To The Moon

The Singapore Real Estate Investment Trust (S-REIT) sector is reeling as the July 2025 earnings season kicks off with a bang—and not the good kind. With 37 trusts set to report between July 28 and August 14, the initial wave of results has triggered sharp sell-offs on earnings day, sparking fears of a broader trend. Sabana Industrial REIT soared 26.9% in DPU, yet its stock tanked 5%. OUE REIT’s 5.4% DPU gain couldn’t stop a 3% drop. Are declining profits and trade tensions signaling a sector-wide slump, or is this a temporary overreaction? This deep dive explores which S-REITs missed the mark, why profits are shrinking, and whether this spells trouble—or opportunity.

The Earnings Shockwave

The season started with a jolt as seven S-REITs reported last week (July 23-25), and the market responded with a collective shudder:

• Sabana Industrial REIT: H1 2025 DPU jumped 26.9% to S$0.017, fueled by 84.1% occupancy and positive rental reversions. Still, shares fell 5%, reflecting investor jitters over geopolitical risks and cost hikes.

• Digital Core REIT: Delivered a stable US$0.018 DPU, backed by higher revenue and NPI. A 2% dip hints at caution over its U.S. exposure amid tariff fears.

• OUE REIT: Posted a 5.4% DPU rise to S$0.0113, driven by a 17.3% drop in finance costs. Yet, a 3% share price slide underscores concerns about revenue/NPI declines.

• Suntec REIT: Achieved a 3.7% DPU increase with strong office and retail performance. A 4% drop suggests market doubts about tariff impacts on tenants.

• Frasers Centrepoint Trust: Held DPU steady at S$0.033 with solid retail results, but a 3% decline reflects broader sector pessimism.

The iEdge S-REIT Index has shed 1.2% since July 23, with 71% of reporting trusts seeing share price drops. This pattern echoes April’s 8.7% tariff-driven sell-off, though the current season’s scope (37 reports) raises stakes.

Is This a Trend?

The earnings day plunge looks like more than a fluke. Five of seven initial reporters saw 2-5% drops, despite mixed DPU outcomes. This suggests investors are fixated on headwinds: U.S. tariffs (30% on EU/Mexico, 35% on Canada, effective August 1), rising operational costs, and geopolitical uncertainty. Sabana’s manager flagged cost pressures eroding margins, while OUE and Suntec cited trade tensions. With over 90% of S-REITs holding overseas assets, global ripple effects could amplify the trend if misses continue. However, falling interest rates—Singapore’s three-month SORA at 2.08%—offer a counterbalance, potentially stabilizing DPU for some.

Who Missed the Mark?

• Sabana Industrial REIT: Analysts projected a 30%+ DPU rise based on occupancy trends. The 26.9% gain fell short, with cost pressures adding to the 5% drop.

• OUE REIT: Expected 7% DPU growth didn’t materialize at 5.4%, with revenue/NPI dips fueling a 3% decline and profit worries.

• Suntec REIT: A 3.7% DPU beat was overshadowed by tariff concerns, leading to a 4% fall and highlighting tenant risk.

These misses underscore declining profits as a concern. Sabana’s margin squeeze, OUE’s hospitality weakness, and Suntec’s retail exposure to trade wars signal broader sector vulnerability.

Profit Declines: Cause for Alarm?

Profits are indeed shrinking for some. Sabana noted operational costs outpacing revenue growth, while OUE’s NPI dipped despite lower finance costs. Suntec’s retail portfolio faces tenant spending cuts amid tariff uncertainty. Yet, not all is grim—Digital Core’s stability and Frasers’ resilience show pockets of strength. The sector’s 6.9% average yield (February 2025) remains compelling versus a 2.7% 10-year bond yield, but sustained profit declines could erode that edge. Trade tensions, with a potential 125% China retaliation looming, pose the biggest threat.

Silver Linings Amid the Storm

• Resilient Players: OUE’s financing gains and Suntec’s office strength suggest selective stability. Upcoming reports from Mapletree Logistics Trust (July 29) and Keppel DC REIT (July 31) could highlight AI/data center upside.

• Undervalued Gems: Sabana’s 7% yield and 26.9% DPU rise look attractive if costs ease. OUE’s 6.2% yield and DPU growth offer value on a dip.

• Macro Support: Falling SORA rates could boost DPU for trusts with floating-rate debt, per recent analyst notes.

Risks on the Horizon

• Tariff Escalation: A 125% China counter-tariff could hit Asian-focused S-REITs, per trade talk updates.

• Market Pullback: The S&P 500’s 65 RSI and VIX at 15.94 signal a possible 7-10% drop, dragging S-REITs with it.

• Earnings Fallout: If CapitaLand Ascendas REIT (August 1) or others miss, the plunge trend could deepen.

Trading and Investment Strategies

Short-Term Plays

• Buy Sabana on Dip: Enter at S$0.38-$0.40, target S$0.45-$0.50, stop at S$0.36. A 12-25% gain if sentiment recovers.

• Buy OUE on Dip: Grab at S$0.28-$0.30, target S$0.33-$0.35, stop at S$0.27. A 10-17% gain on cost stabilization.

• Options Straddle: Use S$0.40 calls/puts on Sabana or S$0.30 calls/puts on OUE for earnings volatility, targeting 200-300% gains on a 10% move.

Long-Term Investments

• Hold Sabana: Buy at S$0.38-$0.40, target S$0.60-$0.70 by 2026, for 50-75% upside with occupancy growth.

• Hold OUE: Buy at S$0.28-$0.30, target S$0.40-$0.45 by 2026, for 33-50% upside with financing gains.

• Diversify with STI ETF: Buy at S$3,800, target S$4,200, stop at S$3,600, for broad market exposure.

Hedge Strategies

• VIXY ETF: Buy at S$15, target S$18, stop at S$13, to hedge tariff volatility.

• STI ETF Puts: Use puts at S$3,800 to protect against a 5-10% market drop.

• Gold ETF (GLD): Buy at S$200, target S$220, stop at S$190, as a safe haven.

My Trading Plan

I’m targeting oversold S-REITs for a rebound, buying Sabana at S$0.38-$0.40, targeting S$0.45-$0.50, with a S$0.36 stop, and using a S$0.40 call/put straddle for volatility. I’ll add OUE at S$0.28-$0.30, targeting S$0.33-$0.35, with a S$0.27 stop. For balance, I’ll invest in the STI ETF at S$3,800, targeting S$4,200. I’m hedging with VIXY at S$15, targeting S$18, and holding 20% cash for dips if tariffs or misses escalate. I’ll monitor upcoming earnings and trade developments closely.

Key Metrics

The Verdict

S-REITs are under siege, with earnings day plunges hinting at a trend driven by tariff fears and profit declines. Sabana and OUE’s misses are notable, but their DPU gains suggest undervaluation if headwinds subside. The sector’s 6.9% yield holds appeal, yet sustained profit drops are a concern. Mapletree and Keppel DC’s reports could shift the tide, while tariff escalations remain a wild card. Buy selectively on dips, hedge wisely, and stay vigilant—this could be a dip to buy or a signal of deeper trouble.

Are you worried about S-REIT profits, or do you see a silver lining? Drop your take below! 🎁

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