Money and Me: An overview of S-REITS, value rotations and REITS paying out higher dividends

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23 November 2020 

Money and Me: An overview of S-REITS, value rotations and REITS paying out higher dividends

Michelle Martin speaks to Kenny Loh, REIT Specialist and Independent Financial Advisor to discuss an overview of the REIT sector,  value rotations, SGX Reg Co statement that REITS must do all they can to boost investor confidence, whether Ascendas REIT is a good buy and REITS that are paying out more dividends.

  • Ascendas REIT’s preferential offering
  • Why Hospitality and Retail REITs are rallying
  • Why some REITs are at all-time high prices despite Covid-19
 

Listen to his previous market outlook interviews here:

Kenny Loh is a Senior Consultant and REITs Specialist of Singapore’s top Independent Financial Advisor. 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, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Sympsosium and Invest Fair. 
 
You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement
Continue Reading Money and Me: An overview of S-REITS, value rotations and REITS paying out higher dividends

Singapore REIT Fundamental Analysis Comparison Table Nov 22 – 2020

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Technical Analysis of FTSE ST REIT Index (FSTAS8670)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased slightly from 822.03 to 828.26 (+0.76%) compared to last month update. Currently the REIT index is currently back in trading on sideway consolidation, after recovered from a sudden sell off last few weeks.

  • As for now, Short term direction: Sideway, until breakout of the resistance (starts up trend) or breakdown of the support (starts down trend).
  • Immediate Support at 819
  • Immediate Resistance at 852, followed by 874.

 

Previous chart on FTSE ST REIT index can be found in the last post Singapore REIT Fundamental Comparison Table on Oct 24, 2020.

 

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.

  • Note 1: The Financial Ratio are based on past data and there are lagging indicators.
  • Note 2: This REIT table takes into account the dividend cuts due to COVID-19 outbreak. Yield is calculated trailing twelve months (ttm), therefore REITs with delayed payouts might have lower displayed yields, thus yield displayed might be lower.
  • Note 3: All REITs in Singapore have already released the Q3 earnings or provide latest business  update.
  • Note 4: Capital Mall Trust has merged with Capitaland Commercial Trust and has became Capitaland Integrated Commercial Trust (C38U). Capitaland Commercial Trust is delisted.

  • Price/NAV increased from 0.92 to 0.95 (Singapore Overall REIT sector is undervalued now).
  • TTM Distribution Yield further decreased from 6.82% to 5.50% (after Q3 earning release after factoring in the dividend cut impact caused by COVID-19). About 27.5% of Singapore REITs (11 out of 40) have Distribution Yield > 7%. Do note that these yield numbers are based on current prices taking into account the delayed distribution/dividend cuts due to COVID-19.
  • Gearing Ratio increases from 36.68% to 37.63%.  In general, Singapore REITs sector gearing ratio is healthy but started to increase as the reduction of the valuation of the portfolio and increase in borrowing.
  • The most overvalued REITs are Keppel DC REIT (Price/NAV = 2.49), followed by Parkway Life (Price/NAV = 2.02), Mapletree Industrial Trust (Price/NAV = 1.78), Mapletree Logistic Trust (Price/NAV = 1.64) and Ascendas REIT (Price/NAV = 1.41).
  • The most undervalued REITs (based on NAV) are Eagle Hospitality Trust* (Price/NAV =0.17), followed by Lippo Malls Indonesia Retail Trust (Price/NAV = 0.30), ARA Hospitality Trust (Price/NAV = 0.49), First REIT (Price/NAV = 0.45), Starhill Global (Price/NAV = 0.58), BHG REIT (Price/NAV = 0.66) and  Sabana REIT (Price/NAV = 0.69).
  • The Highest Distribution Yield (TTM) is First REIT (12.55%), followed by Lippo Malls Indonesia Retail Trust (9.88%), KepPacOak US REIT (8.81%), ARA LOGOS Logistic Trust (8.53%), Cromwell European REIT (7.77%) and ESR REIT (7.69%) and . Reminder that these yield numbers are based on current prices taking into account delayed distribution/dividend cuts due to COVID-19. Some REITs opted for semi annual reporting and thus no quarterly DPU was announced.
  • The Highest Gearing Ratio REITs are Eagle Hospitality Trust (65.5%), ARA US Hospitality Trust (43%), Lippo Malls Indonesia Retail Trust (42.5%), ESR REIT (41.6%), Suntec REIT (41.5%), ARA Logos Log Trust (40.5%) (previously Cache Log Trust), OUE Commercial REIT (40.3%) and Mapletree NAC Trust (40.1%)
  • Total Singapore REIT Market Capitalisation = S$99.3 Billion.
  • Top 5 REITs with biggest market capitalisation are Capitaland Integrated Commercial Trust ($12.81B), Ascendas REIT ($11.26B), Mapletree Industrial Trust ($7.08B), Mapletree Logistics Trust ($8.14B) and Mapletree Commercial Trust ($6.73B).
  • The bottom 5 REITs with smallest market capitalisation are Eagle Hospitality Trust ($119M), BHG Retail REIT ($281M), United Hamsphire REIT ($286M), ARA Hospitality Trust ($278M) and Elite Commercial REIT ($392M)
  • *Eagle Hospitality Trust is currently suspended

