Results generally in line. Slower pace of topline growth, +14% yoy and –0.3% qoq, was affected by the weaker hospitality reits performance. NPI improved a better 14% yoy and 4% qoq due to cost containment measures by the Sreits. Distribution income was up a smaller 9% yoy and 0.1% qoq as higher interest cost and more prudent payout policy eroded bottomline growth.

Refinancing concerns abating, cashflow preservation still key. With 75% of the Sreit debt due in 2009 already locked in 1Q09, concerns over credit availability is abating. Nevertheless, cashflow preservation is still key given that higher average cost of funding and downward pressure on rents from weaker economic prospects are likely to result in negative DPU growth over the next 2 years. In this regard, Sreits are exploring other avenues of cashflow retention, including lowering dividend payout and dividend reinvestment scheme.

Be selective. Sreits have lagged developers in the recent price run up and we see room for catching up. In terms of valuation, Sreits are trading on an average 0.5x P/bk NAV and offer average FY09 yield of 10%. We continue to like the Sreits for its attractive valuations, however, in view of the recent run-up we would be more selective at this point.

Our top buys remain FCT, Suntec, Parkway Life and Starhill Global. FCT offers dividend yield of 8.2-8.6%, higher than its comparable peers and its pure suburban retail exposure appears more resilient. Suntec is yielding 11.8-10.3% over FY09-10. Recent debt renewal exercise has removed refinancing needs till 2011. We continue to like Parkway Life for its ‘base plus’ revenue model, low gearing and minimal refinancing risk.

We have upgraded Starhill Global to Buy with TP of $0.70. Starhill is yielding c12% FY09-10. Newsflow of increased competition from soon-to-open malls have been factored into current share price. The upside risk at this point is the potential of spillover effect of increased pedestrian traffic once these malls open. We have downgraded AiT to Hold purely on valuation grounds after the recent surge in share price. The risk for the Sreit sector at this point remains the possibility of further fund raising if share prices continue to power up.