Shortly into 2022, we already experienced significant market volatility. Do you know where are the risk and opportunities in 2022? Many analysts are already expecting Interest Rate Hikes to curb inflation growth. But how will that impact S-REITs? Do view my webinar below (starting from my section, timestamps below) to learn more.
Timestamps
Introduction (1:44:05)
2021 Market Recap
REIT Sector Performance in 2021, COVID Variant sell-offs (1:45:35)
Top 5 Best Performing S-REITs in 2021 (1:48:06)
The Interest Rate Hike
Fed Dot Plot, Rate Hikes are most likely going to happen (1:49:22)
Will the stock market crash due to the Interest Rate Hikes? (1:51:30)
Interest Rate Hikes are because the economy is doing well (1:51:57)
4 Ways that Interest Rate Hikes can affect S-REITs (1:53:57)
Rental Income (1:54:36)
Interest Expenses due to Cost of Debt being affected (1:59:17)
Compression of Yield Spread (2:03:09)
Historical REIT Index Performance during the previous Rate Hike (2:07:05)
Kenny’s Investing Strategy in 2022
Focus on your Personal Objectives (2:12:58)
REITs as an Investing Strategy (2:13:34)
Choose the Right S-REITs! (2:18:53)
Attactive REITs based on Valuation (Price/NAV) (2:20:08)
Undervalued does not mean it is a good REIT (Distribution Growth) (2:21:59)
Outro (2:24:54)
OTCS Special Market Outlook 2022
2021 saw many market recoveries & S&P500 making new high
Despite ongoing COVID-19 issues.
Will the markets crash in 2022, or climb higher? Shortly into 2022, we already experienced significant market volatility.
Do you know where are the risk and opportunities in 2022?
OTCS invited 3 expert practitioners to share with us their market outlook for 2022; where are the risks and the opportunities in the Singapore and Global markets.
Pan Jingyi (Economics Associate Director, IHS Markit) – PMI (Purchasing Managers’ Index) developments and signals for the market. – Top 2022 predictions by IHS Markit. .
Bring your most pressing questions about Stocks, REITs, Bonds, Global Macro as we will have a Q&A segment for you to get your answers.
Kenny Loh is a Senior Financial Advisory Manager 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, Digital Assets 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
Money & Me: Mapletree merger, growth in commercial S-Reits and the potential return of Reit IPOs in 2022
In this episode of Money & Me, Michelle Martin speaks with Kenny Loh, REIT Specialist and Independent Financial Advisor on his outlook of S-Reits for 2022, his thoughts on the proposed Mapletree Pan-Asia Commercial Trust and if REIT IPOs will make a comeback after delays in 2021.
Kenny Loh is a Senior Financial Advisory Manager 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, Digital Assets 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
I recently came back from a holiday in Malaysia via the VTL, and managed to visit Starhill Global REIT’s 2 properties in Kuala Lumpur. A dedicated article on that will come out soon.
Technical Analysis of FTSE ST REIT Index (FSTAS351020)
FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) decreased slightly from 843.73 to 853.35 (1.14%) compared to the last month update. Currently the Singapore REIT index is still trading with a range between 816 and 890.
The following is the compilation of 40 Singapore REITs 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 the 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 highlighted in green have been updated with the latest Q3 2021 business updates/earnings.
Note 4: 2 REITs submitted their IPOs in November 2021. REITs highlighted in yellow have values extracted from IPO Prospectuses. Yield is calculated based on Estimated DPU / Price, with the Estimated DPU calculated from the Prospectus.
Singapore Overall REIT sector is slightly above fair value now.
Take note that NAV is adjusted downward for most REITs due to drop in rental income during the pandemic (Property valuation is done using DCF model or comparative model)
Most overvalued REITs (based on Price/NAV)
Parkway Life REIT (Price/NAV = 2.18)
Keppel DC REIT (Price/NAV = 1.99)
Mapletree Industrial Trust (Price/NAV = 1.52)
Mapletree Logistics Trust (Price/NAV = 1.43)
Digital Core REIT (Price/NAV = 1.38)
ARA LOGOS Logistics Trust (Price/NAV = 1.32)
Most undervalued REITs (based on Price/NAV)
Lippo Malls Indonesia Retail Trust (Price/NAV = 0.55)
BHG Retail REIT (Price/NAV = 0.64)
Frasers Hospitality Trust (Price/NAV = 0.72)
Suntec REIT (Price/NAV = 0.74)
Far East Hospitality Trust (Price/NAV = 0.76)
OUE Commercial REIT (Price/NAV = 0.76)
Distribution Yields Overview
TTM Distribution Yield decreased to 5.84%
Decreased from 5.93% in December 2021.
10 of 40 (25%) Singapore REITs 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, and economic recovery.
Highest Distribution Yield REITs (ttm)
United Hampshire REIT (9.21%)
First REIT (9.15%)
Sabana REIT (8.67%)
Sasseur REIT (8.45%)
Prime US REIT (8.18%)
EC World REIT (8.10%)
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.