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.

Top 20 Performance of the Month (Source: https://stocks.cafe/kenny/advanced)

SG 10 Year & US 10 Year Government Bond Yield

  • SG 10 Year: 0.925%
  • US 10 Year: 0.86%

 

Summary

Fundamentally the whole Singapore REITs is undervalued now based on simple average on the Price/NAV. Below is the market cap heat map for the past 1 month. We can see from here there was a rotation from Industrial sector to Hospitality & Retail sectors due to the latest news on the vaccines readiness.

(Source: https://stocks.cafe/kenny/overview)

Retail & Hospitality sectors, small & medium cap REITs are very attractive based on the NAV (20% to 40% to fair value). However, do take note that NAV would probably be adjusted downward caused by the devaluation of property value. We have already seen the NAV of some REITs are adjusted downward and the increase of gearing ratio, from the latest earning release or business update.

Yield spread (reference to 10 year Singapore government bond of 0.925%) tightened from 5.82%. to 4.575% due to drop in TTM DPU. However, the risk premium are still attractive to accumulate Singapore REITs in stages to lock in the current price and long term yield after the recovery.

Technically the REIT Index is still trading on sideway consolidation with low volatility until the breakout. Current macro factors such as low interest rate environment and recovery of global economic support the bullish breakout.

Note: This above analysis is for my own personal research and it is NOT a buy or sell recommendation. Investors who would like to leverage on my extensive research and years on REIT investing experience can approach me separately for REIT Portfolio Consultation.

 

Kenny Loh is a Senior Consultant and REITs Specialist of Singapore’s top Independent Financial Advisor. 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, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue Reading Singapore REIT Fundamental Analysis Comparison Table Nov 22 – 2020

Retail REITs in Singapore: How do they stack up?

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Retail REITs in Singapore have rebounded since Phase 2 in Singapore began. In this article, we will be covering 5 predominantly retail REITs in Singapore, namely Capitaland Integrated Commercial Trust, Frasers Centrepoint Trust, SPH Reit, Starhill Global REIT and Lendlease Global Commercial REIT, comparing their portfolio information, financial ratios, etc.

REIT Portfolio Overview

Capitaland Mall Trust recently merged with Capitaland Commercial Trust, to form Capitaland Integrated Commercial Trust. Owning 5 Retail/Office, 8 Office and 11 Retail Developments, wholly in Singapore, CICT is the largest market capitalisation trust in Singapore.


Frasers Centrepoint Trust owns 7 Retail Malls in Singapore, including the newly-renovated Northpoint City. Mostly located away from the downtown, these malls seek to serve housing estates.


SPH Reit owns 5 properties, all of which are Retail Malls. 3 of the malls, The Rail Mall, Clementi Mall and Paragon are situated in Singapore, while Figtree Grove Shopping Centre and Westfield Marion Shopping Centre are located in Australia.


Starhill Global REIT owns properties in China, Japan, Malaysia, Australia and Singapore. In Singapore, Starhill Global REIT owns 2 properties, namely Ngee Ann City and Wisma Atria, which make up 70.1% of its total asset value.


Lendlease Global Commercial REIT owns 2 properties, 313 Somerset in Singapore and Sky Complex, a freehold office complex in Milan, Italy, with 313 Somerset having 71.5% of the IPO Portfolio. Lendlease Global Commercial REIT has also recently acquired a 5% stake in Jem, a shopping mall in Jurong East, Singapore.

