Singapore REIT Fundamental Analysis Comparison Table – 17 November 2019

Technical Analysis of FTSE ST REIT Index (FSTAS8670)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) broke down from a Symmetrial Triangle consolidation pattern but rebounded from 200D SMA support. The REIT index has changed from 929.69 (last post) to 906.82 (-2.52%). Previous chart on FTSE ST REIT index can be found in the last post Singapore REIT Fundamental Comparison Table on Oct 8, 2019.

Based on the current chart pattern,  the sentiment is BULLISH in the long term but REIT index is currently going through a correction.  REIT Index has to go above the 20D & 50D SMA in order to continue the uptrend. The recent sell off could be a welcomed correction before REIT index can charge higher.

 

Fundamental Analysis of 40 Singapore REITs

The following is the compilation of 40 REITs in Singapore with colour coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio. This gives investors a quick glance of which REITs are attractive enough to have an in-depth analysis. DPU Yield for Eagle Hospitality Trust and Prime US REIT are  projection based on the IPO prospectus.  OUE Hospitality Trust is removed after merged into OUE Commercial REIT. Lendlease Global Commercial REIT is not included in this table. Fortune HKD REIT is removed as the REIT has been delisted.

  • Price/NAV increases from 1.07 to 1.08 (Singapore Overall REIT sector is over value now).
  • Distribution Yield increases from 6.27% to 6.29% (take note that this is lagging number). About 30% of Singapore REITs (12 out of 40) have Distribution Yield > 7%.
  • Gearing Ratio increases from 34.6% to 35.2%.  24 out of 40 have Gearing Ratio more than 35%. In general, Singapore REITs sector gearing ratio is healthy. Note: The current limit of gearing ratio for REITs listed in Singapore Stock Exchange is 45% but there is a consultation paper by SGX to review the potential increase to 50-55% limit.
  • The most overvalue REIT is Keppel DC REIT (Price/NAV = 1.83), followed by Parkway Life (Price/NAV = 1.77), Ascendas REIT (Price/NAV = 1.41), Mapletree Industrial Trust (Price/NAV = 1.61), Mapletree Logistic Trust (Price/NAV = 1.41), Frasers Logistic & Industrial Trust (Price/NAV = 1.31) and Mapletree Commercial Trust (Price/NAV = 1.36)
  • The most undervalue (base on NAV) is Eagle Hospitality Trust (Price/NAV =0.59), followed by  Lippo Malls Indonesia Retail Trust (Price/NAV = 0.75).
  • The Highest Distribution Yield (TTM) is Eagle Hospitality Trust (11.96%) , followed by SoilBuild BizREIT (9.79%), Sasseur REIT (8.17%), EC World REIT (8.31%), Lippo Mall Indonesia Retail Trust (8.55%),  First REIT (8.43%) and Cache Logistic Trust (8.01%).
  • The Highest Gearing Ratio are ESR REIT (41.6%), Far East HTrust (39.6%), OUE Comm REIT (40.5%).
  • Top 5 REITs with biggest market capitalisation are Ascendas REIT ($9.00B), CapitaMall Trust ($9.30B), Capitaland Commercial Trust ($7.63B), Mapletree Commercial Trust ($6.69B) and Mapletree Logistic Trust ($6.00B)
  • The bottom 3 REITs with smallest market capitalisation are BHG Retail REIT ($351M), Sabana REIT ($500M) and iREIT Global REIT ($507M)

Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. To learn how to use the table and make investing decision, Sign up next REIT Investing Workshop here to learn how to choose a fundamentally strong REIT for long term investing for passive income generation.

