Singapore REIT Fundamental Analysis Comparison Table Dec 20 – 2020

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Technical Analysis of FTSE ST REIT Index (FSTAS8670)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 828.26  to 854.19 (+3.13%) compared to last month update. Currently the REIT index is testing the resistance of about 852 of a sideway consolidation range.

  • 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 Nov 22, 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 to 0.98
    • Increased from 0.95 in November 2020
    • Singapore Overall REIT sector is at fair value now
  • TTM Distribution Yield decreased to 5.30%
    • Decreased from 5.50% in November 2020
    • After Q3 earning release after factoring in the dividend cut impact caused by COVID-19).
    • About 22.5% of Singapore REITs (9 out of 40) have distribution yields of above 7%.
    • Do take note that these yield numbers are based on current prices taking into account the delayed distribution/dividend cuts due to COVID-19.
  • Gearing Ratio remained at 37.63%. 
    • In general, Singapore REITs sector gearing ratio is healthy but started to increase due to the reduction of the valuation of portfolios and increase in borrowing.
  • Most overvalued REITs (based on Price/NAV)
    • Keppel DC REIT (Price/NAV = 2.35)
    • Parkway Life (Price/NAV = 1.97)
    • Mapletree Industrial Trust (Price/NAV = 1.68)
    • Mapletree Logistics Trust (Price/NAV = 1.60)
    • Ascendas REIT (Price/NAV = 1.40)

(Source: https://stocks.cafe/kenny/advanced) Sign up for the full feature with 20% Early Bird discount!

  • Most undervalued REITs (based on Price/NAV)
    • Lippo Malls Indonesia Retail Trust (Price/NAV = 0.30)
    • First REIT (Price/NAV = 0.43)
    • Starhill Global REIT (Price/NAV = 0.63)
    • ARA Hospitality Trust (Price/NAV = 0.65)
    • OUE Commercial REIT (Price/NAV = 0.66)
    • BHG REIT (Price/NAV = 0.68)
  • Highest Distribution Yield REITs (ttm)
    • First REIT (13.00%)
    • Lippo Malls Indonesia Retail Trust (9.88%)
    • KepPacOak US REIT (8.57%)
    • ARA LOGOS Logistic Trust (8.46%)
    • Cromwell European REIT (7.69%)
    • EC World REIT (7.61%)
    • 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.
  • Highest Gearing Ratio REITs
    • 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%)
    • Mapletree NAC Trust (40.1%)
  • Total Singapore REIT Market Capitalisation = S$103.5 Billion.
  • Biggest Market Capitalisation REITs:
    • Capitaland Integrated Commercial Trust ($13.98B)
    • Ascendas REIT ($11.19B)
    • Mapletree Logistics Trust ($7.93B)
    • Mapletree Commercial Trust ($6.99B)
    • Mapletree Industrial Trust ($6.68B)
  • Smallest Market Capitalisation REITs:
    • Eagle Hospitality Trust ($119M)
    • Lippo Malls Indonesia Retail Trust ($243M)
    • United Hamsphire REIT ($286M)
    • BHG Retail REIT ($289M)
    • First REIT ($339M)
    • ARA Hospitality Trust ($366M)
  • 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: 0.893%
  • US 10 Year: 0.95%

Summary

Fundamentally the whole Singapore REITs is close to fair value 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, and other small & medium cap REITs which are playing catch up now due to cheap valuation.

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

Retail & Hospitality sectors, small & medium cap REITs are still attractive based on the NAV although the recent catch up. However, do take note that NAV of most REITs have been adjusted downward caused by the devaluation of property value.

Yield spread (reference to 10 year Singapore government bond of 0.893%) tightened from 4.575% to 4.407% 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, aggressive M&A for future DPU growth 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 Dec 20 – 2020

Data Centers Play in S-REIT Space

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With wider adoption of e-commerce, Artificial Intelligence and Cloud Computing, this technology disruption will change the way how we work, how we spend and how business do business in future. The adoption of 5G will accelerate the rise of digital economy and the consumption of data. Thus, we are going to see the huge growth in Data Centers in the REIT space moving forward.