Portfolio Distribution

Singapore geographical distribution of REIT retail malls. Note: This diagram shows the properties of Capitaland Mall Trust before their merger, and Frasers Centrepoint Trust before acquisition.

The above diagram shows the geographical distribution of each REIT’s retail properties. Some observations that can be drawn out include:

  • Capitaland Integrated Commercial Trust-owned retail malls (formerly Capitaland Mall Trust before the merger) can be found throughout Singapore, in both housing estates (e.g Junction 8) and downtown areas (e.g Plaza Singapura).
  • Frasers Centrepoint Trust-owned retail malls are mostly found in housing estates away from the downtown areas.
  • Both Starhill Global REIT and Lendlease Global Commercial REIT’s Singapore portfolio own retail malls in Orchard Road. 
  • SPH Reit owns 3 retail malls in Singapore, 2 in housing estates in the west, and Paragon at Orchard Road.

Fundamental Ratios

Fundamental Ratio comparison between the 5 REITs. Information taken from the StocksCafe REIT screener. Values taken on 8 November 2020

The above table shows the corresponding fundamental ratios of the 5 REITs. Some observations that can be made are shown below:

  • Yield (ttm): At current prices, all 5 REITs except Starhill Global REIT have relatively low yields of below 5%. However, yield (ttm) is not a meaningful unit of measurement at the moment, due to recent dividend cuts due to the pandemic, and the switching of dividend payouts of some REITs to a semi-annual payout schedule (e.g Starhill Global REIT).
  • Gearing: Other than SPHReit (with a low gearing ratio of 30.5%) and Starhill Global REIT (with a higher than average gearing ratio of 39.7%), the other 3 REITs have gearing ratios around 35%.
  • Starhill Global REIT and Lendlease Global Commercial REIT are currently relatively undervalued with Price/NAV values of 0.527 and 0.753 respectively. compared to the other 3 REITs.

Lease Management

Lease Management comparison between the 5 REITs. Information taken from the StocksCafe REIT screener. Values taken on 8 November 2020

The above table shows the corresponding lease management values of the 5 REITs. Note that for CICT, values for the former Capitaland Mall Trust are shown instead. Some observations that can be made are shown below:

  • No. of Properties: Capitaland Integrated Commercial Trust owns the most properties, with 16 being Integrated Developments/Retail Properties. Both Frasers Cpt Trust and SPHReit are wholly Retail REITs, while the rest include offices in their portfolios.
  • Occupancy Rate: All 5 REITs have strong occupancy rates of above 94%, with the lowest being Frasers Cpt Trust at 94.9%.
  • Weighted Average Lease Expiry (WALE): Starhill Global REIT and Lendlease Global Commercial REIT have the highest WALE values, at around 5 years. The remaining 3 REITs have lower WALE values, ranging between 1.6 years to 2.6 years.
  • Property Yield: Capitaland Integrated Commercial Trust, Frasers Cpt Trust and Starhill Global REIT have Property Yield values of between  4-6%, while the remaining 2 REITS have values of about 2.8%.
  • Property Portfolio Value: The former Capitaland Mall Trust has the highest AUM value by a considerable margin even before the merger, at $11.5B.

Debt Management

Debt Management comparison between the 5 REITs. Information taken from the StocksCafe REIT screener. Values taken on 8 November 2020

The above table shows the corresponding lease management values of the 5 REITs. Note that for CICT, values for the former Capitaland Mall Trust are shown instead. Some observations that can be made are shown below:

  • Weighted Average Debt Maturity (WADM): Capitaland Integrated Commercial Trust has the highest WADM value, at 4.3 years.
  • Interest Cost: Lendlease Global Commercial REIT has the lowest Interest Cost, at 0.86%. The other REITs have higher Cost of Debt values, ranging between 2.4% to 3.23%
  • Interest Coverage Ratio: Lendlease Global Commercial REIT has a considerably higher Interest Coverage Ratio compared to the other REITs, at 9.2x.
  • Unsecured Borrowings: SPHReit is the only REIT in this comparison that has 100% secured borrowings.

Kenny Loh is a Senior Consultant and REITs Specialist of Singapore’s top Independent Financial Advisor. 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, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also an invited speaker of REITs Symposium and Invest Fair. Kenny Loh also offers REIT Portfolio Advisory for a fee. Do contact him at kennyloh@fapl.sg 

Continue Reading Retail REITs in Singapore: How do they stack up?