate, adopting a cautious stance despite speculation about a potential rate cut as early as July, with Fed Chair Jerome Powell stating that future decisions will be data-dependent.
Market analysts now predict a 75 basis points cut in 2025, up from the previously anticipated 50 basis points.
S-REITs have shown commendable performance, closing the first half of 2025, with a 4.2% total return, as indicated by the iEdge S-REIT Index. Over the past 12 months, S-REITs have delivered a 10.5% total return.
Notably, the top 10 best performing S-REITs have delivered double digit returns in the first half of 2025, including $Frasers HTrust(ACV.SI)$ (21.5%), $CapLand IntCom T(C38U.SI)$ (14.3%), $Frasers Cpt Tr(J69U.SI)$ (11.4%), $CapLand Ascendas REIT(A17U.SI)$ (10.1%), and $ParkwayLife Reit(C2PU.SI)$ (10.0%).
The iEdge S-REIT Index concluded the first half of 2025 at 1,021 and touched 1,030 on July 3, a level which was previously tested three times in November 2024, January 2025 and April 2025. The consensus estimate target price for the next 12 months is pegged at 1,159.
From a balance sheet standpoint, the S-REITs sector maintains an average gearing ratio of 40%, reflecting prudent capital management, that is well below the regulatory limit of 50%.
The 10 S-REITs with lowest gearing ratios are $Sasseur Reit(CRPU.SI)$ $AIMS APAC Reit(O5RU.SI)$ $Keppel DC Reit(AJBU.SI)$ $Far East HTrust(Q5T.SI)$ $Frasers HTrust(ACV.SI)$ $Frasers L&C Tr(BUOU.SI)$ $ParkwayLife Reit(C2PU.SI)$ $StarhillGbl Reit(P40U.SI)$ $IREIT Global SGD(UD1U.SI)$ $Mapletree PanAsia Com Tr(N2IU.SI)$.
On average, these 10 have a gearing ratio of 33.5%.
Sasseur REIT, notable for its low gearing ratio of 25.9% for 1Q25, reported a slight year-on-year dip of 0.2% in its 1Q25 EMA rental income. This was primarily due to weaker forex and lower variable income. However, in RMB terms, 1Q25 EMA rental income saw a 1.6% year-on-year increase.
The REIT’s portfolio occupancy rate improved to 98.9%, up from 97.9% the previous year, with higher occupancy recorded at Chongqing Bishan and Kunming outlets. Management remains committed to maintaining a healthy balance sheet to seize potential opportunistic acquisitions.
Sasseur REIT has rights-of-first-refusal (ROFR) for two assets in Xi’an and Guiyang and could also look for acquisition opportunities within other assets managed by its sponsor. As at 1Q25, its sponsor, Sasseur Group, manages a total of 18 outlet malls including the four properties owned by the Group.
UOB Kay Hian research has noted that the recent preference for quality names has resulted in the 3-month compounded SORA easing by 98 basis points to 2.09% in the first half of 2025. Despite this significant drop, there has been no positive price movement or re-rating for S-REITs. The research house expects broader recovery in liquidity from possible Fed rate cuts at the end of 2025 to lift the sector.
However, global geopolitical uncertainties and tariff risks remain in focus and investors should stay nimble and watch data going into 2H25.
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