The REITs who have the data centers in the current / future portfolio:

(1) Keppel DC REIT (AJBU.SI) – 100% (AUM$2.9B) . 18 Assets across 8 countries.

(2) Mapletree Industrial Trust (ME8U.SI) – 38.7%. 28 Assets (mainly in US)

(3) Ascendas REIT (A17U.SI) = 5.2%.

(4) Capitaland Retail China Trust (AU8U.SI) – Expanded Mandates to include Data Centers in China.

(5) Cromwell European REIT (CNNU.SI) – Have announced an acquisition of Data Centers in Europe in 2021.

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The following table is extracted from https://stocks.cafe/kenny/comprehensive

As we can see from the above comparison table, there is a high correlation between the Price/NAV valuation vs Percentage of Data Centers in the portfolio. This is a strong evidence that Data Centers are trading at a premium to other property classes. Below regression analysis (unfortunately there are only 3 data points) proves a very strong correlation with R-Square of 0.9983!

My Reasons of doing this analysis

(1) To Spot Investing Opportunities in S-REIT (which REIT to buy and the entry level)

(2) To Identify the Valuation Gap (Price/NAV) of REITs with and without Data Centers

(3) To Identify the upside potential (capital gain) if any REITs to acquire Data Centers

(4) To model the “Should Price/NAV” with the % Data Center in the portfolio (Price/NAV = 1.0676 * %DC + 1.2639)

Let’s see whether my modelling works after Capitaland Retail China Trust and Cromwell European REIT acquire the data centers into the portfolio.

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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. 

Continue Reading Data Centers Play in S-REIT Space

The 8 Best Ways to Invest In Gold in 2021

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The Covid-19 pandemic has brought about lots of volatility, dividend cuts, and uncertainty in the stock market. However, there is one asset that is considered a safe-haven: Gold. It is also highly liquid, and can be easily converted back to cash.

Gold holds its value well, and is an inflation hedge. However, unlike gold, fiat currencies are subject to many factors, which can include inflation. For example, in 1975, the price of gold is about US$5000/kg. Today, it ranges USD60,000/kg. However, the purchasing power of a USD5000 bill would have dropped significantly.

Therefore, gold prices always spike in periods of uncertainty and recession, for example, in the current pandemic. Many investors place their money in gold as a safe haven.

8 Ways To Invest In Gold

8 Ways to Invest in Gold

  • Gold Jewelry

Easiest to obtain, however most gold jewelry do not hold their value well, with the exception of collector items. They can either be sold and melted down for scrap, or it can be sold as a collector’s item. For example, gold bracelets from luxury brands, gold watches etc.

  • Gold Bars

Gold bars are highly liquid, and are relatively easy to obtain. Prices can vary depending on purity, size and weight, and whether they are certified as investment-grade.

  • Gold Coins

Similar to jewelry, gold coins are also collector items. Its value depends on rarity, metal quality, and the artwork on the coin. Depending on these attributes, its value can skyrocket into the millions.

  • Gold ETFs

Gold ETFs are exchange-traded funds (ETFs). They are convenient, low cost, and highly liquid, and instead of a investor physically holding onto gold, they are traded on the stock market, and are backed by physical gold stored in a bank vault.

Gold Etfs

  • Gold Mining Stocks and Mutual Funds
  • Gold Futures
  • Gold Royalty Mineral Interests and Royalty Trusts 
  • Gold Certificates 

Gold certificates are issued for a quantity of gold stored in a bank vault.

There are many ways to invest in gold with different instruments with Pro/Cons in each of them.  Investors is advised to choose a suitable instrument according to their preference and risk appetite.

Continue Reading The 8 Best Ways to Invest In Gold in 2021