Industrial P/BV at 0.37x; appears resilient. The industrial sector looks attractive at an average P/BV of 0.37x, close to the REIT sector average of 0.34x. Resilience is underpinned by a historical time lag between changes in leading industrial indicators (including NODX, sea and air cargo throughput) and occupancy levels that could exceed 12 months.

Expect further support from government for industrial users. The government traditionally supports industrial users by reducing industrial land and building rents, and dishing out rental and property tax rebates. We anticipate this assistance to continue as the manufacturing sector remains the single largest driver of Singapore’s GDP. We expect industrial REITs to benefit three ways from this: 1) reduced land rent payments for industrial REITs; 2) increased sustainability for REIT tenants paying land rent directly to JTC; and 3) increased sustainability of the other industrial property users, on which industrial REITs’ tenants are inter-dependent.

Low tenant default risks. Within the industrial REIT space, we prefer REITs with low tenant default risks. These would be represented by large and diversified asset and tenant bases, limited concentration on single tenants and significant MNC representation.

Good capital management. All three industrial REITs are comfortably geared at below 40% with no major refinancing needs over the next two years. Cash calls for MLT and CREIT are not likely in the current year. In terms of capital management, all three industrial REITs look well-positioned to weather the storm

Maintain Overweight; A-REIT our top pick. Among industrial REITs, we favour A-REIT for its least tenant default risk, attributable to its large and diversified asset base, and large and quality tenant base. We also like MLT for its geographical diversification which moderates its risk of asset concentration. CREIT is our least preferred stock for its smaller asset base and higher tenant-concentration risks.