 

  • 1 month decreases from 1.87633% to 1.82783%
  • 3 month increases from 1.87958% to 1.83163%
  • 6 month decreases from 1.93842% to 1.93450%
  • 12 month decreases from 2.12400% to 2.09271%

 

Summary

Fundamentally the whole Singapore REITs is over value now based on simple average on the Price/NAV. The big cap REITs are still quite expensive after the recent correction. Most of the DPU yield for big cap REIT is below 5% now such as CapitaCom Trust, CapitaMall Trust, Fraser Centerpoint Trust, Keppel DC REIT, Keppel REIT, Parkway Life REIT, Mapletree Com Trust, Mapletree Logistics Trust and Mapletree Industrial Trust. However, the yield remains attractive compared to other fixed income asset classes like corporate bonds and government bonds. The yield spread between big cap and small cap REIT remains wide.

Yield spread (reference to 10 year Singapore government bond of 1.771%) has tightened from 4.613% to 4.519%.  The risk premium for small cap REIT is very attractive as compared to big cap REITs. This indicates value picks only in small and medium cap REITs.

 

Technically, the REIT index is still trading on a long term uptrend as 200D SMA is still sloping up but currently going through a correction. Current macro factors are expected to continue to support the bull run of REIT index, there are, (1) low interest rate environment (2) potential relax of gearing ratio to 50-55% limit (3) TINA (There Is No Alternative) for other high yield asset classes. The positive sentiment may entice Singapore REITs to take on more debt to grow the current portfolio.

 

My next Singapore REIT investing course is planned on Nov 30, 2019 (last class in 2019). Registration detail can be found at following link. http://mystocksinvesting.com/course/singapore-reits-investing/

4 Pains of Investing in REITs, and How to Overcome Them

Contributed by Kenny Loh, Senior Consultant & REITs Specialist, Financial Alliance Pte Ltd
(The contributor can be contacted at kennyloh@fapl.sg)

 

A real estate investment trust (“REIT”) is a popular asset class among income seeking investors due to its regular dividend payouts. However, there are pains unknown to most investors that are seldom shared by speakers in public seminars.

The following 4 pains are the common issues constantly faced by REITs investors throughout their whole REIT investing journey.

Pain #1: Dealing with Rights Issues

REITs in Singapore have to distribute a minimum of 90% of the net income to enjoy the tax concession. As such, it is very common for a REIT to raise funds to acquire more properties or refinance the debt due to the limited cash on hand. When a REIT offers rights to existing unitholders, most of the time, the rights will be offered at a discount from the prevailing market price. The share price will most likely be adjusted downwards immediately after the announcement. There is no way retail investors could sell their current holdings immediately after the announcement is made. The investors are then left with no choice but to subscribe to the rights by injecting more cash or be forced to sell the rights at unfavourable prices. If the investors do not have enough ready cash or forget to subscribe to the rights for any reason, they will suffer losses from their invested capital.

 

Pain #2: Unable to Participate in Private Placement

A private placement is a capital-raising event that involves the sale of securities to a relatively small number of select investors. Usually, there is a discounted price offered to private investors during the private placement exercise. With the injection of the additional shares into the stock market, there may be a dilution effect on the distribution yield. Retail investors may be worse off as their current holdings are diluted without a chance to acquire additional shares at a discount. Similar to the rights issue, the share price will normally trade downwards after such an announcement is made, and investors may suffer capital losses on paper.

 

Pain #3: Getting Odd lot when do Dividend Reinvestment Plan (DRP)

Usually REITs pay dividend in cash every quarter or semi-annually. However, some REITs offer a Dividend Reinvestment Plan (“DRP”) to investors as an option to reinvest the dividend in discounted shares instead of receiving it in cash. It sounds good at the first look, but most of the retail investors will end up with odd lots as the investment holdings are normally small. Odd lots are considered to be anything less than the standard 100 shares. Odd lots are usually difficult to sell at a good price due to illiquidity and the wide bid-ask spread. Trading commissions for odd lots are generally higher on a percentage basis than those for standard lots, since most brokerage firms have a fixed minimum commission level for undertaking such transactions.

