BHG Retail REIT started at Buy by DBS as proxy to China retail recovery

Hong Kong money-changer with yuan symbol signHong Kong money-changer with yuan symbol sign. Photo taken pre-Covid

DBS started coverage of BHG Retail REIT at Buy with a target price of S$0.60, calling the units a good proxy for China’s retail recovery.

While the distribution per unit (DPU) has been on a downtrend for three years, the payouts are expected to rise steadily, starting with an around 34 percent on-year bounce this year to an estimated 3.01 Singapore cents, analysts at DBS said in a note dated Wednesday.

BHG Retail REIT posted DPU of 5.16 Singapore cents in 2018, 3.86 Singapore cents in 2019 and 2.24 Singapore cents in 2020, the note said, adding 2020 was particularly hard hit by the Covid-19 outbreak and around 49 million units regaining their entitlement to distributions. Only around 25 million units are expected to regain entitlement to distributions this year, with no more remaining units waived from distribution in 2022, DBS said.

“The recovery will be led by the end of rental rebates and a recovery from COVID-19 restrictions,” DBS said.

The REIT has exposure to three properties located in Hefei and Chengdu, which are seeing strong growth in disposable income per capital and in retail spending, the note said.

BHG Retail REIT units were trading at S$0.57 at 4:24 p.m. SGT Friday, up 0.9 percent.