Gearing Ratios Overview
Gearing Ratio remained at 37.22%
Remainedat 37.22% in December 2021.
Gearing Ratios are updated quarterly. Thus there is no change to the Gearing Ratios.
In general, Singapore REITs sector gearing ratio is healthy but increased due to the reduction of the valuation of portfolios and an increase in borrowing due to Covid-19.
Highest Gearing Ratio REITs
ARA Hospitality Trust (48.4%)
Suntec REIT (44.3%)
Daiwa House Logistics Trust (43.8%)
Lippo Malls Retail Trust (42.3%)
Frasers Hospitality Trust (42.2%)
Elite Commercial REIT (42.1%)
Market Capitalisation Overview
Total Singapore REIT Market Capitalisation increased by 2.63% to S$108.9 Billion.
Increased from S$106.1 Billion in December 2021.
Contributed by IPO listing of Daiwa House Logistic Trust and Digital Core REIT.
Biggest Market Capitalisation REITs:
Capitaland Integrated Commercial Trust ($13.15B)
Ascendas REIT ($12.41B)
Mapletree Logistics Trust ($8.13B)
Mapletree Industrial Trust ($7.21B)
Mapletree Commercial Trust ($6.64B)
No change in Top 5 rankings since August 2021.
Smallest Market Capitalisation REITs:
BHG Retail REIT ($92M)
ARA Hospitality Trust ($383M)
Lippo Malls Indonesia Retail Trust ($414M)
United Hampshire REIT ($445M)
Sabana REIT ($465M)
No change in Top 5 rankings from December 2021.
Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. If you need help to start building your own investment portfolio, or want a portfolio review, book a consultation with Kenny now! First consultation is free.
Top 20 Best Performers of the Month (December 2021)
Mapletree Pan Asia Commercial Trust (MPACT): Proposed Merger of Mapletree Commercial trust (MCT) and Mapletree North Asia Commercial Trust (MNACT)
The Edge: The managers of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) have, on Dec 31, announced the proposed merger of both REITs.
MCT is Singapore’s largest pure-play commercial REIT while MNACT is the first and only North Asia-focused REIT to be listed in Singapore.
Post-merger, the new REIT will be named Mapletree Pan Asia Commercial Trust (MPACT). It will be Mapletree’s flagship commercial REIT positioned to be the proxy to key gateway markets of Asia.
Upon the completion of the merger, the new combined REIT will have a market capitalisation of around $10.5 billion, making it one of the top 10 largest REITs in Asia.
Together, MPACT will hold a diversified and high-quality portfolio of 18 assets across Singapore, China, Hong Kong, Japan and South Korea with assets under management (AUM) of around $17.1 billion. Read More
Digital Core REIT lists, jumps 15% to US$1.01 on first day
BUSINESS TIMES: DIGITAL Core Reit closed some 14.8 per cent higher than its initial public offering (IPO) price of US$0.88 at US$1.01 on Monday (Dec 6), as it made its trading debut on the mainboard of the Singapore Exchange (SGX).
Trading in units of the pure play data centre real estate investment trust (Reit) commenced after the lunch break at 2pm and opened at US$1, some 13.6 per cent higher than its IPO price.
The counter raced to an intra-day high of US$1.09 – nearly 23.9 per cent above its IPO price – before settling down to close at US$1.01 with a total of 104.8 million units changing hands. Read More
Summary
Fundamentally, the whole Singapore REITs landscape is slightly over fair value due to the recent correction based on the average Price/NAV value of the S-REITs. Below is the market cap heat map for the past 1 month. Generally, most S-REITs in the past month have increased in market cap. The 2 standout performers are EC World REIT (-7.88%) and Mapletree North Asia Commercial Trust (11%).
Yield spread (in reference to the 10 year Singapore government bond of 1.66% as of 31st December 2021) tightened slightly from 4.29% to 4.19%. This is due to the 10 year Singapore government bond rate decreasing less (1.69% to 1.66%) compared to the average REIT yield decreasing from 5.93% to 5.84%.
The risk premium is attractive to accumulate Singapore REITs in stages to lock in the current price and to benefit from long-term yield after the recovery. Moving forward, it is expected that DPU will increase due to the recovery of global economy, as seen in the previous few earning updates. NAV is expected to be adjusted upward due to revaluation of the portfolio.
A month after the brief Omicron-induced sell-off (highlighted in blue), it seems that the index has already recovered to a certain extent, and due to its reduced severity, is less feared than initially thought. Since June 2020 (past 18 months) the REIT Index has consolidated and has been moving sideways ever since.
Technically the REIT Index is currently on short term sideways trend, recently bouncing back from its support at 835. Post-pandemic recovery should continue, which can lead to the stablilisation of share prices of Singapore REITs and the return of the dividend for the next few quarters. Based on the latest earning releases, most of the REITs are growing in DPU and cautiously optimistic moving into 2022.
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 my extensive research and years of Singapore REIT investing experience can approach me separately for a REIT Portfolio Consultation.
Kenny Loh is a Senior Financial Advisory Manager 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, Digital Assets 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