 

Pain #4: Unable to do Regular Saving Plan (RSP) with small amount

Dollar Cost Averaging strategy is an excellent way to accumulate REITs over the long term without resorting to timing the stock market. However, there are two major limitations for investors who contribute a fixed amount of salary to build the REIT portfolio every month. First, the investor who contributes $1,000 per month is unlikely to allocate into different REITs for diversification purposes – and most probably end up with odd lots per REIT. In addition, the transaction cost per order is high – this will erode the returns of the portfolio. These limitations make monthly RSP investing for REITs not a very viable solution financially and operationally.

The only way to overcome the above four pains is to pool the monies together to do bulk purchases by leveraging on the lower commission structure of a brokerage firm who can buy and sell in bulk. A discretionary REIT Managed Account is set up to address the above pains investors face. This Managed Account has an investment mandate to invest in global REITs for diversification purposes. Investors who wish to find out more about this REIT Managed Account may write to kennyloh@fapl.sg).

 

Kenny Loh is a Senior Consultant and REITs Specialist of Singapore’s top Independent Financial Advisor, Financial Alliance. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER. He has won multiple awards in financial planning and investment planning.

How The Exchange BTC to ETH Happens

Author: Louise Andrea Jimera

In this world, there is one truth we must face: we need money in order to survive; it is an unavoidable fact of our existence as a human being in this world. Of course, there was a time when this was not the case. A lot of societies in this world started without money or currency. However, as we develop as a species, we also created means as to which we can create a market to interact with one another.

 

 

Our resources are becoming limited, and money creates a boundary between those who cannot afford and the rest. Money is also one of the most powerful influencers in the world today. If you have money, you can influence the world to make it better or worse place. You can even create your own world and build to your heart’s content.

 

We always think of money in its physical form, the coin and paper bill. They have a long history along with our existence as human beings.

 

The coin was first introduced and is the longest type of currency in use today. Many kingdoms and empires used coins as a means of currency. It is usually made with silver and gold, and most of the previous empires and kingdoms have their own of producing them. Each coin may bear the insignia of the country or the current ruler, along with the other symbols associated with the mint. The higher the gold content of the coin, the higher is its value which varies depending on the location as well. In the current era, most coins in the world are not completely made of gold although there is a bit of it in every coin.

However, there are a lot of issues with coin and minting so some countries decided to abolish it. Canada is one of the most famous countries who have decided to get rid of the coin. Read more about it here: https://www.economist.com/the-economist-explains/2013/02/12/why-has-canada-killed-off-the-penny.

The paper bill is next, and it is easier to carry around compared to the coin especially in larger amounts. It is commonly referred to as banknote, as it originated with its use in the banks. According to some records, banknotes were used as a placeholder for people to pay their accounts in the bank. Later on, central banks decided to print banknotes to provide it to the people for them to use in their daily transactions. Ever since then, only the government can legally create banknotes for their own country. It has been that way ever since, and it has been really useful for the world. However, it still has its own problems.

 

One of its issues is its vulnerability: it can easily get destroyed by moist, tearing or burning it. Banknotes can also be copied very easily, especially in this world where advanced photocopiers exist. There are a lot of famous cases about this, most notably this one here. Most central banks have been trying to solve this issue, but many can still create counterfeit bills.

 

This is why the need for a more secure type of currency is currently on the rise, especially with the prevalence of online transactions. Credit and debit cards can be used, but there are still ways to track and take advantage of your information using these cards.

Cryptocurrency is considered as one of the more secure ways to pay for your transactions online. It is a completely virtual type of currency, and you can even “mine” for it if you have an advanced computer system. The way it protects you is with its two way system: the two parties who are transacting can only receive and send payment with a unique passcode. These passcodes change based on the transaction which increases the security. As it is also a form of investment, you can track its value online using websites like Rubix. You can even exchange one cryptocurrency to another like from BTC to ETH. It is really easy once you get the hang of it.

 

There are now many ways to use currency whether it is on the physical world or the virtual one. The only important aspect that you need to care about is your own security and the impact of your purchase to yourself. Learn how to spend wisely and the currency that you will use will not matter anymore.